Railroad Stocks Steam Ahead on Buffett's Buy of BNI

Includes: BNI, BRK.A, BRK.B, IYT
by: Mike Havrilla

Railroad stocks are steaming ahead today on news that Warren Buffett will buy Burlington Northern (NYSE: BNI) as a bet on the recovery of the domestic and global economy as part of Berkshire Hathaway's (NYSE: BRK.A) largest acquisition ever. Berkshire previously owned over 22% of BNI and will also conduct a 50 : 1 split of his Company's Class B shares (NYSE: BRK.B). Buffett is also bullish on the railroad industry as a green form of fuel / cost-effective means for the transportation of goods as compared to other forms of transport such as roadway trucking.

The ProActive Global Railroad Index (+4.3% today) is actively managed and tracks the performance of companies that derive either more than 50% OR $100 million of trailing 12-month revenue from any of the following activities: (1) passenger or freight rail transport services; (2) railcar and locomotive leasing; (3) railcar and locomotive fleet management; (4) rail infrastructure, railcar, locomotive, and railcar/locomotive component parts manufacturing; (5) railcar, locomotive, and component parts repair or refurbishment. The rally today among railroad stocks is helping to stem some of the recent losses experienced over the past three months, as illustrated on the accompanying chart.

Number of Stocks in Index: 52

Number of US stocks in Index: 19

Average Market Cap (US-traded stocks): $6.7 billion

Period Range: $1096.79 - $1255.23

Last Price: $1,176.94 (+11.8% since 24-June)

(This index has been tracked at Investars YOU website since 6/24/09 with a starting value of $1000)

Today Change: 50.84 (4.32%)

This index tracks the performance of the railroad index, including 52 companies on a worldwide basis with 19 of these that are US-based. As a new ETF idea, the global railroad industry would offer investors an investment option in the specialized global transport space such as Claymore's passenger airline ETF (NYSE: FAA), shipping ETF (NYSE: SEA), and PowerShare's Global Progressive Transportation (NASDAQ: PTRP). The iShares Dow Jones Transport (NYSE: IYT) is the most popular means for investing in transports with approximately $500 million in net assets, followed by SEA at about $90 million in net assets while FAA / PTRP are around the $5 million net asset level.

Disclosure: No positions.