Canadian National Railway - Continues To Chug Along

Canadian Nattional Railway (CNI) reported 4Q2018 earnings that were very strong and confirm the turnaround in the operations after JJ Ruest took over the company almost a year ago.

CNI ended 2018 with EPS of C$5.5 and projects EPS of C$6.15 for 2019 which is 10%+ increase. North American economy continues to power along and outlook for most end markets including Inter-modal, Grain, Commodities, Chemicals, Oil and Gas all very strong for 2019. Autos and Lumber (Housing) could be softer than the peak in 2017/2018. CNI is trading at $83 (C$109) which is close to 17.5 times Forward EPS which is inline with long term averages. CNI increased the dividend by 18% to C$2.15 from C$1.82 and also plans to buy back 2-3 % of shares outstanding which are currently stand at 727M.


CNI 4Q2018 Earnings Release
CNI 4Q2018 Results Presentation

FB and AAPL - Best Value In Large Cap Tech

FB and AAPL are the Best Value In Large Cap Tech. Even with FB rising to $165 after 4Q2018 earnings and AAPL at $165 after 1Q2019 earnings they trade at 16 times and 12 times Forward EPS Multiple excluding net cash. These are reasonable multiples for growing companies that are dominant in their end markets and with some innovation can accelerate earnings growth.

AAPL 1Q2019 Earnings Release

FB 4Q2018 Earnings Release

Opportunity to take a Bite of Apple

The correction in AAPL from $233($1.1T market cap) to $145 ($690B market cap) has brought AAPL shares to a very reasonable valuation. Excluding the net cash position shares trade for 12 times forward earnings for a company that is the #1 in its industry and has no immediate risk of disruption.

The slowdown in sales and earnings due to impacts in China and risk due to US China trade war are now priced into the stock. If AAPL can show incremental innovation and show some growth in services and hold its ground in iPhone and iWatch sales we can expect a $200 share price and $900B valuation. Any innovation would imply additional upside.