Buffett, Rockefeller Benefit Canadian Pacific - TheStreet

CALGARY, Alberta (


) -- We think of the Rockefellers as historical fixtures in the U.S. rail industry, as tied to the growth of the railroad industry as the first railroad ties that bridged the Continental Divide. More recently, Warren Buffett has staked his claim to U.S. railroad history with his planned acquisition of

Burlington Northern

( BNI).

So it may not seem immediately apparent that in the current railroad market, it is

Canadian Pacific Railway

(CP) - Get Report

that may stand to gain the most from the Rockefeller and Buffett names.

BB&T just upped Canadian Pacific from underweight to hold. While the ratings upgrade is far from a big bullish call on Canadian Pacific, BB&T sees marginal upside for the rail operation in proposed rail regulation legislation working its way through the U.S. Congress, and courtesy of Warren Buffett.

BB&T believes the upcoming reallocation by

Burlington Northern

( BNI)shareholders, once the rail industry's largest player is folded within Warren Buffett's

Berkshire Hathaway

(BRK.B) - Get Report

, may benefit Canadian Pacific more than other rail stocks.

"While most of the positive catalysts for Canadian Pacific are in line with a positive outlook for all rails, there are some firm-specific reasons to be more positive," said BB&T analyst John Mims. Mims explained that if legislation being headed by Sen. Jay Rockefeller (D-WV) requires increased terminal access regulation in locations like the Los Angeles-Long Beach terminal location, Canadian Pacific may be able to gain some traction that few other railroads could in that event.

As for the reallocation by Burlington Northern investors to other railroad stocks, Mims sees a more direct parallel between Burlington Northern and Canadian Pacific, rather than Burlington and other rail operations.

"With Burlington Northern going away, that is 24% of the market cap in that space going away, and that will cause the scarcity play, and these two companies have a lot in common," Mims said. The most apt comparisons are that both Burlington Northern and Canadian Pacific are both East-West operators, have 30% of revenues derived from intermodal business, and are both strong bulk-export franchises.

Still, Mims stopped short of a buy on Canadian Pacific because shares have performed so well recently. Since a July trough in the low $30s, it's been a climb reminiscent of a Rockies Mountains pass for Canadian Pacific, trading near its 52-week high of $54.88 on Monday.

The overall outlook is strong, as net coal exports will rise on stronger demand from China for steel production ... but that's not a Canadian Pacific-specific story.

The BB&T analyst still does not see enough reason, even with the potential regulatory and Buffett bump, to be too bullish on Canadian Pacific. "

Next year will be good for the rail industry in general, but I'm not getting super bullish. I'm waiting for a better entry point. Nothing in particular jumps out making me want to pound the table now on CP, but it will be interesting to watch," Mims said, adding, "I view it like a global gateway rail."

-- Reported by Eric Rosenbaum in New York.


>>Is Warren Buffett Inspiring a Rail Bubble?

>>The Berkshire Bump the Market is Missing

>>See our new stock quote page.

Follow TheStreet.com on


and become a fan on


Copyright 2009 TheStreet.com Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.