Mort Fuller grew up figuring he would run the family business, the huge Retsof salt mine in upstate New York.
But in 1973 he became a director of Genesee & Wyoming, the small railroad his great-grandfather had purchased in 1899 to transport salt to market.
"I thought it was a very interesting company, and I wanted to do something on my own," says Fuller.
Fuller was intrigued by the possibility of building the 14.5-mile-long line into a larger, more diversified railroad. A quarter of a century later, Genesee & Wyoming (symbol GNWR) owns or has interests in 23 railroads, and owns or leases more than 7,700 miles of track in the United States and abroad.
Fuller took advantage of industry deregulation to pick up smaller railroads that major carriers could not operate profitably. A similar scenario is playing out today in what ABN Amro analyst Jason Seidl calls the best buyer's market in the past 10 years.
In the United States, Genesee buys short rail lines, which are simpler and cheaper to operate than national routes. The company keeps costs low by acquiring outfits that require little capital outlay and are financed in large part by local customers.
Genesee also improves efficiency by eliminating redundant facilities and better utilizing equipment. That tack works well overseas, where Genesee has acquired state-run railroads that were never managed for a profit.
The company has been making a major foray into Australia, which accounted for 46 percent of Genesee's net income in the first nine months of 2001.
Fuller is keen on an ambitious project to build a freight railroad from Alice Springs, in the middle of the Australian outback, to the northern port city of Darwin. Genesee will operate the line through a 50-50 partnership with Australian conglomerate Wesfarmers Ltd.
What's not to like about Genesee? Extended economic weakness could spell trouble. So could poor execution in acquiring and upgrading new railroads.
Genesee shares may look pricey, having soared more than 500 percent since April 1999. Yet at a recent $30, the stock still trades at just 12 times the 2002 consensus earnings estimate of $2.44 per share. That's significantly less than the price-earnings ratio of most larger railroads.
Don't be fooled into thinking the stock has peaked, says Tim Stevenson, manager of the Evergreen Special Equity fund. Stevenson calls Genesee a "quiet, steady monster stock" whose clean balance sheet and strong earnings growth should keep it chugging along.