Home > Stock Market Buys > B BNI @ 79.20

B BNI @ 79.20

Just bought BNI, for a number of reasons.  At a PE of 16, they are undervalued relative to the industry which has an average PE of 20.  Their loads are diverse, without too much exposure to energy, unlike some of the canadian railroads.  Geographically, they are in a strong position with an extensive network in the Mid-West, a location which has been hurt less in this downturn than either of the coasts, but also to the West with it’s valuable ports servicing Asia. They pay a dividend of $0.40 per quarter, which equates to a 2% yield that is well covered by earnings.

On the negative side, they are leveraged to macro-economic performance, and the GDP numbers that came out today do not instill confidence that the country is performing that well. They are also tied to consumers, and consumer spending, which did increase during the previous month, but is expected to decline again as the savings rate recovers after the government spending incentives expire.   And while they may be cheap relative to their peers, the whole industry may be overvalued, as 20 sounds pretty lofty.
Technically, their stock is developing some strong signals that say buy.  If you draw a regression channel from the bottom of the market in March to today (10/1/09), it is currently approaching the bottom of that channel, which coincides with a previous high, creating some good resistance. The Relative Strength index has taken a tick higher after being at the lowest level in months, and while volume has been declining steadily for months, as is has for all stocks, volume actually has started increasing and September volume was higher than August.

Disclosure: Long BNI, no positions in any other railroad stocks.


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