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Warren Buffett's Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) has disclosed a greater than 10% stake in Burlington Northern Santa Fe (BNI). Through three insurance subsidiaries (Columbia, National Indemnity, and National Fire & Marine) Berkshire beneficially owns 39,027,430 shares of Burlington Northern common stock according to an SEC filing made on Friday, April 6, 2007.

Berkshire's most recent reported purchase was made on Thursday, April 5th, and consisted of 1,219,000 shares purchased at $81.18 each.

Upon presenting the familiar table of Berkshire's major investments in his most recent letter to shareholders, Buffett wrote:

We show below our common stock investments. With two exceptions, those that had a market value of more than $700 million at the end of 2006 are itemized. We don't itemize the securities referred to, which have a market value of $1.9 billion, because we continue to buy them. I could, of course, tell you their names. But then I would have to kill you.

It appears that Burlington Northern was one of the two large positions Berkshire was accumulating. Clearly, Berkshire has been a big buyer of Burlington Northern shares since Buffett wrote his letter to shareholders, because Berkshire's position now has a market value of approximately $3.2 billion.

The size of the Burlington Northern investment will make it one of about a half dozen very large positions held by Berkshire. This investment dwarfs each of Berkshire's investments made during the past few years – it is already considerably larger than any other single investment recently disclosed by Berkshire including the investment in Posco (NYSE:PKX), US Bancorp (NYSE:USB), ConocoPhillips (NYSE:COP), Anheuser Busch (NYSE:BUD), Johnson & Johnson (NYSE:JNJ), USG (NYSE:USG), Wal-Mart (NYSE:WMT), and Tesco (OTCPK:TSCDY).

This is the biggest single common stock investment made by Berkshire in a long time.

It's big news – and it seems to have caught most Buffett watchers off guard. GuruFocus, a site that tracks Buffett's moves religiously, announced that its contest to name the two mystery investments alluded to in Buffett's annual letter had failed to turn up any guesses that Burlington Northern would be among the pair.

Burlington Northern Santa Fe operates one of the largest rail systems in North America. The system includes 32,000 route miles of track of which 23,000 are owned route miles.

In recent years, Burlington Northern Santa Fe has been buying back stock. The company expects share repurchases will remain the primary use of its free cash flow. In fact, Burlington Northern may allow "a moderately higher level of debt" so the company can "devote additional financial capacity to share repurchases".

In that respect, at least, it is a typical Berkshire investment.

BNI 1-yr chart:

BNI 1-yr chart

Source: Berkshire's 10% Stake in Burlington Northern Catches Most Buffett Buffs Off Guard