Warren Buffett's Burlington Northern Stake Nears 18% As Buying Accelerates

[touchring]

Any thoughts? Will this be a good buy. The stock looks quite dead - http://moneycentral.msn.com/investor...spx?Symbol=BNI


Warren Buffett's Burlington Northern Stake Nears 18% As Buying Accelerates

Warren Buffett's stake in Burlington Northern Santa Fe is approaching 18 percent after Berkshire Hathaway paid close to $74 million for nearly a million shares on Monday and Tuesday of this week.

http://www.cnbc.com/id/22698689?__so...*blog*&par=RSS

[dbarberic]

Re: Warren Buffett's Burlington Northern Stake Nears 18% As Buying Accelerates

I know nothing about this specific stock and what is a good entry price point, but I believe that on a macro trend, railways are a play on high energy costs and a good move.

A modern diesel locomotive can move one ton of freight nearly 400 miles on one gallon of diesel fuel.

[Jim Nickerson]

Re: Warren Buffett's Burlington Northern Stake Nears 18% As Buying Accelerates

I know nothing about this specific stock and what is a good entry price point, but I believe that on a macro trend, railways are a play on high energy costs and a good move.

A modern diesel locomotive can move one ton of freight nearly 400 miles on one gallon of diesel fuel.

You gotta reference for that tidbit?

[dbarberic]

Re: Warren Buffett's Burlington Northern Stake Nears 18% As Buying Accelerates

You gotta reference for that tidbit?

http://www.voteview.com/rtopic1.htm

Railroads are more energy efficient and less polluting than trucks. A diesel-electric locomotive can move one ton of freight an average of 379 miles (610 km) per gallon of diesel fuel. This is 3 times the fuel efficiency of a truck. Diesel-locomotives are three times cleaner than trucks on the basis of air emissions per ton moved.

http://www.railrunner.com/markets/wh...clean_tech.php

Highway freight traffic represents 55% of the total. Highway vehicles transport 8.85 billion tons of freight and highway vehicles overall consume 172 billion gallons of petroleum-based fuels of which 34 billion gallons are annually consumed in delivery of freight by truck. Class I railroads (large operators with more than $300 million in revenues), on the other hand, consume less than 4.1 billion gallons of fuel, first because they carry less freight than trucking firms and second, because they can carry 400 ton-miles of freight per gallon whereas trucks can only carry 123 ton-miles per gallon of fuel. Table 1

http://www.aspo-usa.com/index.php?op...=168&Itemid=91

Today’s diesel railroads are roughly eight times more energy-efficient than heavy diesel trucks.

I think Buffett's BN stake is a back end infrastructure / expensive energy play.

[Jim Nickerson]

Re: Warren Buffett's Burlington Northern Stake Nears 18% As Buying Accelerates

http://www.voteview.com/rtopic1.htm



http://www.railrunner.com/markets/wh...clean_tech.php




http://www.aspo-usa.com/index.php?op...=168&Itemid=91


I think Buffett's BN stake is a back end infrastructure / expensive energy play.

Nice work, db, perhaps you are on to something regarding Buffett's reasoning.

[bill]

Re: Warren Buffett's Burlington Northern Stake Nears 18% As Buying Accelerates

http://www.aspo-usa.com/index.php?op...=168&Itemid=91


I think Buffett's BN stake is a back end infrastructure / expensive energy play.

Is he’s getting ready to move ethanol on rail and or build rail infrastructure.
A closer look at Marmon from a previous post http://www.itulip.com/forums/showthr...4236#post24236 reveals a large tanker capacity.

http://www.marmon.com/Companies.html

Transportation Services & Engineered Products
Enersul Inc. operates sulphur forming and handling facilities.
EXSIF Worldwide, Inc. is a lessor of intermodal tank containers, suitable for the transportation, distribution and storage of bulk liquids, chemicals and gases globally.
Penn Machine Company manufactures replacement parts for mining equipment.
Railserve, Inc. , provides contract switching services to companies with on-site rail yards.
Trackmobile, Inc. manufactures mobile railcar moving vehicles for in-plant and yard switching.
Uni-Form Components Co. fabricates tank heads and other components.
Union Tank Car Company (United States and Mexico) and Procor Limited (Canada) together are North America's largest manufacturer and lessor of railroad tank cars, with over 70,000 cars in their combined fleets.

[dbarberic]

Re: Warren Buffett's Burlington Northern Stake Nears 18% As Buying Accelerates

Nice work, db, perhaps you are on to something regarding Buffett's reasoning.

As a side note, shipping is even more efficient than rail. Think barges and other freight ships.

[c1ue]

Re: Warren Buffett's Burlington Northern Stake Nears 18% As Buying Accelerates

Folks,

You're barking up the wrong tree.

Buffet doesn't do technology.

He doesn't try to tap into fads.

His entire investment philosophy is based on buying into effective monopolies built on superior management, market understanding, and sound financial underpinning.

BN is a perfect potential effective monopoly which also has structural monopoly characteristics.

I haven't looked into great detail as to how BN's management and fiscal performance compares to its US peers - but that is the key to understanding why Sir Warren is buying in.

Without even knowing a damn thing, I'd bet money right now that BN is better than its peers...Or has something like the asbestos suit hanging over an otherwise healthy business.

[GRG55]

Re: Warren Buffett's Burlington Northern Stake Nears 18% As Buying Accelerates

Folks,

You're barking up the wrong tree.

Buffet doesn't do technology.

He doesn't try to tap into fads.

His entire investment philosophy is based on buying into effective monopolies built on superior management, market understanding, and sound financial underpinning.

BN is a perfect potential effective monopoly which also has structural monopoly characteristics.

I haven't looked into great detail as to how BN's management and fiscal performance compares to its US peers - but that is the key to understanding why Sir Warren is buying in.

Without even knowing a damn thing, I'd bet money right now that BN is better than its peers...Or has something like the asbestos suit hanging over an otherwise healthy business.

As usual on iTulip, the big picture becomes clear when one reads the whole commentary from multiple contributers. "dbarberic" is correct when he says:

As a side note, shipping is even more efficient than rail. Think barges and other freight ships.

My wife is a transportation economist and many years ago patiently explained to me how important transportation costs are to businesses producing and selling low value products, like agriculture, fertilizers, bulk chemicals and many raw materials. Barges are even cheaper than railways, and the USA has a fantastic competitive advantage with it's waterborne transportation system (that covers an enormous part of its territory) using the Mississippi and Missouri rivers, and inshore Gulf Coast. An example: Fertilizer made near Tampa is shipped to Midwest farmers by barge, and they in turn ship their crops to tidewater the same way. Can't be done any cheaper.

Buffett is on record as generally avoiding owning direct exposure to commodities. However, he certainly must see the same inflationary pressures that are being discussed on this site. His accumulation of pipelines, railways (Berkshire owns not just BN) and what you correctly call "effective monopoly" businesses would appear his preferred risk adjusted way to participate in commodity production, distribution and potential rising prices in the future.

Clearly he has more confidence in the US economy than many others this week.

[touchring]

Re: Warren Buffett's Burlington Northern Stake Nears 18% As Buying Accelerates

Clearly he has more confidence in the US economy than many others this week.

He is not incorrect, the bubbles in Asia are even more dangerous.

[c1ue]

Re: Warren Buffett's Burlington Northern Stake Nears 18% As Buying Accelerates

GRG,

The other things to keep in mind are:

1) Sir Warren is a patriot - the real non-agenda, non-personal aggrandizement type. This does color his investment philosophy as much as anything I've ever seen him do (and I follow him very closely).

2) Other countries don't allow foreigners to own key infrastructure like railroads. Only the US is stupid, greedy, and arrogant enough to even open the possibility.

[GRG55]

Re: Warren Buffett's Burlington Northern Stake Nears 18% As Buying Accelerates

GRG,

The other things to keep in mind are:

1) Sir Warren is a patriot - the real non-agenda, non-personal aggrandizement type. This does color his investment philosophy as much as anything I've ever seen him do (and I follow him very closely).

2) Other countries don't allow foreigners to own key infrastructure like railroads. Only the US is stupid, greedy, and arrogant enough to even open the possibility.

Given the 11% pay raise the German state rail workers just got, who would want to own their railways?

[blazespinnaker]

Re: Warren Buffett's Burlington Northern Stake Nears 18% As Buying Accelerates

Buffet has been known to buy businesses that have significant tailwinds, as long as their management isn't evil.

Rail having a monopoly can actually work against it as much as it can work for it (ie: government regulation, which has been discussed several times regarding BN and Buffet's investment).

I think inflation and oil prices are probably the biggest reason he's buying rail.

I agree on the patriotic thing though. He is weird that way, however in the last little while he's changed his approach (betting against the dollar, buying in israel, etc)

[bill]

Re: Warren Buffett's Burlington Northern Stake Nears 18% As Buying Accelerates

Is he’s getting ready to move ethanol on rail and or build rail infrastructure.
A closer look at Marmon from a previous post http://www.itulip.com/forums/showthr...4236#post24236 reveals a large tanker capacity.

http://www.marmon.com/Companies.html

Transportation Services & Engineered Products
Enersul Inc. operates sulphur forming and handling facilities.
EXSIF Worldwide, Inc. is a lessor of intermodal tank containers, suitable for the transportation, distribution and storage of bulk liquids, chemicals and gases globally.
Penn Machine Company manufactures replacement parts for mining equipment.
Railserve, Inc. , provides contract switching services to companies with on-site rail yards.
Trackmobile, Inc. manufactures mobile railcar moving vehicles for in-plant and yard switching.
Uni-Form Components Co. fabricates tank heads and other components.
Union Tank Car Company (United States and Mexico) and Procor Limited (Canada) together are North America's largest manufacturer and lessor of railroad tank cars, with over 70,000 cars in their combined fleets.

new web page since buffett took over:http://www.marmon.com/sectors.asp?Me...d=6&trans=true


http://biz.yahoo.com/ap/080529/rail_congestion.html
US rail network facing congestion 'calamity'
Thursday May 29, 4:57 pm ET
By Michael Tarm, Associated Press Writer AP IMPACT: US freight rail congestion could mean billions in losses for economy

CHICAGO (AP) -- Railway executive Matthew Rose stood before fellow industry leaders, pointing to a map meant to tell the future of the U.S. rail freight network. It was drenched in red -- east to west, north to south.
The blotches illustrated areas where, by 2035, traffic jams could be so severe trains would grind to a halt for days with nowhere to go.
"For those of you who've ever seen a good rail meltdown, this is what it looks like," Rose, CEO of Burlington Northern Santa Fe Corp., said as the crowded hall shifted uncomfortably in their chairs. "It's literally chaos in the supply chain."
.
.

Many politicians are joining rail executives in sounding the alarm. "The amount of money we're investing nationally is pathetic," Rep. Peter DeFazio, D-Ore., said during a recent congressional hearing on congested freight routes. "We're heading toward fourth-world infrastructure."
.
.
Any solution will have to include Chicago, which handles about 40 percent of all U.S. rail freight on 180,000 trains a year.
But the big choke point is Chicago, where it can take up to two days for trains to wind through the city.

They need a few of these:
http://www.alliancetexas.com/tabid/2...estport%202008

hooking up to this:
http://www.nascocorridor.com/naipn/index.html

[Starving Steve]

Re: Warren Buffett's Burlington Northern Stake Nears 18% As Buying Accelerates

I like what I see here with the shipping corridor between Canada, the U.S, and Mexico. This is thinking BIG. We "CAN DO" it.

And we can do it with water, with energy, with labour, with the Amero, with defence, and with everything.

One united continent with plenty of opportunity and resources for everyone; this is the future.