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"I swear by my life and my love of it that I will never live for the sake of another man, nor ask another man to live for mine." -- John Galt When at the age of twelve, at the time of the Russian revolution, I first heard the Communist principle that Man must exist for the sake of the... More
  • Buffet buys BNSF for 34 Billion 1 comment
    Nov 3, 2009 10:43 AM | about stocks: BRK.B, BNI
    Warren Buffet agreed to buy Burlington Northern Santa Fe for 34 Billion in Cash and stock.  BNI Shareholders will have the option of being bought out in cash (100 dollars per share) or Berkshire stock.  Berk-B is currently trading for $ 3,310 per share, but the Berkshire Board has approved a 50-1 Split for Burlington Share holders that have smaller denominations of equity.  Buffet already owns 22% of the Railroad but is going all in on his biggest acquisition ever.
     
    I own shares of BRK-B and also BNI.  Why do I think Buffet is buying BNI???
     
    1. BNI primarily operates on the West Coast & Mid-West.  The West coast is growth.  The West Coast has the key Long Beach terminal that brings in goods from China/Asia.  In the future... The US will be doing MORE business with China/Asia (West Coast) and less business with Europe (East Coast).
     
    2. We are in a recession.  Railroads are a cyclical business.  Intermodal has been hit but at some point it will come back.  When we come off these depressed levels of rail, you will wish you bought at the bottom.  I'm probably more bearish than Warren in this regard ( I think he's early to the party), but his track record is much much better than mine.
     
    3. I actually like that they are heavily involved in the PRB.  The PRB sells cheap coal... cheap energy that people need to heat and air condition their homes.  You need that in a good economy and you need that in a bad economy.  Americans might be buying less flat screen TV's for the time being, but they will be turning up their thermostats when Winter comes.
     
    4. BNI has invested in their own infrastructure.  They invested in capital improvements ( extending 2 lane tracks to 4 lane tracks) and are ready for growth. 
     
    Buffet is betting on ...
    America (West coast & Mid West)
    China growth
    US/China business relations
    ( long term it's also a play on high oil prices/anti trucking/carbon emissions play)
    Transporting commodities such as coal, grains, etc.
    Recession ending/softening
    Hard assets as these railroads infrastructures cost money.

    Author is long BRK-B & BNI
    Themes: Market Outlook, M A, Investment Ideas Stocks: BRK.B, BNI
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This post has 1 comment:

  •  
    Nice article, John. And I think you have the right of it - and I even agree that Buff has pulled the trigger just a bit early, though we have to admit that he just might know something about the coming weeks that we don't, LOL.

    I would say that this is an indirect China play, though, as China will soon be sucking in mountains of coal and other commodities from de-industrialized America.
    2009 Nov 03 05:44 PM Reply
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