CP

CANADIAN PACIFIC RAILWAY LTD., $74.72, Toronto symbol CP, has appointed Hunter Harrison as a director and its new chief executive officer. Mr. Harrison is the former CEO of Canadian National Railway Co. (Toronto symbol CNR). CP feels Mr. Harrison will duplicate his success at CN, which included improving efficiency and speeding up deliveries. New trains and the recent drop in oil prices should also boost CP’s profitability....

CANADIAN PACIFIC RAILWAY LTD. $73 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 170.9 million; Market cap: $12.5 billion; Price-to-sales ratio: 2.4; Dividend yield: 1.9%; TSINetwork Rating: Above Average; www.cpr.ca) has attracted a lot of media attention lately. That’s mainly due to efforts by a U.S.-based investment firm that wants to improve its performance and possibly spark a takeover offer.

In our three-part Successful Investor portfolio strategy, we advise investors to invest mainly in well-established companies, spread your money out across the five main economic sectors, and downplay stocks that are in the broker/media limelight, which can bloat investor expectations.

Downturns can be brutal when stocks fail to live up to those inflated expectations. So, investors have asked why we chose a #1 stock that’s in what they see as ‘the limelight’. The difference is in the definition.

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CANADIAN PACIFIC RAILWAY LTD. $73 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 170.9 million; Market cap: $12.5 billion; Price-to-sales ratio: 2.4; Dividend yield: 1.9%; TSINetwork Rating: Above Average; www.cpr.ca) has attracted a lot of media attention lately. That’s mainly due to efforts by a U.S.-based investment firm that wants to improve its performance and possibly spark a takeover offer. In our three-part Successful Investor portfolio strategy, we advise investors to invest mainly in well-established companies, spread your money out across the five main economic sectors, and downplay stocks that are in the broker/media limelight, which can bloat investor expectations. Downturns can be brutal when stocks fail to live up to those inflated expectations. So, investors have asked why we chose a #1 stock that’s in what they see as ‘the limelight’. The difference is in the definition....

These three industrial stocks are more volatile than our more conservative picks, like CP Rail and CN Rail (see page 61). Even so, their rising sales, healthy balance sheets and strong reputations in niche markets help temper their risk. All three also trade at attractive multiples to earnings. Moreover, they all kept paying dividends during the recession. However, we only see two as buys right now. SNC-LAVALIN GROUP INC. $39 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 161.1 million; Market cap: $6.3 billion; Price-to-sales ratio: 0.8; Dividend yield: 2.3%; TSINetwork Rating: Average; www.snclavalin.com) is a leading Canadian engineering and construction company. It specializes in large-scale public works projects, such as roads, bridges, transit systems and water-treatment plants....

CANADIAN PACIFIC RAILWAY LTD., $73.54, Toronto symbol CP, has resumed normal operations now that Ottawa has ended an eight-day strike by its locomotive engineers, conductors and yard workers. The strike probably cut CP’s earnings per share by around $0.20 in the second quarter of 2012. The company earned $0.82 a share in the first quarter. At CP’s recent annual meeting, U.S.-based activist investment firm Pershing Square Capital Management, which owns 14.2% of the company, succeeded in replacing seven of CP’s 16 directors with its own nominees....

CANADIAN PACIFIC RAILWAY $74.58 (Toronto symbol CP; Shares outstanding: 170.9 million; Market cap: $12.7 billion; TSINetwork Rating: Average; Dividend yield: 1.9%; www.cpr.ca) is the 2012 “Stock of the Year” for The Successful Investor, our conservative growth advisory. We chose CP early this year because we liked its plan to increase its efficiency. As well, a prominent U.S.-based activist investment firm, Pershing Square Capital Management, had acquired 14.2% of CP and was pushing for more changes. We thought that would further boost the company’s earnings and share price. Despite a market downturn, CP’s stock is up 8.1% since our Successful Investor recommendation. We think it has further gains ahead....

Activist U.S. investment firm Pershing Square Capital continues to make its presence felt at CP Rail (Canadian symbol CP). With 14.2% of the company’s shares in its hands, Pershing Square has replaced seven of the 16 directors with its own nominees. And it may also aim to install Hunter Harrison, the man who made CNR more efficient, as CEO of Canadian Pacific Railway. Pershing’s involvement is just one reason why we made CP our #1 Stock Pick for 2012. It’s one of many reasons that CP Rail remains at the top of our list of Canadian stocks....

This is the latest in a series of video interviews in which Pat McKeough will give his advice on a variety of topics. Some will deal with his overall investment philosophy, others on specific investment strategies and still others will be comments on events that are affecting the markets and the economy. This time, he discusses one of the most venerable of Canadian stocks. A reader asked about CP Rail, Pat’s #1 Stock Pick for 2012, and all of the media attention it’s receiving. Shouldn’t we avoid stocks in the limelight? Not in this case, says Pat, and he explains why.
The Real News About CP Rail...

CANADIAN PACIFIC RAILWAY LTD., $74.11, Toronto symbol CP, rose 1% this week after U.S.-based activist investment firm Pershing Square Capital Management, which owns 14.2% of the company, succeeded in replacing seven of CP’s 16 directors with its own nominees. CP’s chairman, John Cleghorn, and chief executive officer, Fred Green, also resigned. Pershing Square will probably try to install Hunter Harrison, the successful former CEO of CN Rail, as CP’s new chief executive officer. Even if CP hires someone other than Mr. Harrison, the company will continue to work on improving its efficiency by purchasing new locomotives, upgrading its tracks and streamlining its schedules....

CANADIAN PACIFIC RAILWAY $76.76 (Toronto symbol CP; Shares outstanding: 170.9 million; Market cap: $13.1 billion; TSINetwork Rating: Average; Dividend yield: 1.8%; www.cpr.ca) reported higher-than-expected earnings in the latest quarter. In the three months ended March 31, 2012, the company’s earnings soared 317.6%, to $142.0 million from $34.0 million a year earlier. Earnings per share rose 310.0%, to $0.82 from $0.20, on more shares outstanding. That beat the consensus estimate of $0.75 a share. Severe winter weather and avalanches in B.C. delayed the company’s trains and depressed the year-earlier results. This was the main reason for the earnings jump. Revenue rose 18.3%, to $1.4 billion from $1.2 billion....