Only those who have children of their own will have shed that natural aversion to dining on other peoples' leftovers. Thankfully, investors can proudly pick through Warren Buffett's bowl of discarded and less favored railroad stocks without getting grossed out.

Earlier this week, I encouraged Fools to consider a strategy for investing in railroad stocks that I believe will permit Fools to vastly outperform Buffett's rather costly acquisition of Burlington Northern Santa Fe (NYSE:BNI). Now, another impressive earnings result from Canadian National Railway (NYSE:CNI) provides a perfect opportunity to explore why I consider this transnational operator an excellent choice for a competing long-term investment.

Canadian National's adjusted net earnings fell 20% from prior-year levels to $400 million, although the result includes a currency hit of about $33 million relating to relative strength in the Canadian dollar versus the greenback. For the full-year 2009, adjusted earnings fell by 13% -- a remarkable feat considering the gut-wrenching deterioration of industrywide freight volumes that I documented throughout the year.

Key to Canadian National's success was an operating ratio that averaged 67.3% for 2009, easily outperforming peers like Burlington Northern and CSX (NYSE:CSX) with corresponding margin markers of 76% and 74.7%, respectively.

Another key differentiating factor within an industry of closely matched major rivals remains Canadian National's attractive, well-diversified freight revenue mix. The operator derives more freight revenue from grain and fertilizers than from any other segment, but that accounts for just over 20% of the total. By contrast, Burlington Northern relied on intermodal traffic for a full 29% of freight revenue, with another 27% coming from coal.

Unlike coal-heavy haulers like CSX and Norfolk Southern (NYSE:NSC) that derive some 30% of revenue from hauling the fossil fuel, Canadian National collected only 7% of its freight revenue from coal during 2009. Moreover, whereas CSX reported a decline of 23% in coal volumes shipped for the fourth quarter, Canadian National observed a 19% increase. Canadian National pulled some coal-hauling market share away from rival Canadian Pacific (NYSE:CP) last year following a rate dispute, and now hauls seaborne met coal from Teck Resources' (NYSE:TCK) prolific mines in the Pacific Northwest.

With a diverse freight mix, some of the lowest operating costs in the industry, geographical convenience for accessing healthy Asian trade markets, and accumulating market share for coal, Canadian National Railway may be the sweetest morsel left in the bowl after Buffett swallowed Burlington Northern whole. Toss in a pending fleet of 70 ultra-efficient diesel locomotives from suppliers like General Electric (NYSE:GE), with a corresponding 15% to 20% reduction in fuel consumption, and you have the makings for a railroad to give Buffett's choice a run for its money.

I encourage Fools to wait patiently for a pullback from this sector, and offer Canadian National Railway as an attractive alternative to Buffett's chosen one.

More than 1,400 Motley Fool CAPS members, including 551 All-Stars, expect five-star pick CNI to outperform the S&P 500. In all, the CAPS community has shared its collective insight on 35 "road and rail" companies. Join the free CAPS community today and share your views on how the rail industry will fare throughout these persistent economic headwinds.

Fool contributor Christopher Barker has never hopped a freight train, but he thinks it would be a fun place to learn the harmonica. He can be found blogging actively and acting Foolishly in the CAPS community under the user name TMFSinchiruna. He also tweets. He owns no shares in the companies mentioned.

Canadian National Railway is a Motley Fool Stock Advisor recommendation. Try any of our Foolish newsletters today, free for 30 days.

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