There aren’t all too many investors who can commit to investing for the next three years, let alone the next three decades! Undoubtedly, if you’re a young, new investor who’s looking to build a fairly large nest egg for retirement, you should aim to flex your number-one advantage (time) in the world of investing. Indeed, time really is on your side. And the sooner you get started with your first investment purchases, the better.
Though bargain-basement stocks may not rally swiftly overnight like artificial intelligence (AI) stocks can, I do think the risk/reward trade-off favours long-term investors with the patience and mindset to ride things out over the years and decades.
While the future is unknowable, I see various industries that stand to be less impacted by the rise of various game-changing, disruptive innovations. Whether we’re talking about large regulatory hurdles that can prevent new entrants from taking share from industry incumbents or firms that leverage technology to sharpen their competitive advantages, there exist the types of companies that are fit for holding on for decades.
CN Rail: A dividend-growth stock to stash away
First, we have CN Rail (TSX:CNR), a company with one of the widest moats around. As you may know, it costs a fortune to purchase the assets (think rail cars, tracks, locomotives, and all the sort) to even get started in the railway business.
With hefty regulatory hurdles in the rail business, some of which are impossible for new entrants to pass, potential new rail rivals will be halted in their tracks (pardon the pun) from building a rail track as extensive as CN’s or anywhere near its turf.
Simply put, CN Rail’s extensive network is unique and impossible to replicate.
That’s not to say that firms can’t acquire their way to a more competitive track network. I think mergers and acquisitions (M&A) are the only way to go for rail firms looking to expand their presence across the continent. And as impressive as CN Rail’s network already is, I think the company may have enough financial firepower to acquire one of the extensive rail players south of the border.
Indeed, consolidation activity in the rail scene may prove inevitable, especially if CN can demonstrate that it can move goods more efficiently from coast to coast (or somewhere in between).
CN Rail: What lies on the track ahead?
It will be interesting to see what the firm seeks to buy after missing out on acquiring Kansas City Southern. For now, smaller, short-line rail acquisitions could help CN Rail steadily expand its presence. Perhaps doubling down on trucking services could also be an excellent complement, especially once self-driving trucks and convoys begin to go mainstream. Should the economy be rocked by a recession, perhaps CN Rail could acquire another major U.S. rail firm at a hefty discount.
At 19.2 times trailing price to earnings (P/E), CNR stock also looks discounted for investors seeking a core holding they can buy and forget about for the long run.
With a growing 2.06% dividend yield, CNR stock is a name to watch if you’re a fan of the “buy-and-hold-forever” investing style. As we move past rail strikes, I view CNR as an absolute steal, especially compared to other pricier rail stocks today, many of which are overdue for a violent valuation reset.
