How to Buy Canadian Pacific (CP) Stock

Contributor, Benzinga

Want to jump straight to the best? Most of our users prefer Interactive Brokers for stock trading.

Canadian Pacific Railway (NYSE:CP)

71.500

0.01 [0.01%]
64.37 – 84.22
929.87M
0.00K/3.17M
66.49B
929.87M
0.5967/0.83%
19.440
929.69M

The fallout of the coronavirus pandemic caused Canadian Pacific Railway to drastically reduce its guidance. Revenue ton-miles, an industry keystone, will fall so much that earnings per share are expected to stay flat for the entire year of 2020. (Revenue ton-miles represent the money a company makes for every volume of freight that is transported.) Investors think the worst is behind the company and continue to support it, keeping the price of the stock relatively resilient.

Canadian Pacific certainly may be playing the game of underpromise and overperform. The company actually set a record for the number of grain shipments it transported during the last 3 months. Executives continue to downplay freight volumes, claiming they will be depressed. The company did report a 6% drop in net income although it increased its revenues by 16% year over year — certainly a respectable result for what industry analysts call “unprecedented times.”

Canadian Pacific Railway (NYSE:CP)

71.500

0.01 [0.01%]
64.37 – 84.22
929.87M
0.00K/3.17M
66.49B
929.87M
0.5967/0.83%
19.440
929.69M

How to Buy Canadian Pacific (NYSE: CP) Stock and Options

You can buy Canadian Pacific through the purchase of stock, options or industry-specific mutual funds and exchange-traded funds (ETFs). CP is listed through the New York Stock Exchange (NYSE), which makes it available through all major brokerages unlike many stocks under $10 in its industry.

The first step to buying into Canadian Pacific is to choose a reputable brokerage. Doing so will help you avoid slippage and input errors. No matter how well the company performs, you need to buy in at a good price to optimize your returns on the investment. This text will focus on buying options because of its slightly more difficult process.

  1. Pick a Brokerage

    As an established stock on the NYSE, Canadian Pacific options should be easy to buy without any added commission.

    Because every broker carries CP, you can focus your efforts on finding the broker that is most attractive to you. If you are using an offshore broker, make sure it is regulated through a prominent financial authority. You will need regulatory protection for your basic information and your accounts when moving money in the market.

  2. Choose Strike Price

    If you believe the coronavirus has beaten down the price of Canadian Pacific, you should buy call options. Call options move in tandem with the CP price in a leveraged way. Each call option is a contract that controls 100 shares of CP. The contract gives you the right to “call” shares away from an option seller on the expiration date at a predetermined strike price. If the CP price is at or above the strike price on the expiration date, the call executes. 

    The most important decision of your call option order is the strike price. Strike prices are listed in option chains. Check with your broker for the details of how these are listed.

    CP options usually move with the CP stock price, but they move with leverage. For instance, if Canadian Pacific goes up 5% in a day, a call option may gain 54%.

  3. Choose Expiration Date

    The last day that your call option contract is valid is the expiration date. The time value becomes 0 on that day. Any value the option keeps is known as an intrinsic value because the option is “in the money.”

    Pick your expiration date based on the length of time you want to hold the contract.

  4. Decide How Many Contracts

    After the expiration date, you will pick the number of call options you want. Choose this based on the number of shares you want control over during the trade.

    If you choose a Canadian Pacific call option at a strike price of $320, you will call 100 shares of Canadian Pacific to yourself at $320 if the price is at or above $320 on the expiration date. If the price is less than $320 on the expiration date, the option is “out of the money,” considered worthless, and will not execute.

  5. Watch Stock Price

    Because energy and transportation are being heavily affected by the coronavirus, those industries are being carefully watched. CP is often one of the more volatile premarket movers. You can make a purchase of CP stock in the premarket but not options.

Best Online Stock Brokers

get started securely through Webull’s website
Best For
Intermediate Traders and Investors
N/A
1 Minute Review

Webull, founded in 2017, is a mobile app-based brokerage that features commission-free stock and exchange-traded fund (ETF) trading. It’s regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).

Webull offers active traders technical indicators, economic calendars, ratings from research agencies, margin trading and short-selling. Webull’s trading platform is designed for intermediate and experienced traders, although beginning traders can also benefit.

Webull is widely considered one of the best Robinhood alternatives.

Best For
  • Active traders
  • Intermediate traders
  • Advanced traders
Pros
  • No account maintenance fees or software platform fees
  • No charges to open and maintain an account
  • Intuitive trading platform with technical and fundamental analysis tools
Cons
  • Does not support trading in mutual funds, bonds or OTC stocks
get started securely through Moomoo’s website
Best For
Active Traders
N/A
1 Minute Review

Moomoo is a commission-free mobile trading app available on Apple, Google and Windows devices. A subsidiary of Futu Holdings Ltd., it’s backed by venture capital affiliates of Matrix, Sequoia, and Tencent (NASDAQ: FUTU). Securities offered by Futu Inc., regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).

Moomoo is another great alternative for Robinhood. This is an outstanding trading platform if you want to dive deep into smart trading. It offers impressive trading tools and opportunities for both new and advanced traders, including advanced charting, pre and post-market trading, international trading, research and analysis tools, and most popular of all, free Level 2 quotes.

Get started right away by downloading Moomoo to your phone, tablet or another mobile device.

Best For
  • Cost-conscious traders
  • Active and Advanced traders
Pros
  • Over 8,000 different stocks that can be sold short
  • Access trading and quotes in pre-market (4 a.m. to 9:30 a.m. ET) and post-market hours (4 p.m. to 8 p.m. ET)
  • No minimum deposit to open an account.
Cons
  • No chat support
Get started securely through Axos Invest’s website
Best For
Sign Up Bonus
N/A
1 Minute Review

It seems like new digital investment management platforms are sprouting up left and right, and for good reason — there’s a great need for easy, straightforward investment management that doesn’t cost an arm and a leg in fees or to get started. If you’re new to investing or an old hat who wants to make the switch to a virtual manager, deciding which features you need can be confusing if not overwhelming.

If you want a no-frills financial management platform, Axos Invest (formerly WiseBanyan) takes a traditional but sophisticated approach to automated online investing.

Best For
  • Traditional investors trying out an automated investor for the first time
  • New investors that want to take a hands-off approach to portfolio management
Pros
  • Straightforward automated investing
  • Relatively low account minimum and automated investing fee
  • A solid roster of available investment account types
Cons
  • Not a stand-out from other services if you’re someone who likes all the bells and whistles with your digital financial platform
  • No direct relationship with a human financial advisor
get started securely through Interactive Broker’s website
Best For
GlobalAnalyst Product
N/A
1 Minute Review

This latest groundbreaking technology is IBKR GlobalAnalyst, a new trading tool that helps investors compare the rate of PEG or price-earnings growth valuations and provide more immediate and comprehensive financial metrics of stocks, globally.

Recognizing that stock selection can be challenging for investors to compare the valuations of domestic and international stocks, Interactive Brokers created GlobalAnalyst to offer investors a simple, yet powerful tool to easily evaluate investment opportunities around the world.

Using GlobalAnalyst, investors can search for stocks by region, country, industry, market capitalization and currency to uncover undervalued stocks worldwide. The resulting table displays the current market and financial metrics, including the PEG Ratio. The PEG Ratio is the PE ratio divided by the three-year compound earnings growth rate, and smaller PEG Ratios typically indicate undervalued companies.

Best For
  • Price earnings growth valuations
Pros
  • Easily evaluate investment opportunities
Cons
get started securely through eToro’s website
Disclosure: eToro USA LLC; Investments are subject to market risk, including the possible loss of principal.
Best For
Copy Trading
N/A
1 Minute Review

eToro is a broker that offers access to over 25 of the world’s most popular cryptocurrencies, forex and over 1600 stocks. They have a few unique education and useability tools. Traders can begin buying and selling in as little as 10 minutes.

eToro’s unique CopyTrader feature allows new investors to “copy” the buy and sell orders of professional investors, while the company’s eToro Club feature provides investors with a range of additional education tools and resources. 

Best For
  • Traders looking for an easy-to-use platform
  • Traders who want to practice their trades using a virtual account before entering the market
Pros
  • Simple platform that is easy to master
  • CopyTrader feature that allows new traders to copy the same strategies used by professionals
  • Virtual dummy account that gives you $100,000 to practice trades
Cons
  • High non-trading fees
Best For
Canadian stock research

Join Stocktrades.ca

Looking for stock research, screeners, model portfolios and more? Want access to the best of the best on the Toronto Stock Exchange? Land on Stocktrades.ca for guidance on growth, dividend and value stocks with objective and timely investment news and information. 

Stocktrades offers superior investment advice with its free plan and includes foundational stocks, custom model portfolios, growth stock screeners and dividend safety screeners.

Just $20.83 gives you access to Stocktrades Premium’s Canadian growth stock picks and dividend stock picks as well as: 

  • Annual foundational stock picks
  • 9 model growth portfolios
  • Dividend safety screeners
  • Growth stock screeners
  • Custom research requests
  • Brand new IPO centre
  • Q&A section

Get access to your membership today.

Canadian Pacific Stock History

The Canadian Pacific Railway Limited stock began to trade on the NYSE on October 3, 2001, after Canadian Pacific Limited spun off its railway operations. Its exposure to the public markets helped its image and bottom line. In subsequent years, the company enjoyed a rise in freight revenues and was named a top Canadian employer by several publications. The company also trades on the Toronto Stock Exchange under the ticker symbol CP.

CP began its NYSE run humbly in the stocks under $20 category. The stock price experienced major growth in 2012. After a pullback from 2015-2016, CP began a 4-year bull market toward its current levels.

Pros to Buying Canadian Pacific Stock

Canadian Pacific is a strong company with plenty of cash reserves to withstand the coronavirus.

  • Earnings: CP earnings continue to rise faster than its competition even in the face of the coronavirus.
  • Analyst sentiment: Industry specialists overwhelmingly expect that CP will be able to retain its earnings performance.
  • Stability: With a cash pile to see it through low points, CP won’t have to worry about crushing debt slowing its operations even if there is a 2nd wave of COVID.

Cons to Buying Canadian Pacific Stock

Depending on how you structure your portfolio, you may want to consider these points before buying into CP.

  • Limited upside: The resilience of the CP stock and quick recovery following March 52-week lows means there may be less upside to the stock than some laggards.
  • A high P/E: Canadian Pacific’s price-to-earnings (P/E) ratio is higher than its competitors (19.7 to 13 times), which speaks to the positive sentiment it has with smart money. But an overly high P/E can spell pullbacks if CP is unable to maintain its returns for any reason. How hard will a second coronavirus wave hit the market? No one is betting for a return to March, but Mother Nature is undefeated whenever she wants to be.
  • Industry crunch: Transportation may not be the best investment considering the entire market. Analysts predict earnings will grow by 3.9% per annum over 3 years, which is a far cry from the 22% they predict for the general market.

Smooth Sailing on the Pacific?

Canadian Pacific will certainly never be in the penny stocks under $5 range, but that doesn’t necessarily guarantee optimized returns for investors. If you are looking for a solid company with a good balance of upside and resilience, then CP may be for you. Those with a more risk-tolerant profile may want to search elsewhere for short-term returns.