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TIP860: Canadian Pacific Kansas City Limited (CP.TO): Irreplaceable Moat, Unproven Compounding w/ Kyle Grieve & Shawn O'Malley
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In today’s episode, Kyle Grieve and Shawn O’Malley discuss Canadian Pacific Kansas City, the only railroad that connects Canada, the United States, and Mexico on a single network. They trace how the company helped shape Canada, how an activist investor and a legendary railroader turned it into one of North America’s best-run railroads, and why a transformational merger has made its recent results much harder to judge. Along the way, they look at the barriers to replicating a railroad, management’s compensation program, the risks facing the business, and the company’s current intrinsic value.
IN THIS EPISODE YOU’LL LEARN:
(00:00:00) Intro
(00:02:18) How a railroad helped decide the shape of Canada
(00:04:05) Why railroads are among the hardest businesses to disrupt
(00:12:49) How Bill Ackman and Hunter Harrison transformed Canadian Pacific
(00:13:52) The scheduling idea that optimized railroad margins
(00:30:06) What makes CPKC’s three-country network nearly impossible to replicate
(00:44:19) Why an irreplaceable moat doesn’t guarantee great shareholder returns
(00:55:43) The hidden accounting reason the merger still weighs on returns
(01:10:15) How a rival mega-merger could threaten CPKC’s growth story
(01:17:57) Valuation discussion
(01:20:04) What CPKC is worth today, and what would change our minds
(01:20:49) Whether CPKC will be added to their position in the Intrinsic Value Portfolio
Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences.
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