TIP860: CANADIAN PACIFIC KANSAS CITY LIMITED (CP.TO): IRREPLACEABLE MOAT, UNPROVEN COMPOUNDING

W/ KYLE GRIEVE & SHAWN O’MALLEY

TIP860: CANADIAN PACIFIC KANSAS CITY LIMITED (CP.TO): IRREPLACEABLE MOAT, UNPROVEN COMPOUNDING W/ KYLE GRIEVE & SHAWN O’MALLEY

11 November 2026

In today’s episode, Kyle Grieve and Shawn O’Malley discuss Canadian Pacific Kansas City, the only railroad that connects Canada, the United States, and Mexico on a single network. They trace how the company helped shape Canada, how an activist investor and a legendary railroader turned it into one of North America’s best-run railroads, and why a transformational merger has made its recent results much harder to judge. Along the way, they look at the barriers to replicating a railroad, management’s compensation program, the risks facing the business, and the company’s current intrinsic value.

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IN THIS EPISODE, YOU’LL LEARN:

  • How a railroad helped decide the shape of Canada
  • Why railroads are among the hardest businesses to disrupt
  • How Bill Ackman and Hunter Harrison transformed Canadian Pacific
  • The scheduling idea that optimized railroad margins
  • What makes CPKC’s three-country network nearly impossible to replicate
  • Why an irreplaceable moat doesn’t guarantee great shareholder returns
  • The hidden accounting reason the merger still weighs on returns
  • How a rival mega-merger could threaten CPKC’s growth story
  • What CPKC is worth today, and what would change our minds
  • And so much more!

Disclosure: This episode and the resources on this page are for informational and educational purposes only and do not constitute financial, investment, tax, or legal advice. For full disclosures, see link.

TRANSCRIPT

Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

[00:00:00] Kyle Grieve: Today we’re covering one of the oldest businesses that we’ve ever looked at on the show. It’s even older than Coca-Cola. And in the last 15 years, it’s reinvented itself two times. So the first set of shareholders fared quite well. But the jury is still out on that second set. And that business is Canadian Pacific Kansas City Railroad.

[00:00:17] Shawn O’Malley: When you told me that we were doing a railroad business today, I braced myself for some train puns and a business that is maybe not the sexiest in the world, one that grows about as fast as the economy. And just generally, railroads have not been the type of place that we’ve looked for portfolio ideas.

[00:00:37] Kyle Grieve: Yeah. And I think that was my first assumption as well. And I think for most railroads, it’s probably the right assumption. But in terms of Canadian Pacific Kansas City, they kind of went from being one of the least efficient railroads in North America to one of the best.

[00:00:50] Kyle Grieve: And the stock compounded very healthily. While that happened then, management weighed one of the biggest and boldest bets in the entire company’s history. Now, as a result of this bet, their network grew very significantly, and on paper, their moat widened. But the returns for shareholders haven’t been nearly as impressive as I would have thought.

[00:01:08] Shawn O’Malley: And that leaves us with a pretty tricky question to answer. Either that bet is a slow burn that’s ready to pay off, or the price has permanently lowered the company’s capital efficiency. And those two answers lead to some wide-ranging outcomes for how somebody might think about investing in today’s business.

[00:01:27] Kyle Grieve: Let’s find out which one it is.

[00:01:32] Intro: Since 2014, with more than 200 million downloads, we have interviewed the world’s best investors, studied deeply the principles of value investing, and uncovered many compelling investment opportunities. We focus on understanding businesses and intrinsic value, investing accordingly, and sharing everything we learn with you. This show is not investment advice. It’s intended for informational and entertainment purposes only. All opinions expressed by hosts and guests are solely their own, and they may have investment in the securities discussed. Now, for your hosts, Shawn O’Malley and Kyle Grieve.

[00:02:18] Kyle Grieve: Welcome to The Investor’s Podcast, episode 861. Our co-host Daniel recently pitched GE Aerospace to you, Shawn, and while I also like that business, I also agreed with the decision to not add it to the Intrinsic Value Portfolio. But I also know one of the reasons for that idea being presented in the first place was to clone a very, very impressive portfolio manager, Chris Hohn, who I highly respect.

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