I want to explain something of critical importance to our investment strategy.
The reason why some investments can shower you with wealth for the long haul is the simple concept that they are “irreplaceable assets.” Irreplaceable assets like our railroad holdings make them “profit machines.” Because their market share can’t be assaulted by any competitors, they consistently and reliably turn out revenue streams for their owners over decades, or even centuries.
This is the kind of asset we want to own. Take UNP, for instance: “The largest freight railroad in the U.S., Union Pacific owns a nearly 32,000 mile long route network stretching across much of the western half of the United States. Many of the firm’s network right-of-ways were assembled in the 19th century and would be impossible to acquire or reproduce today.”
Then too, there’s also CNI, “Canada’s largest railroad with 20,600 route miles of track. This rail transports key commodities and industrial products including oil, coal, forest products and auto parts across Canada and through the central part of the United States all the way down to the very Gulf of Mexico.”
There’s another term that applies to this kind of investment, too. These are referred to as possessing “economic moats” around their businesses, again because there’s seemingly no way anyone else can ever compete against them.
But, and this is critically important to us; this is not the reason why we want to buy and hold shares in these two railroads, as good as this reason is. Nope, this was not how I decided to buy them, and it was never any consideration as to how I came to hold them this long.
For those who have read and known me for a while, the only reasons I take to the shares of any particular company is because the 10-year line-chart for any company’s ‘analysts’ consensus of 12-month forward-looking earnings estimates,’ and their safe-dividend payout and growth tell me just what the above verbal description of these two railroads say. It is because they possess these moats, and it is because they possess irreplaceable assets, they are able to gently ramp up their charges and fees, in order to maintain a steady growth of their profitability and safe-dividend payout.
That’s how I found them. I own them, and they have been a source of continual investment reward ever since. What’s in your portfolio?
Here’s to your investment success!
Harold F Crowell