We recently published a list of 11 Best Freight Stocks To Buy Now. In this article, we are going to look at where Canadian National Railway Company (NYSE:CNI) stands against other Best Freight Stocks To Buy Now.
While logistics oversees the overall supply chain strategy, including inventory management, warehousing, and customer service, the freight market refers to the industry involved in the transportation of goods from one location to another using various modes such as road, rail, air, and sea. According to a report by Precedence Research, the global freight transport market is valued at $34.53 billion in 2024 and is expected to reach $100.81 billion by 2034, representing a compound annual growth rate (CAGR) of 11.31%. North America is estimated to have a market size of $11.74 billion in 2024 and is forecasted to grow at a robust CAGR of 11.45% during the same period. Trade within the North American region, particularly between the United States, Mexico, and Canada, plays a vital role.
In 2023, the US transborder freight flows with these countries totaled $1.57 trillion. Several factors, such as increasing international trade, the expansion retail industry, and the growth of e-commerce platforms are boosting the demand for secure and faster freight services. Similar to other industries, the freight market is also witnessing a rise in sustainability efforts and technological integration. Artificial intelligence, in particular, is revolutionizing the industry by enhancing efficiency and optimizing operations. AI applications, such as real-time inventory monitoring, smart warehousing, traffic management, and freight-matching platforms, are streamlining freight processes.
Companies Brace for Tariff-Induced Challenges
President-elect Donald Trump’s proposed tariffs on key trade partners such as China, Mexico, and Canada could severely impact the US transportation industry. Sector experts warn that these tariffs could undermine the growth of North American trade and warned that the proposed trade policies could inadvertently harm the US businesses Trump aims to support. Jason Miller, interim chair of supply-chain management at Michigan State University, explained that higher tariffs would drive up prices, reducing demand and leading to a decline in freight movement. This trend could pose revenue risks for major companies dependent on freight activity.
On December 13, Reuters reported that Trump’s tariff strategy, aimed at creating jobs and compensating for lost revenue from planned tax cuts, effectively acts as a new tax on consumers, whose spending drives the US economy. According to Mary Lovely, a senior fellow at the Peterson Institute for International Economics, the tariffs could significantly disrupt trade flows. She predicts that the new administration could implement these measures as early as the second or third quarter of 2025.
Trucking, which accounts for about one-third of U.S. transportation, has been particularly vulnerable to tariff-induced economic slowdowns. Dean Croke, principal analyst at DAT Freight and Analytics, noted that tariffs imposed during Trump’s previous term led to a trucking recession throughout most of 2019. The industry is already experiencing its longest downturn, driven by flat industrial production and overcapacity from the pandemic-era shipping boom. Cross-border trade between the U.S., Mexico, and Canada remains one of the few bright spots for the trucking sector. In September 2024, the value of cargo transported across these borders reached $88.5 billion, a 7.7% increase from the previous year. However, new tariffs could jeopardize growth opportunities. The proposed tariffs could also derail railroad companies’ plans for growth.
Freight remains an uncertain yet essential industry, serving as a cornerstone for global trade and a vital base for manufacturing. If manufacturing gains momentum in the US, the freight sector may play an even more critical role in supporting supply chains and economic growth.
Our Methodology
To compile our list of the 11 best freight stocks to buy now, we scanned transportation ETF plus online rankings to compile an initial list of 25 companies that offer freight services. Then we used Insider Monkey’s Hedge Fund database to rank 11 stocks according to the largest number of hedge fund holders, as of Q3 2024. The list is sorted in ascending order of hedge fund sentiment.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Canadian National Railway Company (NYSE:CNI)
Number of Hedge Fund Investors: 44
Canadian National Railway Company (NYSE:CNI) is a Canadian freight railway company that operates a vast network connecting Canada, the US, and Mexico. The company transports a diverse range of products for manufacturers, energy producers, and agricultural firms seeking reliable cross-border logistics solutions.
Canadian National Railway Company (NYSE:CNI) is focusing on growing its intermodal business, particularly through Western Gateways, and is leveraging its end-to-end supply chain efficiency to attract more traffic. The company is also investing in technology to enhance maintenance scheduling, reduce dwell times, and improve overall reliability. Additionally, the company is investing in terminal capacity and infrastructure, including the Greater Toronto Area fuel terminal and plant capacity on both sides of the border. Despite the softer domestic intermodal market, international volumes are expected to drive growth, driven by strong demand for Canadian and US grain. For the fourth quarter, Canadian National Railway Company (NYSE:CNI) is forecasting sequential and year-over-year growth in intermodal business.
Canadian National Railway Company (NYSE:CNI) is also taking proactive steps to optimize resources. This includes stopping hiring in surplus areas and furloughing non-essential personnel, and locomotives. These measures are aimed to help maintain fluidity and reduce costs while ensuring the ability to scale up quickly as volumes recover.
Overall, CNI ranks 8th on our list of best freight stocks to buy now. While we acknowledge the potential of CNI to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CNI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.