The Lifetime Investment Stock I’d Buy With $8,000

Here’s why I would invest an $8,000 windfall in Canadian National Railway (TSX:CNR)(NYSE:CNI) right now.

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Where would you invest an $8,000 windfall?

Once in a while, investors find themselves with a bit of extra cash. It might be the result of a bonus at work, a rebalancing of the portfolio, or even a small inheritance. Regardless of the source, the thing we Fools want to do is invest it wisely.

Here are the reasons why I think Canadian National Railway (TSX: CNR)(NYSE: CNI) would be a great investment right now.

1. Competitive advantage in intermodal transport

Canadian National Railway owns 32,000 km of rail tracks serving the U.S. and Canada, and is the only railway company in North America that has access to three coasts.

This unique rail network is a huge competitive advantage right now for Canadian National because the entire long-haul transport industry is undergoing an incredible transition. In the past, the long-distance intermodal market was dominated by trucking companies because trucks were simply the most efficient and cost-effective way to transport raw materials and finished goods.

Today, with improved efficiencies at rail operators and higher diesel costs for truckers, the railway companies are able to compete for more of the long-haul business.

Canadian National Railway is benefitting greatly from this transition. In its second-quarter earnings statement, Canadian National reported intermodal freight revenues of $716 million. This accounted for more than 24% of total freight revenue for the quarter.

To enhance the level of service Canadian National offers its customers, the company operates more than 20 intermodal terminals located at strategic points throughout its network.

Canadian National Railway’s management continues to enhance its end-to-end competitive advantage throughout the supply chain, and shareholders should see long-term benefits. These are still the early days for big changes in the intermodal transport sector.

2. Oil and gas clients

Canadian National’s extensive network also gives it a great advantage to tap into the new energy renaissance in the North American oil and gas industry.

Pipeline bottlenecks in western Canada have spawned exponential growth in crude-by-rail shipments in the last few years as Canadian oil producers are sending crude oil by train to reach higher-priced markets.

The western Canadian oil producers are also sending massive amounts of oil by rail to refineries. For example, in the second quarter of 2014, Suncor Energy Inc. sent an average of 36,000 barrels per day of crude oil by train from its oil sands operations in western Canada to its facility in Montreal. Historically, the feedstock crude for the refinery was sourced from overseas suppliers. Now, the cheaper and more reliable option for Suncor is to send western Canadian crude.

One other major change in the oil and gas industry has been a huge addition to Canadian National’s revenues — shale gas. The process of hydraulic fracturing for shale gas involves pumping a mixture of water and sand into the shale formation to force the release of trapped natural gas.

The amount of sand required for this process is massive and Canadian National Railway is delivering increasing volumes of it to feed the boom in shale gas production.

3. Economic growth in the U.S.

Demand for cars, lumber, and manufacturing supplies continues to grow as the U.S. economic recovery progresses. Canadian National’s unique rail network gives its customers access to nearly all the major population centres in the U.S. and Canada.

4. Dividend growth and capital appreciation

Canadian National Railway increases its dividend every year and shareholders have slept well while watching the stock rise nearly 500% in the past 10 years.

Canadian National Railway is one of those rare stocks you can buy and hold forever. The company has a sustainable competitive advantage, offers reliable dividend growth, and provides the opportunity for steady capital appreciation. That’s probably why Bill Gates own 13% of the stock.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Walker has no position in any stocks mentioned. David Gardner owns shares of Canadian National Railway. Canadian National Railway is a recommendation of Stock Advisor Canada.

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