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!

Greed is NOT Good!

You don’t need the Inspector to tell you that the markets are in trouble. The Toronto Stock Exchange plunged more than 500 points in early trading Monday, following steep declines in the European and Asian stock markets amid investor pessimism over the U.S. government's stimulus plan to prevent a recession. Precious OIL is down below $90. The key point of all of this, besides the pain and bloodshed, is that the US Fed WANTS commodities to take a hit. They want oil prices to weaken. What this means to investors is that right now commodity stocks are on sale. However, this does not mean all stocks have bottomed.

Best advice the Inspector has is to limit your exposure to over-valued stocks. For example, Potash recently crashed back to earth. Back in December the Inspector profiled Potash a second time, after a huge run up. I sold a significant portion of my holding and hopefully you followed suit if you were in a similar circumstance. Within a few weeks after selling a significant portion of my holding, Potash ran up even further. Rather than kick myself for missing $146, I was happy to have locked in a profit and now that is has come crashing down I can arrogantly say “told you so.” Never get too greedy! When you have a chance to take 15% off the table, especially with a volatile stock in a volatile market, do not hesitate!

The Inspector’s new year’s resolution is to be extremely vigilant about the investment advise published. 2007 was a good year, but 2008 looks to be a very tricky year and nothing can be taken lightly. One of the improvements for the InspectorSTOCK.com blog will be more frequent updates on all stocks mentioned. Often times a stock is profiled and not revisited once circumstances change – the Inspector does not want to mislead. For this reason, the Inspector will regularly update all stocks mentioned. None the less, the onus is always on you the reader, to research fully any investment advice presented. Don’t trust anyone! Certainly not me! Trust the facts!

SELL! In case you did not read the 2007 Inspector STOCK re-cap, several stocks have fallen out of favour with the Inspector since profiling them. They include Canadian Tire and KRY. This was communicated January 1st 2008. The Inspector now adds to the sell list, Rogers Communications.

BUY! Petro-Canada is a good value. Be prepared for ups and downs – long-term though, this stock will gain modestly and allow you to sleep at night.

In the next blog entry, the Inspector will profile a company not covered before that will allow further restful nights. A conservative stock that you can count on during a very perilous investment climate. Have no fear, the Inspector is here!

DISLCOUSRE: I own shares in Petro-Canada, Potash, Rogers and CRYSTALLEX. Chavez is a commie bastard!

Read My Lips - BCE DEAL IS GOING TO GO THROUGH!

Back in August, this site profiled BCE and the proposed leveraged buy-out by the Ontario Teacher’s Pension Fund - if it goes through it will be the largest LBO ever. The take-out price is set at $42.75 and the deal is now due to close in the 2nd quarter of this year. Back in August, BCE was trading around $39. The deal was thought to be pretty close to a sure thing.

With the recent market turmoil and investor anxiety, BCE has gone down further. BCE closed today, January 18 2008, at $36.37.

Well, the good news is that the Inspector still thinks this deal will close and recommends BCE as a buy.

Understand the risks – if the deal does not go through, the stock price will drop like a stone to around $24. However, even this worst-case scenario should be temporary, as BCE has assets many other suitors covet. In the unlikely event that the Ontario Teacher's Pension Plan deal does not go through, BCE would likely be able to garner other offers. This would be a very painful and bumpy road, but good to understand. The biggest stumbling block for the deal to close is banks coughing up the money for this leveraged buy-out. We all know about the credit squeeze taking place, and this is largely the reason why BCE is trading down. Investors are worried sick.

Well, as is often cited by the Inspector, other people's panic can be to your advantage. The panic bodes well for investors with strong stomachs. With BCE trading at $36 and change, there is an opportunity to make more than 15% in about 6 months. Nothing is certain in life except death and taxes (and even those are and have been challenged! Witness Wesley Snipes fighting the IRS and Dr Ron Paul running for the Republican nomination on a platform that includes abolishing the IRS! As for death, well, that’s still frozen in time, so to speak.)

In any case, the Inspector won’t promise you immorality or end taxes (though if you live in the US, you might do well to get behind Ron Paul and get the word out!). What the Inspector will do is provide you with sound investment advice. In a really nasty market such as the one we are in, BCE is a nice opportunity to make some cash.

DISCLOSURE: I own shares of BCE. Always do your homework.

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