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CN Rail (Andrew Vaughan/Andrew Vaughan/The Canadian Press)
CN Rail (Andrew Vaughan/Andrew Vaughan/The Canadian Press)

Schizas’ Mailbag

No end in sight for CN stock’s epic run Add to ...

Hi Lou,

Looking to buy a dividend stock to keep long term and help fund my retirement goals which are 30 years out. It’s for the RRSP so I need to minimize risk. I am considering CN Rail. While it is at a high price and P/E, I wanted to know your thoughts if it is still a good entry point as I believe they have still some things working for them.

Thanks in advance,

Rick

Hey Rick,

Thanks for the assignment.

I want to congratulate you for taking a long-term view of your retirement goals. Unless of course you are 60 years old and dreaming of Freedom 90! This will be the fourth time since 2009 that I inspect the charts for Canadian National Railway Co. (CNR). The last time was on Oct. 25, 2013, on a request from Mario. The shares were trading for $115.45 and he was concerned about the pending 2 for 1 split. The research indicated that the shares had more to give and that he should consider the split as a market neutral event. What drove the analysis was the strength of the uptrend line and the ongoing support along the moving averages. When the shares pulled back buyers were willing to step in at what they saw as sales prices. It was also mentioned that the company had reported a long string of earnings growth that beat analyst expectations. In retrospect, continuing to hold the stock through the split was the right call.

Another scout of the charts will help you in deciding if CNR is suitable for your RRSP.


The three-year chart once again exhibits an intact uptrend line and support along the moving averages. In addition, there is an ongoing series of higher highs and higher lows. Finally we have the golden cross that formed in late October of 2011. If you were looking for a masterpiece to hang in your office this chart should be considered!


The MACD and the RSI on the six-month chart both signaled a buy in April when the shares tested support along the 50-day moving average then ran to a 52-week high of $74.75 in late July. The stock has pulled back and is building a base near $72.00. We did get a signal ahead of the retreat from the MACD and the RSI.

It is impossible to give you a forecast for the next 30 years but I would say that there isn’t much evidence of a trend reversal at this time. The trend is your friend until it ends. The next quarterly report is scheduled for October, which you should put on your calendar. You mentioned your criteria include dividends, which in the case of CNR yields 1.38 per cent. I would also advise that you should buy some on a regular basis over the next 30 years to average in your purchases.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it in to lou@happycapitalism.com.

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