Wednesday, February 6, 2019

Recent Sale / Buy, February 2019

I Could Do That Better Gremlin here to talk about a recent sale and buy.  The thing I could do better is most of the Super Bowl commercials, which were bad.  In fact, all commercials during that game should be funny, or you've screwed up.  No one talks about the heartwarming or cute ones, they talk about the funny ones!  Hell this year no one even wanted to talk about the game or halftime show, which were both snoozes to a neutral participant (me).  That being said there were a few funny ones, but seriously if you have millions of dollars - try to hire someone who is funny.

Right, anyway - at the end of January Tupperware (TUP) announced a major 60% cut in its dividend.  As soon as I read this the shares were gone.  Good bye; their stock crashed harder after opening too.  Now I have had stocks through cuts in the past - GE, PGH, and KMI.  Of those I have only held onto KMI.  I have a strong no cutters policy, and I will stick by it.  In addition, TUP has serious business problems.  Why buy their stuff, when I can get products just as good from my local Chinese food take out?  Riddle me that.  In addition, management promoted someone from HR to run the company.  As an scientist / engineer that is practically the most insulting thing you could do.

So yesterday, I added shares of Canadian National Railway (CNI) in my taxable account.  I bought 15 shares, with a total cost of $1,261.05 ($83.605 / share, plus commission).  The current yield is 1.98%. For a detailed summary of their history, etc. please visit: CNI's Seeking Alpha Profile.

There are 7 Class I railroads in North America - Union Pacific (UNP), BNSF - wholly owned by Berkshire Hathaway (BRK.A/B), Canada Pacific (CP), CNI, Kansas City Southern (KSU), CSX Corp. (CSX), and Norfolk Southern (NSC).  Of those, I already own UNP, and I would like to also CSX, NSC, and KSU in the long run.  Rail is an extremely efficient method of travel, and I should know since my office overlooks a train station that I ride a commuter train to and from.  Yes, rail does have its constraints in terms of geographic reach and difficulties expanding.  However, the barriers to entry are beyond extreme and the obvious efficiencies of the system will shield the industry from other delivery methods.  Trucks are inefficient (yes even the electric ones by comparison) and air travel is costly.  Sea travel is efficient, but is constrained in a similar way rail is, plus shipping across oceans is time consuming.  So I will leave that spiel there, about rail in general, because I only added one of the 7 rail companies.

The reason I purchased CNI is twofold.  First, the stock has an excellent history of rewarding shareholders and growth in value.  Second, they have a major geographic advantage that none of the other rail companies have.  CNI has exclusive access to the closest deep water ports to Asia and Europe from North America.  These ports are Prince Rupert, British Columbia and Halifax Nova Scotia, respectively.  There is a huge advantage to that geography, especially considering the world economy will always involve trade and speedier solutions will always be at a premium.

This purchase will add $22~ to my forward 12 month dividend income.

I will update my portfolio page at the end of the month.

What do you think of CNI?

- Gremlin
- Long CNI, UNP, and KMI


  1. A little stock shuffling going on I see. Noting wrong with that especially after a stinging cut. I'm still holding on to my GE and with my January results the cut did not affect my passive income stream year over year... still managed growth. I can understand you wanting to get rid of TUP. Nice rail pick up. Interestingly I never bought into the rail sector. Nothing against it. I know many in the DGI community hold UNP, NSC, CSX, etc. The rails looks like a good swap for your TUP.

    1. Keith,

      Partly stock shuffling, the CNI position is >>>> than the TUP one ever was. I saw GE did hurt your totals, and it still has profitable parts - I considered holding too, but twice getting burned is enough. Either way, a couple of cuts won't slow this engine down. Thanks for the comment!

      - Gremlin

  2. Dividend cuts just suck, don't like them and I actually get pretty pissed off every time I receive one haha WIth that being said, I like your move into the railroad sector. It has been on a tear with strong dividend growth, after a slow period a few years ago. The barriers of entry are high in the industry, which is my favorite kind to invest in :)

    The Super Bowl sucked this year. I was really bored watching it and didn't enjoy anything haha Couldn't agree more with your take about the commercials. They were too safe with the commercials and everyone tried to make the perfect, heart-warming commercial. I don't want to cry or feel emotional after watching commercials, I want a good laugh!


    1. Bert,

      Thanks for the comment. I do too, this one led me to sell this immediately and read up on their management plus to see how they are swimming up river. CNI will make me much more at ease.

      Totally agree with your SB take. Funny how all that cash gets spent and doesn't work on the intended audience, at all!

      - Gremlin