Below is a note from Hedgeye CEO Keith McCullough on why we're adding Kansas City Southern (KSU) to the long side of Investing Ideas today:
"I'm still looking to signal BUY in our Best Ideas (Institutional Research Product) on pullbacks. Let's add KSU here.
On Election Day, shares of Kansas City Southern (KSU) fell as much as -12% intraday. About 48% of the railroad operator’s revenue comes from Mexico.
The company’s executives acknowledged the irony of posting results on the day of Trump’s inauguration following the share price drop:
"Obviously the political and economic uncertainty is probably first and foremost on most of our minds, and the irony of us reporting earnings on the inauguration day of the 45th President is not entirely lost on us," Chief Executive Patrick Ottensmeyer said.
Our Industrials Analyst, Managing Director, Jay Van Sciver explains why he thinks Trump uncertainty is already priced-in, but skittish investors are missing the positives:
- Kansas City Southern’s multiple is cheaper than usual.
- Van Sciver sees robust growth ahead (cost savings and favorable profit outlook).
- Van Sciver thinks M&A speculation will heat up again and close the gap between where it is trading now and its historically premium valuation."
