Warren Takes a Ride

Confirmed by a reliable financial news source, Warren Buffet, through his Berkshire Hathaway investment company, has taken a 10% position in BNSF Common stock. Already, there has been a "Warren pop' today:

Bloomberg

Warren Buffett must have read that Trains article about the BNSF double
tracking project on the Transcon in New Mexico. Mr. Buffett must be
figuring that the doubletrack project will boost BNSF's bottom line.

Hey, maybe he's just fixing a market for those EMDs.

You know, I have a lot of respect for Jim Cramer - he's made me some money over the last few years - but he always likes CSX stock, and except for a very short term play, I cannot condone CSX stock - it's just not run as well as BNSF. Were I an uber-long-term investor like Mr. Buffet, I too, would choose BNSF. The story on CNBC's sqawk box this morning was that he was taking positions in two other undisclosed railroads. They were curious which ones, and said "gee it could only be UP, CSX, or NS" but then someone chimed in how Mr. Buffet's buddy Bill Gates is the largest shareholder of the "Canadian Northern" (um, we haven't called it that since 1920 or so...) Neglecting entirely the KCS and CP.

However, I consider this a good sign - Buffet only invests in companies he feels have a very good chance of doing well.

Tadman wrote:You know, I have a lot of respect for Jim Cramer - he's made me some money over the last few years - but he always likes CSX stock, and except for a very short term play, I cannot condone CSX stock - it's just not run as well as BNSF. Were I an uber-long-term investor like Mr. Buffet, I too, would choose BNSF. The story on CNBC's sqawk box this morning was that he was taking positions in two other undisclosed railroads. They were curious which ones, and said "gee it could only be UP, CSX, or NS" but then someone chimed in how Mr. Buffet's buddy Bill Gates is the largest shareholder of the "Canadian Northern" (um, we haven't called it that since 1920 or so...) Neglecting entirely the KCS and CP.

However, I consider this a good sign - Buffet only invests in companies he feels have a very good chance of doing well.

I know - he must have bought all the outstanding stock in Amtrak!

Kidding aside, he also could have invested in Class 2s. The DM&E, though unstable now, could bring a nice price if the rumored sale to the Union Pacific goes through. Otherwise, based on the lack of complaints about their service in this forum, I'd guess he picked Norfolk Southern and one of the Canadian roads.

How serious is this DM&E instability? I haven't heard anything of the sort, just that the government won't grant their loan for PRB construction.

That's about all I know, aside from everyone in Rochester, MN hating them and the PRB proposal, and their track not being in the best shape. I understand they're still planning to invest in track upgrades - they've hired the testing company my dad works for, to take cores of the railbed and ballast. Other than that, I don't have any insider info.

Who knows? Maybe they got Mr. Buffett to invest in them too, just like he did in the BNSF (to pretend to bring this back on topic).

Who said UP is going to buy DM&E/IC&E? Where do you get your info? Thats just railfan speculation. I dont believe until I see it. CN or CP is a possible option IF DM&E is even for sale. I dont see it happening anytime soon...

(could one of the moderators move this to... um... Midwest Railfan maybe? Maybe there's already a thread on the DM&E?)

Yup, you're right, it is speculation that they'd buy the DM&E, though it started with someone else on this forum. If I can find the post, I'll link it here. Not sure that anyone would like to buy them right now - the UP appears to be kind of P.O.'d at them if the site below is to be believed. They apparently skipped out on $591k payable to UP for environmental remediation.

http://www.dmetraintruth.com/ (the site does have an axe to grind though)

The site also hints that the DM&E is foreign-owned, though they don't support that assertion. It certainly is privately-held though, so maybe Warren Buffett did buy a slice.

The graphic of Warren "taking a ride on the Reading' appearing in the print edition of The Wall Street Journal almost is worth the buck to buy it at the newsstand today.

Here is the article for those with access to the subscription site:

http://online.wsj.com/article/SB117613987945764194.html

In my opinion Warren would never invest in a company as risky as the DME. He is a billionare for a reason. If there little venture was as promising as they make it out to be do you really think it would take 10 plus yrs to nail down financing? They are a 600 mile, slow boat to nowhere, rr with mailline speeds of 30mph.( ok 40mph for a few miles.) Even with their line rebuilt and expanded into the PRB they still have to rely in a partner railroad to deliever there goods to a final destination.

I don't know why anyone would think that the UP is interested in the DME. The CNW got rid of it for a reason. It goes nowhere. The best thing as far as the future holds for the DME are the ethanol plants coming on line, but that alone doesn't make it that attractive.

If Warren was going on the risky side I think maybe KCS would be more to his liking for such reasons like the Mexican port of Lazaro Cardenas preparing to finish phase I of there expansion for intermodal service. This will allow lower labor costs compared to LB/LA. It has 50% ownership of panama canal rr and 100% ownership of mexican rr. It is the smallest class 1 rr with stipulations with STB allowing it to be a easier takeover target. It has a highly vaule east to west route with the meridian speedway and also a vauleable nafta route Canada to Mexico with partner rr's.

A "Common Sense" opinion piece from the Wall Street Journal (subscription site) appearing April 11 regarding BK's reportable position taken in BNI

http://online.wsj.com/article/SB117623806138165489.html

Brief passage:

• Warren Buffett ended the suspense, disclosing in an SEC filing that one of the mystery companies in which he's been accumulating shares is Burlington Northern Santa Fe. Although this isn't one of the two companies -- Deere and Caterpillar -- that I picked for him, I can readily understand his reasoning.
  
  Burlington certainly fits Mr.Buffett's stated profile. It's:
  
  a) large (a market capitalization of almost $30 billion);
  
  b) with consistent earnings (five-year growth at an annualized 22%);
  
  c) a high return on equity (19% last year) and low debt ($7 billion in long-term debt);
  
  d) in a business anyone can understand; and
  
  e) enjoys high-quality management.