ALL ABOARD! CN RAIL

The conservative stock recommendation for this week is . . . drum roll . . . Canadian National Railway (CNR trades on TSX). Yes, this is the stock Bill Gates owns in huge quantity. Yes, this is the sector Mr. Warren Buffet is invested in as well. Think you are smarter than those two? CN Rail slid in latter part of 07, but recently bounced on good forth quarter earnings and an announced 10% dividend increase. The future is bright for this stock.

UBS analyst Fadi Chamoun said in a note to clients Wednesday that earnings are likely to pop in the coming years. “The current recession in the housing market and the rapid appreciation of the Canadian dollar have masked CN Rail’s earnings power in the past 12 months,” Mr. Chamoun said in a note to clients. “We believe that CN Rail’s continued investment in productivity, ongoing share buyback and projected ramp-up of some of its revenue initiatives... build a solid base for recovering earnings power in the next two years”

Check out CNR’s chart on Google Finance

2008 has already proven to be volatile and looks to be a very tricky year for investors. The most minute good or bad news sends massive ripples through the market. The Inspector recommends sticking with a solid stock, through good and bad. CN is such a stock. Buy it on the dips.

As always, never buy or sell all at once. Average out your price by buying or selling in increments, usually in about two or three different transactions. Too many people seem to think that buying all at once is cheaper, since it incurs lower transaction fees. Think about how little a stock price needs to move to pay out that transaction fee.

Another piece of advice: keep your eye on your target. For CN, the Inspector’s target is to buy and hold, barring any catastrophes. The Inspector plans to add to the position on dips, or in the case of a substantial run-up, sell a portion. It is good to remain flexible.

DISCLOSURE: I own shares in CN Rail. It’s a good company and a good sector to be in. However, don’t take the Inspector’s word for it – always do your own research!