JPMorgan Chase & Co. (JPM), J.C. Penney Company, Inc. (JCP): Two CEOs With the Foresight to Avoid Crashes

Buffett looked at the economics of the railroad industry perhaps a decade or more into the future. He liked what he saw, and he pulled the trigger.

Taken from Berkshire Hathaway Inc. (NYSE:BRK.B)’s 2011 Shareholder Letter:

Measured by ton-miles, rail moves 42% of America’s inter-city freight, and BNSF moves more than any other railroad – about 37% of the industry total. A little math will tell you that about 15% of all inter-city ton-miles of freight in the U.S. is transported by BNSF. It is no exaggeration to characterize railroads as the circulatory system of our economy. Your railroad is the largest artery.

The media questioned the buy, but now Buffett’s acquisition is hailed as genius.

The same goes with Berkshire’s acquisition of H.J. Heinz Company (NYSE:HNZ). Why buy a company for almost 20% above its all-time high? Again, I think that Buffett is looking a decade into the future. I think he sees two things: stubbornly low interest rates in the short-term and high rates in the long-term.

Short-term, Buffett gets a 9% return on his $8 billion Heinz investment.  And when inflation picks up, H.J. Heinz Company (NYSE:HNZ) will have pricing power because of its brand name. Furthermore, H.J. Heinz Company (NYSE:HNZ) will have scaled its investment in emerging markets. McKinsey estimatesthat just 440 emerging market cities over the next 15 years will be responsible for 50% of GDP growth and 40% of global consumption growth.

Bottom line

Few CEOs can make correct decisions based on their view 10 years into the future. Jamie Dimon gave up profits to hedge risk, and Buffett deployed capital when all around him were too scared to act.

When a CEO has the discipline to patiently take detailed notes on his surrounding environment, you should probably pay attention — because that CEO might just avoid the next crash.

The article 2 CEOs With the Foresight to Avoid Crashes originally appeared on Fool.com and is written by Chris Marasco.

Post written by ChrisMarasco who has no positions in any stocks mentioned. The Motley Fool recommends Berkshire Hathaway and H.J. Heinz Company. The Motley Fool owns shares of Berkshire Hathaway and JPMorgan Chase & Co. Chris is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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