Canadian Pacific Railway Ltd. $55 – Toronto symbol CP

CANADIAN PACIFIC RAILWAY LTD. $55 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; SI Rating: Average) also profits from the resources boom, since products such as coal, fertilizers and forest products account for a third of its freight revenue.

The company is vulnerable to higher fuel prices, but so are its competitors, and it can pass much of the extra cost along to its customers.

Recent investments in new locomotives and track have improved its fuel-efficiency by 5.6% in the past five years. Greater fuel efficiency also gives CP an advantage over trucking firms.

CP will probably earn $3.88 a share in 2006, and the stock trades at 14.2 times that figure. Earnings in 2007 could reach $4.39 a share in 2007 as two of its major customers expand production of coal and potash, and the stock trades at just 12.5 times that estimate. The $0.75 dividend yields 1.4%.

CP Rail is a buy.

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