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Tickers in this Article: CSX
What do Coca-Cola (NYSE: KO), Campbell's Soup (NYSE: CPB) and Deere & Co. (NYSE: DE) all have in common?

In short, they've all survived some of the biggest economic catastrophes the world has ever seen. While thousands of business have come and gone since the early 1900s, these companies have managed to prosper through more than a century of political and economic turbulence.

So what's allowed these companies to continually generate shareholder wealth despite two world wars, the Great Depression, and countless bear markets and recessions?

It's simple: They all belong to a select group of investments that we like to call "Legacy Assets."

#-ad_banner-#For those of you aren't familiar, "Legacy Assets" is a distinction my colleague David Forest has reserved for companies that have rewarded shareholders for generations. Not only do these companies often sport durable brand names and impenetrable economic moats, their strong competitive advantages have led them to consistently outperform the market for decades.

But it's not just the companies themselves that have stood the test of time. The products they make have remained virtually unchanged. In some cases, the same products have been generating wealth for more than 200 years.

While tech companies like Apple and Microsoft have to come up with the next high-tech gadget or operating system every year, Legacy Assets don't.

Likewise, Legacy Assets don't deal in "collateralized debt obligations" and other hard-to-understand financial products. Legacy Assets simply produce valuable, easy-to-understand products that you probably use every day. And that's led these stocks to trounce the S&P 500 year after year.

Take a look for yourself...



The chart above shows the StreetAuthority Legacy Asset Index -- an equal-weighted portfolio of 10 Legacy Asset stocks that tracks their performance since late 1999.

As you can see, since January 1, 2000, the S&P 500 has returned 51% including dividends. But Legacy Assets have returned 352%, almost seven times the return of the S&P.

And remember: We aren't talking about "fly-by-night" stocks with a lot of risk. These are some of the safest, easiest-to-understand companies on the planet.

Of course, as you can imagine, given the historic nature of these companies and length of the time they've been in business, there aren't many of these Legacy Asset stocks remaining.

In fact, they're so rare that in Dave's newest research report, 'The Top 11 Legacy Assets of All Time,' he mentions that he has found only 11 identifiable Legacy Asset stocks in total.

Unfortunately, out of fairness to Dave's subscribers, I can't reveal the names of all of these stocks today... but I can share one of them with you -- we call it Legacy Asset #6.

That company is CSX (NYSE: CSX), a leader in freight rail transportation for more than 180 years.

Its roots go back to 1827, when the Baltimore and Ohio Railroad Co. (B&O) chartered the first common carrier train in the United States. During the Civil War, the railroad moved Union troops and supplies and was the target of attacks. Bridges were burned and rebuilt, tracks were torn up and replaced, telegraph lines pulled down and restored.

By the end of the 19th century, the B&O had built almost 5,800 miles of track and connected Chicago and St. Louis to Baltimore, Philadelphia, New York and Washington, D.C. Today, CSX is an $11.8 billion company operating in the eastern United States. It owns 21,000 miles of track. The company hauls coal, chemicals, intermodal traffic (shipping containers) and other merchandise.

CSX's status as a Legacy Asset stock comes from a few key points...

First of all, like most railroad companies, CSX owns irreplaceable assets.

The network of track that CSX has in place is virtually impossible to replicate. CSX spans the densely populated eastern United States, capturing about half of the rail volume in the region. Its rights of way and installed track form a nearly impenetrable barrier to competition from other railroads.

Shipping by rail is also less expensive than trucking for long distances. It is four times more fuel-efficient per ton-mile. Today's trains can move a ton of freight more than 430 miles on a gallon of diesel. And though railroads can be notoriously expensive to maintain, CSX has done a great job at keeping costs down. Capital expenditures typically amount to 16% to 19% of revenue.

And although railroads spend large amounts of money on their infrastructure, a dollar spent on railroad infrastructure has historically offered a more certain (and lower-risk) return than a dollar spent on infrastructure in other industries. Simply put, without rail operators like CSX, commerce would be much more expensive.

Remember, we said the true test of a Legacy Asset is how it fares during times of war, recession or uncertainty. That said, CSX managed to raise its dividend during economic crisis in both 2008 and 2009.

In fact, over the past decade, the company's dividend has increased by 729%. And it's supported by a rock-solid payout ratio of 31% over the past 12 months.

If that weren't enough, look how CSX has performed over the past five years -- especially when you compare it with the S&P 500.



The S&P has posted a more than respectable 120% return over the past five years, but CSX has gained 212%. Not bad for a "boring" railroad stock.

While nothing is assured, CSX should keep delivering impressive returns through good times and bad. That's the power of Legacy Assets.

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