Top Canadian Stock #2

The growing landscape in the energy industry is driving growth in the railroad industry. Surging ethanol production and Canadian oil sands production are at the forefront of this trend.

And Canadian National Railway (CNI) will profit from it.

Canadian oil sands have been hit hard by the spike in oil. Competing with Saudi producers, who basically stick a pipe in the ground and wait for the oil to come out, is all about reducing the high costs of production.

Much of the bitumen, the raw material gathered from oil sands, is shipped to the Gulf Coast, where there are refineries that can refine the goo into gasoline. The cost for pipeline transport is around $17.95 a barrel.

Canadian National Railway's new strategy can beat that price.

The strategy is called Pipeline on Rail, and it makes CNI the low-cost choice for oil sands miners. CNI will be shipping 10,000 barrels a day on its "rail pipeline" within months, and can ramp up Alberta-to-Gulf Coast capacity to four million barrels a day.

My relative-strength chart shows Canadian National's better-than-market performance since the end of 2007.

NEXT: Top Canadian Stock #3