One day after my colleague Sheldon Liber wrote an interesting posts about railroad stocks, Bloomberg News reported that Warren Buffett's Berkshire Hathaway Inc. (NYSE:BRK.A) had become the largest shareholder of Burlington Northern Santa Fe Corp. (NYSE: BNI)
Coincidence? I think not.
Liber wrote that Burlington Northern along with CSX Corp. (NYSE:CSX) and Norfolk Southern Corp. (NYSE:NSC) were worth watching. He even noted that, "If you read any commentary from Warren Buffett you will learn that he looks for strong cash flow as a sign of success and resists investing in companies with a lot of debt."
It has about $6.7 billion in long-term debt. Free cash flow after dividends was $712 million in 2006. The railroad reports earnings April 24. Analysts are expecting earnings of $1.09 on revenue of $3.67 billion, according to Thomson Financial. The mean target price for the stock, which closed Thursday at $82.92, is $88.54.
Shares of Burlington Northern are bound to jump when the market reopens Monday when investors try to go all board.
Sorry, I couldn't resist one bad railroad pun.
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Reader Comments (Page 1 of 1)
4-08-2007 @ 7:46PM
Mr. noitall said...
I agree, this is not a coincidence. Sheldon & Warren think alike, this is why I already suggested that Mr. Buffet consider hiring Mr. Liber so he can groom him to run Berkshire Hathaway someday.
Sheldon, if you do get the job, i'm sure you will continue to need my input and advice, (I would expect to be paid for it by then).
4-09-2007 @ 7:55AM
Michael Schneider said...
It's rare for anyone to correctly point to what Warren Buffett will buy. Sheldon didn't do it exactly but he came close enough and his "timing" turned out to be perfect.
You can find many items about Warren Buffett at http://www.Barrelomoney.com including a list of his holdings and also a synopsis of an article comparing his investment style with Carl Icahn's.
4-09-2007 @ 11:37AM
Hugh Doyle said...
At this time,considering an energy shortage, I believe railroads are a great buy. They, themselves, think likewise. Norfolk Southern has committed millions of dollars in the coming year just to improve their lines and equipment.
4-14-2007 @ 1:22PM
John Beaulieu said...
What other mode of Transportation has a ready-made solution to the restrictions on fossil fuel use that will come if the US Government gets serious about Global Warming. How soon do you think you will see a Hydrogen powered truck or airplane? The railroads have the easy option to electrify their mainlines. Yes it will be expensive, but do you think Hydrogen or other methods will be cheap. And yes, the loss of coal hauling will hurt, but look at all the business there is to take from trucking.