Bill Gates has been accumulating shares of CN Rail (TSX:CNR)(NYSE:CNI) for many years now. The wide-moat company that many of us like to refer to as “North America’s most efficient railway” has been navigating through a tough 2020. While headwinds have weighed on CN Rail’s past few quarters, I still applaud CEO J.J. Ruest and company for having done a stellar job of managing through one of the worst crises in recent memory.
Warren Buffett, a great friend of former Microsoft co-founder Bill Gates, is also a raging bull on the business of railways. Through Berkshire Hathaway, the Oracle of Omaha owns BNSF (Burlington Northern Santa Fe) railroad in whole. BNSF is one of the biggest North American freight railroads out there. In many ways, the railway is pretty similar to CN Rail.
The railways are magnificent investments over time. Just ask Warren Buffett and Bill Gates
CN Rail also has an extensive network that reaches all three major North American coasts, with a moat that’s wide enough to protect the firm’s share of economic profits over the long run.
With a history of posting enviable operational efficiency, CN Rail, I believe, is a best-in-class railway that ought to be at the foundation of any long-term Canadian investors’ portfolio. The company’s dividend may seem small at just shy of the 2% mark, but it’s subject to the greatest (and most predictable) magnitude of growth, not just over years but over decades.
Warren Buffett and Bill Gates love the railways for their vast moats and their highly predictable earnings over time. While railways are cyclical (I like to refer to them as the heart of the economy), they tend to hold their own far better than most other stocks when Mr. Market deems it’s time to pull the rug from underneath investors. So, while cyclical, the wide moats of CN Rail make their stocks seem more defensive in nature, as it’s the rails that tend to come roaring on the back of new bull markets.
Bill Gates trims his exposure in CNR stock: Should long-term investors care?
Most recently, Bill Gates trimmed his stake in CN Rail stock, raising $370 million from the sale of just over 2.5 million shares. That’s a pretty big chunk of profits that Gates took off the table. However, I don’t think the move is a sign of bad things to come for CN Rail, as it looks to bounce back from the horrific coronavirus crisis. If anything, I’d be more inclined to load up on the stock ahead of an economic reopening.
So, why did Bill sell the stock?
We can only speculate as to the reasons why the man chose to take profits. But if I had to guess, it’s not because he’s no longer bullish on the company over the long term. The recent CNR share sale was from the Bill & Melinda Gates Trust. If I had to wager a guess, I’d say Gates is looking to raise additional funds to further aid in the fight against COVID-19.
As such, CN Rail investors shouldn’t panic or think that Bill Gates is beginning a series of share sales that could eventually see the man exit the stock. Gates still owns over 14 million shares of CN Rail and is still one of his biggest holdings.
If anything, investors should look to buy the shares that Gates has sold. CN Rail will keep on rolling for many years to come, and I think Gates is still bullish on the name over the long term.
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Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Joey Frenette owns shares of Berkshire Hathaway (B shares) and Canadian National Railway. David Gardner owns shares of Canadian National Railway. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares), Canadian National Railway, and Microsoft. The Motley Fool recommends Canadian National Railway and recommends the following options: short March 2021 $225 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and long January 2023 $200 calls on Berkshire Hathaway (B shares).