Why is Buffett buying Burlington Northern? (property, investing, stock market, profit)

[brightdoglover]

To the poster who thought that there will be less "stuff" to transport in the future because electronic gadgets often include more than one function... 'sob'
There's more to economic activity and things being shipped than iPods.
I appreciate the previous cogent discussions of the specifics of the rail business and implications of Buffet's move. To this less-informed mind, it does seem that relying on trucking for moving goods of all kinds is only headed to gone- remember $4 gasoline? It didn't go on long enough to impress enough average people, but when the spigot runs dry (or is turned off or played around with by our Saudi best friends) the rail system will be ready, we can only hope.
Ayn Rand or no, I look forward to the return of major rail freight (and the end of long-distance trucking- they can still take containers and things to and from railheads).
Of course I always wished I looked like Dagny Taggert and had at least two if not more hunky rationalists lusting after my mind...

[Drover]

Originally Posted by evilnewbie

Honestly, I don't see a very high return for buying an old railway system... Am I missing something, what does Buffett think is going to happen? Anyone else have better insight? I wouldn't buy any Berkshire shares, they are way too expensive and I don't have that much money... hahaha...

Consider it a hedge. Railroads are relatively immune to economic boom-and-but cycles.

Also, you'll be pleased to know that Berkshire common stock just underwent a 50-1 split so shares are going for about $65 a pop.

[treasurekidd]

Also, you'll be pleased to know that Berkshire common stock just underwent a 50-1 split so shares are going for about $65 a pop.

Excellent! Berkshire anything at $65 is a once in a lifetime opportunity. With this railroad purchase, along with his long term highly profitable investments in GE and GS, Buffett has set Berkshire up to be highly profitable long after he is gone. Time to get on board this train too, if you'll pardon the pun.

[GregW]

Burlington Northern hauls much of the coal used to generate electricty in this country. Their roadbeds and rolling stock are relativly new. Seems like a good move to me. Long term profit instead of short term speculation.

I just wish I had enough money to get in on this deal.

[Omaha Rocks]

Originally Posted by evilnewbie

Honestly, I don't see a very high return for buying an old railway system... Am I missing something, what does Buffett think is going to happen? Anyone else have better insight? I wouldn't buy any Berkshire shares, they are way too expensive and I don't have that much money... hahaha...

Here's one that'll make you chuckle: I actually live 3 blocks east of Warren Buffet! Okay, technically it's 3 blocks east and about 2 miles north, but hey...


I don't know why Buffet bought BN, but you can be darned sure he did his homework. Though I'm no huge Buffet fan, he is amazing. He's in his mid-late 70s, still lives in the same modest home he's been in for 50 years, and drives his own car to work every day. He doesn't have to be doing this stuff, but it's just who he is.

My guess is that he's seeing the beginning of a resurgence in rail transportation of freight. He's acting on a good hunch.

[Mike from back east]

Originally Posted by Omaha Rocks

Here's one that'll make you chuckle: I actually live 3 blocks east of Warren Buffet! Okay, technically it's 3 blocks east and about 2 miles north, but hey...


I don't know why Buffet bought BN, but you can be darned sure he did his homework. Though I'm no huge Buffet fan, he is amazing. He's in his mid-late 70s, still lives in the same modest home he's been in for 50 years, and drives his own car to work every day. He doesn't have to be doing this stuff, but it's just who he is.

My guess is that he's seeing the beginning of a resurgence in rail transportation of freight. He's acting on a good hunch.

I'm not a WB groupie either, but I sure admire the guy. Amazing thing is that he buys companies which are in plain sight of all investors and the "wizards" on Wall Street, but when he does it, it's like striking gold. Right there in plain sight.

Any of us could have bought into BNSF. A couple of years ago, WB bought an early stake (~5%) in those 3 RR's (UP, BNSF, NS) as he understood the inherent value in today's RR business (discussed earlier in this thread) and that early stake gave him access to the Boards and CEO's of those firms, access that allowed him to know which RR represented the best VALUE. He has now placed his bet on BNSF as he no doubt sees them as the "best of breed" or the "category killer" in that biz. Typical WB, buy the best horse and let it work for you.

[Gunluvver2]

I wonder if Buffet supported Obama in the last election knowing that Cap & Trade legislation would destroy the trucking business and move a lot of that business to the railroads?

However if Cap & Trade totally destroys the coal business ( Obama has stated that he would destroy coal) BNSF and the railroads that have built their core business around hauling coal will be in a world of hurt. Buffet may have shot himself in the foot.

GL2

[treasurekidd]

However if Cap & Trade totally destroys the coal business ( Obama has stated that he would destroy coal)

Like it or not, coal is cheap AND plentiful, so regardless of what Obama says, it's not going away. And when politicians say "destroy it", they really mean "tax it to death". That's just a politician pandering to one of his biggest special interest supporters, the environmental movement. The worst they'll ever do to it is treat it like they treat tobacco, and that's still very profitable, and still growning fast outside of the US. Even if we did ban it here (which won't happen), coal will still be mined and hauled to the west coast ports for shipment to China and India.

[Mike from back east]

Regarding WB's emphasis on buying companies WITH great managements, here's a piece from Bloomberg on just that aspect.

Excerpt:

Warren Buffett didn’t just buy a railroad when he announced his purchase of Burlington Northern Santa Fe Corp. He hired the engineer, too. “It’s a bet not only on the company but on talent,” said Gary Bradshaw, portfolio manager at Hodges Capital Management Inc. in Dallas, which owns 150,000 Burlington Northern shares.


Regarding Cap and Trade and our current President, I'm aware that WB is one of Obama's inner circle. Cap and Trade has been a concept for a while, I'm sure he's aware of that and other such long term trends and ideas. That could be why he bet on the RR's in the first place, along with the basic VALUE that business inherently represents. I'm not sure if Cap and Trade will destroy coal, it should make clean western coal more attractive than the dirty coal from back east. Like oil, coal will be around for quite a while as we transition most of our energy requirements to wind, solar, and nuclear.

[floridasandy]

certainly is a buffett love fest here.....

i guess everybody is happy that berkshire's $8.23 billion of paper losses on the stock index derivatives was was down from $10.19 billion at the end of march.