Enlarge By Nati Harnik, AP Warren Buffett, CEO of Berkshire Hathaway waves to shareholders prior to the annual Berkshire Hathaway shareholders meeting in May 2, 2009. Buffett's Berkshire Hathaway is buying Burlington Northern Santa Fe railroad. Most investors looking for the "next big thing" seek out whiz-bang investments like alternative energy, lifesaving biotech drugs, handheld Internet devices and, for doomsayers, hard assets like gold. Railroads, which had their heyday in another era, are rarely mentioned as a must-have investment for those looking to get rich. So why is Warren Buffett, arguably the world's most famous and successful investor, betting more than $26 billion of his spare cash to acquire all of Texas-based railroad Burlington Northern Santa Fe (BNI)? On Tuesday, Buffett turned heads on Wall Street when he placed his biggest bet of his career on rails — and the battered USA economy, for that matter. RAILROAD DEAL: Warren Buffett buys Burlington for $26.3B WHAT BERKSHIRE SAYS: 'All-in wager on the economic future of the United States' In promoting the deal, the so-called Oracle of Omaha insisted that the business of moving things like food, sources of energy, autos, agricultural products and other stuff consumed by consumers and businesses will grow during the next 10, 20, 30 years. In an interview with USA TODAY, Buffett stresses that the rail industry is modern indeed. He trumpets the ability of railroads to move goods from Point A to Point B more efficiently and more environmentally friendly than the fuel-guzzling 18-wheelers that clog the nation's already overcrowded highways. "The rail business is actually in tune with the future," Buffett says. "Trains move goods using far less fuel than alternatives." 470 miles a gallon In typical Buffett fashion, the shrewd investor has done his homework, and rattles off facts about railroads with the same confidence he displays when talking about price-earnings ratios or how he values businesses. "Burlington Northern Santa Fe last year moved, on average, a ton of goods 470 miles on a single gallon of diesel, and society has an enormous interest in using less oil to transport goods," Buffett says. Indeed, Buffett very much likes the green component to his rail investment, likening it to an energy-saving play. "Each train displaces 280 trucks on the road," Buffett says. "When it comes to spewing pollutants there is nothing more efficient than trains. It is very much in line with the future goals of society. While the railroads won't take over the world it is something that is part of the future." The deal with Burlington Northern was struck in a super-quick 15 minutes early last week after a meeting with the railroad's CEO Matthew Rose. And while it might seem downright scary to commit tens of billions of dollars in such a short time span, Buffett stresses that he finished his research on the company a long time ago. Prior to the deal, Berkshire Hathaway already owned a nearly 25% stake in the railroad. "Buying 100 shares of a stock is like buying a piece of a business," says Buffett. "If I don't know enough about a company to buy the whole business, I don't know enough to buy 100 shares." Winning at the finish line Like all his investments and acquisitions, Buffett says he simply had to decide "if it is a good business, with good management and something that makes good long-term sense." On all those points, he concluded the answer was yes. Buffett says he believes the rail investment will deliver "steady and certain growth" over the coming decades. Despite the uncertainty surrounding the pace and sustainability of the economic recovery, Buffett says the railroad business is one that will thrive for years once the economy gets back on track. "We can't predict what will happen year to year," he says. "We have a system that works. It doesn't work every day or every week. The great American economic engine sputters sometimes. It sputtered at times in the 19th century, the 20th century and now the 21st century. But when we get to the finish line we win." Buffett-watchers said the deal is trademark Buffett: He bought a company that is easy to understand and that has a trusted and proven management team — and at a price that is likely to generate gains over the long-term. Though his $100-a-share offer was more than a 30% premium to Burlington Northern's close Monday, the stock traded at nearly $115 in June 2008. When asked what his time horizon was to reap the major benefits of this mega-deal, Buffett replies, "We will hold it (this investment) forever." Buffett acknowledges that the railroad business is something that he can get his arms around. Many times in the past he has said that a key to successful investing is to steer clear of investments that are too complicated. "Railroads are the kinds of things we understand," he says. Morningstar analyst Keith Schoonmaker offered further insight into Buffett's reasoning. "We think Buffett values railroading for its bulletproof economic moat via nearly irreplaceable rights of way, a predictable business model, economic efficiency, and strong free cash flow despite heavy demand for capital investment," Schoonmaker says. Cheerleading the USA In his statement Tuesday announcing the deal, Buffett said "it's an all-in wager on the economic future of the United States." Back in October 2008, when the financial implosion was ravaging investor stock portfolios, Buffett wrote an op-ed piece in The New York Times under the headline: "Buy American. I Am." Similarly, in the fall of 2008, Buffett injected $5 billion into banking giant Goldman Sachs (GS) and $3 billion into General Electric (GE) at a time when raising capital in the financial markets was both difficult and expensive. Investors took to heart Buffett's latest big bet on America, a cheerleading role he has increasingly played since the worst financial crisis since the Great Depression intensified last year. "He has gradually and graciously accepted the reality that he is playing a leadership role in the national economic dialogue," says Lawrence Cunningham, author of How to Think Like Benjamin Graham and Invest Like Warren Buffett. "He knows that people listen to what he says and copy what he does." Adds Jeff Matthews, a hedge fund manager at Ram Partners and author of Pilgrimage to Warren Buffett's Omaha: "This overshadows anything he has done before. He is not just doing this deal for the fun of it. He is doing it to make money in the long run. And I think that would be reassuring to investors." When asked if he felt a responsibility to address the broader issues related to his level of confidence in the U.S. economy, rather than simply address what he thought were the pros of the big rail deal, Buffet responds "We are not doing it to spread a message. But the very act itself may be a message." Indeed, Buffett's willingness to make a major investment at this point of the recovery cycle could spur other reluctant investors to follow suit, says John Stoltzfus, analyst at Ticonderoga Securities. "The provenance of Tuesday's deal by Berkshire, along with its size and profile," says Stoltzfus, "will also likely serve as a 'Go' signal to others who may have been waiting in the wings for someone whose judgment they respect to 'jump in the water first." For years, Buffett has said he was seeking a big deal, that he was looking for "an elephant," says Vahan Janjigian, chief investment strategist at Forbes and author of Even Buffett Isn't Perfect: What You Can —and Can't — Learn from the World's Greatest Investor. "This is the elephant," says Janjigian. "Berkshire Hathaway is so big, you can't move the needle by buying $100 million companies." Commenting on the size of the deal, his biggest ever — it tops the $17.8 billion acquisition of insurer General Re in June 1998 — Buffett says: "Railroads come in big pieces. And I like sizable deals. It is much easier to do one $34 billion deal than three $10 billion deals." Buffett, who still has $20 billion in cash, says there are other values out there. But he wouldn't tip his hand about what he is eyeing. "Sure there are values out there, but we don't advertise them," he says. Despite data that point to an economic recovery, Buffett says aside from insurance, he has yet to see much improvement in the other businesses he owns, which include furniture stores, ice cream shops and other consumer-related companies. "Business hasn't bounced much," he says. "Business has stopped going down" but it hasn't shot up either. "Fear has disappeared," adds Buffett. "What we had was as close to a meltdown as you can have. But that has passed." TRACKING THE RECOVERY: Index forecasts moderating growth in early 2010 Despite his reputation as an oracle, Buffett refuses to predict when the economic recovery will kick in and be sustainable. "We will come out of it," he says. "I don't know when." 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