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(B)(N) CNR Canadian National Railway Company

December 12, 2012

Deal Book. We seldom make money in the stock market by “accident” because the most likely place for accidents to happen is in the “volatility zone” (N) of stock market pricing and we never own any of the companies that are trading in (N) in the Perpetual Bond™ (B) which is the only kind of investment that we’ll make.

Of course, there are “up accidents” (please our Post, The All Canadian Four Play, October 2012) of which there are few and “down accidents” of which there are many. Please see, for example, our Post, (B)(N) RIM Research in Motion Limited, November 2012, but that is far from being an exception in the rather long list of “down accidents” that we have reason to avoid and which usually affects at least half the market and sometimes as much as two thirds and even more. The “expected return” of a portfolio of the stocks of companies all of which are trading in (N) is, not surprisingly, zero or less. Please see, for example, two of our Posts from June, Capital Safety in the Market Lane and NASDAQ 100 – (B)(N) There And Done That, for information on the “Contra Portfolio” which is all (N) as most investors are finding out “accidentally” and “anecdotally”, as it were.

It is surely also not a surprise that in order to avoid “accidents” we need to keep our heads up and not be talking on our cell phones (to our broker, for example). We’ve talked about the two Canadian railroads in our earlier Post (please see, (B)(N) CP Canadian Pacific Railway Limited, November 2012), CP in the context of Pershing Square Capital Management and their efforts to correct what they saw as a “down accident” which created for us a rather pleasant “up accident” because we were already there way before them. Today we have the further encouraging news that Cascade Investment LLC had upped their stake in the Canadian National Railway to more than 10% representing an investment that is currently worth about $4 billion (The Canadian Press, December 12, 2012, Microsoft founder Bill Gates ups stake in Canadian National Railways to 12%) and, again, fortunately, we were in the right place at the right time. Go figure.

Exhibt 1: (B)(N) CNR Canadian National Railway Company – Risk Price

(B)(N) CNR Canaidan National Railway Company - December 2012

Canadian National Railway Company is engaged in the rail and related transportation business.

(Please Click on the Chart to make it larger if required.)

The Chart shows that we have held CNR continuously since $45 in 2009 and are still holding it now at $98 (up from $85 in November). We generally don’t care about the purchase price (subject to the rule that the stock price should be plausibly above the Risk Price (SF)) but “selling” is a discipline and can be done by actually selling all or part of the stock or by taking a long put position to protect the price that we have over market volatility. Please see our Post, The Wall Street Put, August 2012, for more information on the buying and selling discipline.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of  investment lore. We have just one product

The Perpetual Bond™
“Alpha-smart with 100% Capital Safety and 100% Liquidity”
Guaranteed
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to RiskWerk@gmail.com.

Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.

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