Union Pacific: The Largest Railroad in the United States

Dave Sather presented his in-depth investment thesis on Union Pacific (UNP) at Wide-Moat Investing Summit 2015.

Union Pacific is the largest railroad in the United States covering 32,000 route-miles throughout 23 states. This network gives it a 30% market share that covers the western 2/3rds of the US including the key west coast ports, Canada and Mexico. UNP operates in a duopoly with Burlington Northern Railroad where both rails benefit from the efficiencies associated with long distances between major hubs. This gives them a distinct advantage over substitute services offered via trucking. The dynamics of the rail industry as a whole have changed in the past 15 years due to more efficient locomotives and double-stacking of cargo. In an era where the broad market is priced to deliver zero return over the next decade, UNP is priced at less than a market multiple (16x earnings) with safety and stability–ie: a true wide moat. Due to short term weakness and pessimism in the transports as a whole, we think the long term investor is presented with a true wide moat business that should double over the next ten years while allowing investors to sleep well at night.

About the instructor:

Dave Sather is president and founder of the Sather Financial Group, Inc, a “fee-only” financial planning and investment management firm responsible for overseeing approximately $290 million in client assets. Dave was raised in El Paso, received his B.A. in Business Management from Texas Lutheran University and received his M.B.A. from Texas A&M University. He has spent the past twenty years in the financial analysis, investment and banking industries. As team leader he is responsible for coordinating portfolio management as well as financial and strategy planning of a client’s life. This strategy planning not only includes traditional fee-only investment management, but also estate, retirement, taxation and risk management planning. In addition to his work with Sather Financial, Dave is a Director of Business Bank Of Texas. Dave is an adjunct professor in the Business program at Texas Lutheran University and is a member of the schools Executive Advisory Council. He is also Chairman of the Finance and Investments Committee for the Brownson Children’s Home and is Treasurer of First English Lutheran Church. He and his wife, Carol, live in Victoria, Texas.