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The Thesis
Anschutz acquired a large stake in Southern Pacific Railroad, pushed for its merger with Union Pacific, and rode the consolidation of American railroads to enormous profits.
The Story
Philip Anschutz, an oil and gas entrepreneur, began investing in railroads in the 1980s when they were deeply out of favor — considered relics of the 19th century. He acquired a controlling stake in the Denver and Rio Grande Western Railroad, then Southern Pacific Railroad, and pushed for a merger with Union Pacific that was completed in 1996, creating the largest railroad in America.
The bet on railroad consolidation proved extraordinarily prescient. As the US economy grew and intermodal shipping expanded, the consolidated railroad network became increasingly valuable. Anschutz's railroad investments generated over $5 billion in profits and funded his expansion into entertainment, telecommunications, and sports (he owns the LA Kings, LA Galaxy, and AEG live entertainment). His willingness to invest in an industry that Wall Street considered dead, and his patience to let the consolidation thesis play out over a decade, generated transformational wealth.
Key Insight
Industries that Wall Street considers dead often have the best risk-reward — when expectations are zero, any improvement creates enormous upside.
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See how Glen Bradford applies these principles to his own investing. Long Fannie Mae & Freddie Mac junior preferred — conviction meets patience.