Up by 15.77%: Is CNR Stock a Good Buy in January 2024?

As share prices climb higher, CNR stock looks set to be in recovery mode. However, does that make it a good holding for January 2024?

| More on:
railroad

Image source: Getty Images

With the announcement of interest rate hikes ending and rate cuts on the horizon, the Canadian stock equity markets are going through an uptick. As of this writing, the S&P/TSX Composite Index is up by 11.92% from its October 2023 low.

The rise in the Canadian benchmark index indicates improving performances by equity securities from various industries. As the situation continues to improve, it can mean good news for several sectors of the economy, including the railway industry.

Cooling inflation will likely mark an improvement in economic activities. In turn, it can lead to a greater demand for transporting various goods. The development can mean excellent news for railway stocks like Canadian National Railway (TSX:CNR).

As of this writing, CNR stock is up by 15.77% from its 52-week low. Let’s look at whether it is a good time to buy the stock or remain cautious about allocating money to the railway sector giant.

Canadian National Railway

CNR stock has been around for a long time, delivering substantial growth since it began trading on the stock market. A lot of its growth over the past decade and a half came through the company’s focus on becoming the best in the country when it comes to precision-scheduled railroad commitments. However, the pandemic saw too much of CNR’s focus go toward growth.

The commitment created issues as CNR tried to acquire Kansas City Southern Railway. Unfortunately, CNR stock lost the chance to acquire it, and its biggest competitor in the Canadian railway sector leveraged the opportunity to expand by acquiring the company. As of now, CNR has repositioned itself to being a precision railroad company.

The company’s management aims to generate solid cash flows, eliminate the need for strikes, and manage unpredictable factors like bad weather better. A solid approach to these initiatives can lead to fewer problems. As it serves various industries through its transportation services, an improvement in the economy can combine with its shift in focus to drive growth for the stock and its investors.

Despite losing the chance to expand its railroad network, CNR stock still enjoys the competitive edge of being the only railroad network connecting three coasts in North America.

Foolish takeaway

For all the good news it has, CNR might still face issues in the near term. The railroad company was historically a major contributor to colonization and was involved with residential schools. When it became apparent that CNR would not do much to repair its relations with indigenous people, the council of 12 indigenous advisors in the company resigned.

With no public apology for its involvement in a dark part of Canadian history that had it dubbed “the train of tears,” the company might be looking at a situation where it falls out of favour with investors.

While it has enjoyed some momentum in share price appreciation over the last few weeks of trading on the TSX, CNR stock is in second place in the Canadian railway industry. The company is behind in growth and volume, which might change as the year progresses. However, it will need a strong demand for its services to make a meaningful recovery to better valuations.

It can be considered a risky holding to consider for your self-directed portfolio in the long run.

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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Canadian National Railway. The Motley Fool has a disclosure policy.

More on Dividend Stocks

data analytics, chart and graph icons with female hands typing on laptop in background
Dividend Stocks

Down by 25%: Is Canadian Tire Stock a Buy in February 2024?

Take a closer look at this Canadian retail stock if you are looking for low-cost additions to your self-directed portfolio…

Read more »

stock research, analyze data
Dividend Stocks

Is it Too Late to Buy Dollarama Stock?

Dollarama (TSX:DOL) stock is up almost 200% from its 2020 lows. Is it still a buy?

Read more »

Golden crown on a red velvet background
Dividend Stocks

Cash Kings: The Top 2 Canadian Stocks That Pay Monthly

Two Canadian stocks are cash kings to income investors for their generous dividends and monthly payouts.

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

2 No-Brainer Stocks to Buy Right Now for Less Than $20

Cheap TSX stocks such as Savaria have the potential to deliver steady gains to long-term shareholders in 2024.

Read more »

grow dividends
Dividend Stocks

TFSA Passive Income: 2 Dividend Stocks to Double Up on Right Now

These top TSX dividend stocks are on sale.

Read more »

Aircraft wing plane
Dividend Stocks

Is Bombardier Stock a Buy After Missing its Earnings Estimates?

After going past its earnings estimates, Bombardier stock looks like an excellent holding right now.

Read more »

Businessperson's Hand Putting Coin In Piggybank
Dividend Stocks

RRSP Ready: 2 Stellar Stocks for Your Annual Contribution

Two high-yield stocks are ideal options if you plan to maximize your annual RRSP contribution limits and reduce taxable income.

Read more »

grow dividends
Dividend Stocks

3 Stocks That Could Be Easy Wealth Builders

Long-term investors would be wise to have these three Canadian stocks on their radar.

Read more »