A recent addition to my Speculative Portfolio has been Canadian National Railway (CNI). Although there are other rail stocks that appeal in the current energy price environment, CNI has unique characteristics that made it my choice.

Canadian National Railway is enjoying a high profit margin of approximately 26%, which is at or near the top in the industry. The company states that it has many more short-term than long-term freight contracts, which gives them the ability to adjust rates to accommodate current economic conditions. Investors who follow the rails know that CNI benefits from the huge Price Rupert Terminal, which is projected to bring in approximately $110m to CNI coffers this year.

True, earnings missed consensus by a penny ($0.61/$0.62) recently, but considering the severe weather (CNI had to shut down temporarily to ensure safety), fuel and maintenance issues, the quarter could have been worse. Excellent year ahead earnings seem right on "track".

The stock is priced at $50.92, which is slightly above its 200-day moving average and at a mid-point from a 52-week high of $58.49 and low of $41.89. However, the PE of CNI is around 12, significantly below the industry PE average of 20. I see no compelling reason for the disparity. In fact, with the recent grain shortage panic and continuing energy issues, CNI stands to benefit from increased shipments of these commodities as well as increased freight traffic from elsewhere in Canada and the U.S. as rails remain an obvious choice for efficient, relatively cheap transport. (Click map of CNI rail system to enlarge.)

Canadian National Railway could be a $65.00 stock one year from now.

Note: I mentioned the Prince Rupert Terminal being an earnings windfall for CNI. Here is a tidbit of news for readers. There is a proposed $12b plus container port scheduled to be put in place on the Cape Fear River between Wilmington and Southport, N.C., which will be amongst the largest on the eastern seaboard. Slated for operation around 2015, the port is to employ 12,000 workers once the political posturing ceases. I am presently looking into the rail system(s) and other infrastructure plays that will most benefit from this major addition to our country's incoming container traffic system.

Disclosure: The author owns CNI.