Techquity
Technology Investor, Fundamental Research
Canadian Pacific Kansas City has a huge moat in long-distance North American freight as the only railroad running one connected line across Canada, the US and Mexico. Competitors must hand off freight at borders, switch carriers and deal with delays, while CPKC runs one network under one operator from north to south. It is a business to buy and hold for many years. x.comÂ
North American freight railroads own right-of-ways that would be impossible to recreate today, which makes them permanent holds. California's $126 billion-plus high-speed rail shows the cost: much of its spending goes, directly and indirectly, to securing right-of-way for just a few hundred miles in one state. Recreating that nationwide, especially in dense areas like CSX's East Coast, is impossible. Union Pacific is acquiring Norfolk Southern. x.com x.comÂ
North American railroads are irreplaceable franchises, since land, permits and capital to build new ones don't exist, and a wave of mergers is reshaping the board. Union Pacific is best in class at a 59.6% operating ratio versus Norfolk Southern's 70.3%, a spread that is pure management and the core of their merger thesis. If that deal passes, BNSF's answer is CSX, a $100B-plus deal only Berkshire can fund in cash. Canadian Pacific Kansas City suits long-term compounding. x.com x.com x.com x.comÂ
CSX could get a boost as high oil prices push logistics from trucks toward trains. x.comÂ
Union Pacific holds one of six irreplaceable franchises dividing the continent, since nobody will ever build another US railroad: the land, permits and capital don't exist. Its latest results back that up, with operating earnings up 12% on higher fuel surcharges, volume growth, core pricing gains and other revenue, partly offset by business mix. US railroads are breaking out to all-time highs. x.comÂ
Berkshire Hathaway is hard to call expensive: about $400B of cash and $300B of stocks mean a roughly $1T valuation pays only about $300B for the railroad, energy, insurance and operating businesses. Its insurance float is a massively underestimated source of cheap capital, and the cash is a call option on future chaos, letting it write huge checks when markets panic. Greg Abel understands its culture. Whitney Tilson, quoted via @kejca, expects it to beat the S&P 500 over five years. x.com x.com … Show more
Trucking and freight brokerage stocks look extended and expensive, pricing in an improbably steep earnings ramp. CDL licensing is tightening capacity and AI capex buildouts help areas such as flatbed, but J.B. Hunt trades near 30x next year's earnings. XPO is the most egregious, as less-than-truckload carriers will lag the upcycle while adding capacity. Landstar faces weak brokerage margins and platform pressure versus other public brokerages, before AI's effect on take rates. x.comÂ
