Warren Buffett's Berkshire Hathaway Inc. has bought BNSF (Burlington Northern Santa Fe railroad) for 34 billion dollars. Buffet has been buying BNSF, and other railroad stock (UP and NS), for some time now - since before the recession.
Is Buffett losing his touch? Why would somebody buy a stodgy old railroad when he could purchase something trendy like Compuglobalhypermeganet?
Unnoticed by many, railroading has made a big comeback since its woebegone days of the 60's and 70's. Gone are the the bloated engine crews, the excess trackage, the passenger trains, the arcane business practices, and the outdated government regulation that almost ran the industry into the ground.
Today's American railroads haul freight and freight only, the biggest part of the business is still commodities like coal, but consumer goods imported from China etc. are also a large portion of the business. A ship can unload its cargo in California and have it in New York in a matter of a few days - it's that efficient. "Containers On Flat Cars" (COFC), means goods shipped in special containers are easily moved from ship, to rail, to truck. TOFC (Trailers On Flat Cars) are also big business, especially with companies like UPS. Most of the goods bought in North American stores have made at least part of the trip to the shelf via railroad.
Of the handful of big railroads left today, BNSF is widely regarded to be the best of the best. Originally the Atchison, Topeka and Santa Fe Railway (AT&SF), and largely relegated to the Southwestern U.S., the company, led by CEO Matt Rose (and Robert Krebs before him), became a national force when it merged with the Burlington Northern Railroad (BN). Though BN was the bigger company, Santa Fe's corporate culture won out - prompting one wag to say that BNSF stood for "Big New Santa Fe."
BNSF stands to grow with the end of the recession, having considerable assets in the Powder River coal basin and the "Transcon," its land bridge across much of the continent - stretching from California to Chicago and many points in-between. The Transcon has seen continual improvements over the past few years and has hosted 80 to 100 trains a day - long trains too. On top of that, BNSF has a good safety record, good labor relations, and a real knack for making money. It ain't virtual - just profitable.
Photo: MDRails
