Canadian Pacific Kansas City Limited (CP): A Bull Case Theory

We came across a bullish thesis on Canadian Pacific Kansas City Limited on Disruptive analytics’s Substack by Magnus Ofstad. In this article, we will summarize the bull’s thesis on CP. Canadian Pacific Kansas City Limited's share was trading at $79.83 as of June 23^rd. CP’s trailing and forward P/E were 26.61 and 22.83, respectively according to Yahoo Finance.

Canadian Pacific Kansas City (CP) operates a vital rail network stretching from Northwestern Canada through the U.S. Midwest to Mexico, transporting essential bulk goods like grain, coal, potash, fertilizers, and automobiles. These commodities are largely immune to cyclical disruptions like AI-driven automation or shifting trade policies, providing the business with durable demand. CP's 2021 acquisition of Kansas City Southern created the only single-line railroad spanning North America north to south.

While the merger initially weighed on operating margins due to integration costs, those margins are now improving as the integration matures. Despite tariff concerns, CP stock is up 10% year-to-date, reflecting investor confidence in the company’s long-term positioning. As a capital-intensive business, CP regularly reinvests in infrastructure, including sidings, double-tracking, and terminal upgrades, to increase capacity and drive operational efficiency. These infrastructure improvements, while costly, are key to unlocking future growth.

While not a flashy investment, CP is underpinned by a resilient business model, a strong economic moat, and long-lived assets. A discounted cash flow analysis suggests the company is fairly valued at current levels, though its steady cash generation, essential service profile, and network scale make it a compelling long-term hold.

With activist investor Bill Ackman stepping back, CP may now offer an opportunity for value-focused investors to enter a stable, wide-moat business with improving fundamentals and manageable downside. Though lacking immediate excitement, CP’s slow-but-steady trajectory could reward patient investors over time.

Previously we covered a bullish thesis on Canadian National Railway Company (CNI) by Kay Kay in February 2025, which highlighted its irreplaceable network, regulatory protection, and pricing power. The company’s stock price has appreciated approximately by 3% since our coverage. The thesis still stands as CNI’s moat remains intact. Magnus Ofstad shares a similar view but emphasizes CP’s North-South integration benefits.

CP isn't on our list of the 30 Most Popular Stocks Among Hedge Funds. While we acknowledge the risk and potential of CP as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock.

READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.

Disclosure: None. This article was originally published at Insider Monkey.