Canadian Pacific Railway

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

The biggest position in Pershing Square's portfolio is Canadian Pacific Railway ( CP), a $12.6 billion railroad that owns close to 15,000 miles of track that spans Canada and come of the Northeastern and Midwestern U.S. Ackman's firm owns a $1.83 billion stake in Canadian Pacific, totaling 14.2% of the firm's outstanding shares, enough to earn Ackman seats on the board this year as well as a coup in selecting the firm's CEO.

Canadian Pacific earns the lion's share of its revenues by transporting commodities like coal, grain and fertilizers, no great shock given the geographic location of CP's tracks across Southern Canada. That's attractive positioning because commodities tend to be more resilient to economic headwinds than other, more cyclical freight categories like industrial goods.

Canadian Pacific has tended to lag the rest of the Class I railroads in the last few years, putting up stagnant efficiency ratios while bigger railroads upped their financial performance. But with investments in fuel consumption and a push towards using longer trains, Canadian Pacific is well positioned to up its efficiency in the next few years.

>>5 Volatile Stocks to Buy More Of

Financially, the firm has felt some ill effects from having to maintain those thousands of miles of track: the firm has a lot more debt than its peers do. But that comparison is exacerbated by the fact that its peers have trimmed their own debt loads of late.

Despite the bigger debt load, CP should have no trouble covering its obligations with the amount of cash it generates.

If you liked this article you might like

Fed Pares $4.5 Trillion Balance Sheet But Easy-Money Era Isn't Over

Bank Stocks Move Higher as Fed Decides to Start Unwinding Balance Sheet

Bank Stocks Move Higher Ahead of Federal Reserve Meeting

All Eyes on the Godfather of Central Banking as Fed Has Huge Meeting This Week

The Stock Market Stinks and the Stench Is Going to Get Much Worse Soon