Appalaches Capital, an investment management firm, released its third-quarter 2024, investor letter. A copy of the letter can be downloaded here. Appalaches Core LO ended the quarter with a 3.0% gain after all fees and expenses compared to the S&P 500’s return of 5.9%, the equal-weighted S&P 500’s return of 9.6%, and the SOFR Index return of 1.4%. The fund has achieved a net return of 7.1%, year-to-date. During the quarter, the firm made several changes to the portfolio, with about two-thirds now allocated to risk assets, aligning better with a normalized allocation, and planning to invest idle cash as opportunities arise in companies with strong competitive positions. The firm aims to buy shares at a discount to their intrinsic value, but this has been more challenging over the past year. In addition, please check the fund’s top five holdings to know its best picks in 2024.
Appalaches Capital highlighted stocks like Canadian National Railway Company (NYSE:CNI) in the third quarter 2024 investor letter. Canadian National Railway Company (NYSE:CNI) operates rail, intermodal, trucking, and marine transportation and logistics. The one-month return of Canadian National Railway Company (NYSE:CNI) was 2.83%, and its shares lost 6.42% of their value over the last 52 weeks. On November 29, 2024, Canadian National Railway Company (NYSE:CNI) stock closed at $111.69 per share with a market capitalization of $70.004 billion.
Appalaches Capital stated the following regarding Canadian National Railway Company (NYSE:CNI) in its Q3 2024 investor letter:
“During the quarter, we established core positions in two railroads: Canadian National Railway Company (NYSE:CNI) and CSX Corporation (CSX). The investment thesis is simple. Domestic railroads have not seen volume growth over the last 20 years despite being the cheapest, cleanest, and safest form of freight transportation.4 The lack of volume growth and related share losses to trucking is due to the poor reliability of the networks. However, there is strong evidence to believe that this may not be the case going forward. It seems that investors are overweighting historical characteristics of the industry and not giving credit to recent and sustainable improvements in service metrics. If the rails are able to show any sign of sustained volume growth, our investment should perform very well.
The Canadian railroads have more or less operated at full capacity over the last two decades, while the U.S. networks have not. Why is that? There are a few reasons for the anemic volume growth domestically, but only one of which is not shared by the Canadian railroads: service. In 2017, had you shipped goods by rail in Canada, the odds that your shipment would arrive on time, or the “trip plan compliance” rate, was around 90% or higher. In the U.S., these levels were closer to 50%.5 Maybe you have a different opinion, but I am not particularly excited about using a shipping service that only has a coin flip’s chance of arriving on time, even if it may be more economical…” (Click here to read the full text)
A driverless train traversing vast countryside, illustrating the companies long-distance rail transport services.
Canadian National Railway Company (NYSE:CNI) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 44 hedge fund portfolios held Canadian National Railway Company (NYSE:CNI) at the end of the third quarter which was 42 in the previous quarter. In the third quarter, Canadian National Railway Company (NYSE:CNI) delivered $1.72 of EPS, 2% higher than last year. While we acknowledge the potential of Canadian National Railway Company (NYSE:CNI) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In another article, we discussed Canadian National Railway Company (NYSE:CNI) and shared the list of best low beta stocks to buy along with the latest updates around the broader market. In addition, please check out our hedge fund investor letters Q3 2024 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.