In 2024 Berkshire Hathaway meeting, Warren Buffett stated that one of his businesses will still be in business in 100 years. His subsidiary is Burlington Northern Santa Fe, his freight railroad.

That’s as long-term as it gets. And while investors can’t buy BNSF stock directly, I think other American railroads — like CSX (NASDAQ:CSX) – Looks like a good stock to consider buying.

Buffett on railways

Freight railroads like CSX move things like chemicals, commodities, and consumer products across the U.S. And Buffett is probably right to think that will still be happening a hundred years from now.

The only question is how, and there’s good reason to think it will be by train. Currently, moving freight by rail is much cheaper than putting it on a truck—the main alternative.

According to CSX, a truck can haul a ton of cargo 134 miles on a gallon of fuel. Its trains can travel 506 miles for the same cost.

This gives rail a significant advantage over trucking when it comes to moving freight. And rail also enjoys a lack of direct competition – each operator has only one main rival in its region.

CSX divides the eastern part of the USA with South Norfolk. And as Buffett notes, the costs and complications of building fresh rail infrastructure make the emergence of fresh competitors highly unlikely.

That’s why Buffett thinks BNSF is a business that will survive into the next century. And I think key parts of the Berkshire Hathaway CEO’s thesis apply just as well to other U.S. railroads, including CSX.

What are the risks?

Not everyone sees it that way. In 2020, Cathie Wood’s ARK Invest released a report saying it expected autonomous electric trucks to take market share from freight rail by 2025.

We’re not there yet, but it’s fair to say we haven’t. However, the competitive landscape is changing. Despite their cost advantages, rail has been losing market share to trucks over the past 10 years. The reason is needy service – focused on margins rather than customers.

The Surface Transportation Board also introduced cross-switching rules. As a result, if a rail operator does not meet certain standards, it now risks losing business to competitors.

That means companies like CSX will have to focus on improving customer service. And that could come at the expense of profit margins—which have historically been excellent.

That’s clearly a risk, but I think it can also be a positive. Improving service to avoid competition from other railroads could put CSX in a position to regain market share lost to trucks.

Why I buy

With the appointment of Joe Hinrichs, former Ferry executive – CSX has already taken a large step towards responding to the needs of its customers. I think that is very positive in the miniature term.

I also think the stock looks like a good value and I’m buying it. A price-to-earnings (P/E) ratio of 18 for a company in an industry that Buffett thinks will be around in 100 years seems like a good deal to me.