In its annual letter to shareholders, Berkshire Hathaway Inc. (BRK.A) reported net income of $8.1 billion and revenue of $112 billion for 2009. That's an improvement over the net income of $5.0 billion and revenue of $108 billion in 2008. However, net income in 2007 totaled $13.2 billion.

In dollar terms, the conglomerate's book value rose 19.8% last year to $21.8 billion, or $84,487 per share. That was the best gain since 2003, but trailed the S&P 500's return of 26.5% for the year.

CSX (NYSE: CSX), a railway company whose peers include Burlington Northern Santa Fe (NYSE: BNI), Union Pacific Corp. (NYSE: UNP) and Norfolk Southern Corp. (NYSE: NSC), reported earnings for the second quarter on Monday after the bell. Net sales declined 25%, and earnings from continuing operations declined 24% to 72 cents per share.

Declines are never nice, but for a company like CSX, it's only to be expected. The recession continues to have an impact on operations. Management said that volumes decreased; it also mentioned how CSX is doing its best to run as efficiently as possible to combat the dropping top line. Maybe it's working out, because according to Reuters, the company beat Wall Street estimates by 10 cents.

Is it time to ride the rails? In Gordon Pape's The Internet Wealth Builder, analyst Tom Slee reaffirms his buy rating on Burlington Northern Santa Fe (NYSE: BNI), his top pick in the sector.

"Burlington Northern is my preferred choice in the railroad industry. At first glance, Burlington Northern had a particularly bad first quarter.

"Profit was $0.86 a share, down sharply from $1.30 a share the year before. However, when unusual items such as an unfavourable coal rate decision are excluded, operating earnings amounted to a much more acceptable $1.13 a share, well above the 96c analysts were looking for.

CSX (NYSE: CSX), a railway company whose colleagues include Burlington Northern Santa Fe (NYSE: BNI), Norfolk Southern Corp. (NYSE: NSC) and Union Pacific Corp. (NYSE: UNP), issued its Q1 report on Tuesday after the bell. As one might imagine, there was a drop in both sales and net income. The top line declined by 17%. The bottom line, on an adjusted basis (taking into account an item from last year's similar quarter), dropped 23% to $0.62 per share.

The economy is still taking its toll, obviously. Volumes were down during the quarter. However, the market sometimes cares about only one thing: beating expectations. CSX actually beat the analyst expectations of $0.51 per share. This significant difference led traders to push shares of CSX higher by 6.5% during Tuesday's after-hours session.

Burlington Northern Santa Fe (NYSE: BNI - option chain) stock is falling today after the Surface Transportation Board ruled that the company overcharged two Western power companies for coal shipments. The agency gave BNI a $345 million penalty. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on BNI.

This morning, BNI opened at $61.70. So far today the stock has hit a low of $61.20 and a high of $63.98. As of 11:45, BNI is trading at $62.45, down $1.26 (-2.0%). The chart for BNI looks neutral and S&P gives BNI a 3 STARS (out of 5) hold ranking.

There is a lot of money sitting on the sidelines waiting for the right time to get back into the stock market. Maybe that time will be after the Dow Jones Industrial Average tests 7000, or even 6000. Maybe it will be after quarterly reports start turning positive. I'm sure many people will not do anything until the housing market turns around. Then there are those that have sworn off the stock market or at least individual stocks entirely.

These and a multitude of other issues may be keeping you from investing for now and no one could blame you, but if it is your intention to get back in when the coast is clear then you should be making some preparations by putting together your watch list.

Here are some of the stocks on my watch list. I usually have about 20 stocks that I am interested in. Some of them I own already and I am interested in acquiring more. Some have appeared in my Chasing Value column, and some or all might appear there again.

Annaly Capital Management (NYSE: NLY) is one of the stocks mentioned in Fortune Magazines "Ten Promising Stocks for 2009" and is currently paying almost a 15% yield at Fridays closing price of $14.92. The company borrows money at short term rates and only invests in long-term Federally backed mortgages. They have avoided subprime loans and derivatives entirely.

Boardwalk Partners (NYSE: BWP) is expanding and was highlighted today as another high yield value stock Chasing Value: High yield thru Boardwalk's pipes that you can acquire for less than the price the general partners paid in October.

Burlington Northern Santa Fe (NYSE: BNI) can claim Berkshire Hathaway (NYSE: BRK.A) as it's largest shareholder and you can buy shares for less than 'my pal Warren' did.

Intuitive Surgical (NASDAQ: ISRG) is one of my top holdings and favorite companies. I have owned it for years and only selling some shares at $192. I recently started building a new position in a new portfolio in the past few months and I am interested in buying more. It closed at 134.38 on Friday.

This post is part of a series featuring bargain stocks that are worth a look now. See more Cheap Stocks.

Maybe a railroad stock doesn't exactly seem like the cutting edge in investments. In fact, it might even strike you as old-timey. Fair enough -- but if you check out the year-to-date performance of Burlington Northern Santa Fe (NYSE: BNI), it's hard not to be impressed. At the end of November, the stock was down just 8% for 2008, compared to a loss of 40% for the broader S&P 500 Index (SPX).

The Texas-based freight firm transports everything from lumber and coal products to canned goods and oats. While you may have a perception of trains as pollution-spewing dinosaurs, BNI happily defies those stereotypes. Not only is the company adding new rail lines, it has also recently won accolades for its environmentally friendly practices. (Environmentally friendly for a railroad, of course -- I won't kid you by saying these locomotives run on rainbows and happy thoughts.)

On the fundamental front, BNI reported third-quarter earnings in late October that crushed analysts' expectations, and offered a rosy forecast for the fourth quarter. CEO Matt Rose said he's optimistic about his company's future, despite macroeconomic uncertainty. A pullback in corporate spending could actually benefit BNI, says Rose, because it's cheaper to transport goods by rail than by truck. "As the economy slows down, customers are going to be paying a lot more attention to cost," noted the chief executive.

CSX (NYSE: CSX), a transportation company whose competitors include Burlington Northern Santa Fe (NYSE: BNI), Norfolk Southern Corp. (NYSE: NSC), and Union Pacific Corp. (NYSE: UNP), reported earnings for the third quarter on Tuesday. The results weren't bad, driven in part by a drop in energy costs and an effort to keep costs under control.

Revenues increased 18%, approaching $3 billion. Earnings per share from continuing operations skyrocketed 40% to $0.94. As management pointed out, distributors are exploiting railways to the advantage of their supply chains. This is cool for shareholders of CSX, who obviously are hoping their company can successfully navigate the tough economic landscape that we're all trying to find maps for. And if oil prices continue to fall, then CSX may find it easier to manage its operations.

And there's another positive. According to this source, CSX beat analyst expectations by a penny. Unfortunately, according to that same source, management believes that it will hit the lower end of the spectrum in terms of its previous guidance. CSX is looking to earn between $3.65 and $3.75 per share for the fiscal year.

Taking everything together, I'm not sure I'd want to enter CSX at this time. It is well off the 52-week high, but it's not exactly near the 52-week low, either. Even though the energy picture might be moderating for the company, and even though its business does offer a compelling transportation service, I think a macro slowdown might send shares back toward the low. And according to this source, freight volume declined by over 2%. Problems in the automotive industry are negatively affecting CSX. Heck, problems in many industries will be with us for a while. CSX will see its operations pressured. And, again, that tells me that I'd have to see a big drop in the stock to find it attractive at this point.

Disclosure: I don't own any company mentioned; positions can change at any time.

"Even with the poor outlook for the economy, there are many investment opportunities being created by high energy prices and the low dollar," notes Jim Powell. In his Global Changes & Opportunities Report, he explains, "American 'rust belt companies' look especially good."

"Surprisingly, rising fuel prices are making some American manufacturers more competitive and I could not be happier about the improved outlook for many efficient U.S. producers.

"U.S. machine tool makers are starting to take back some of the business they lost to Japan 20 years ago. U.S. imports of Chinese steel are declining dramatically, while domestic production is rising at rates not seen in years.

"The list of U.S. businesses that are benefiting from the new trade relationships will lengthen, but it won't happen overnight. It's not just a matter of being loyal to the home team. America will benefit from creating more real wealth instead of the flim-flam financial products that led to the phony boom.

I've received a few chuckles for investment directions I've suggested in the past, but if you care to review a couple of my previous generalities, I believe that my record has held up fairly well.

I submit for approval the following investment angles for the balance of 2008 and possibly beyond:

Have I suggested investments in water holdings? Yes, I do believe that I have. I believe that going long in water stocks could be an investment hedge of the decade. I also suggest a look into the desalination technology from General Electric Co. (NYSE: GE).

I'd think it's a good idea to stick with the railroads, such as Burlington Northern Santa Fe (NYSE: BNI). I claim that, with all things given, for now, railroads can't fail. Conversely, I think it's a good time to back away slowly from trucking. I think misery lies ahead there.

The earnings crunch is in full swing, and here are a few of the highlights of this past week's earnings coverage from BloggingStocks:

• Airgas Inc. (NYSE: ARG) beat expectations and raised its guidance.
• Boeing Co. (NYSE: BA) beat estimates and said the 787 Dreamliner was on schedule.
• Burlington Northern Santa Fe Corp. (NYSE: BNI) fourth-quarter profits fell on rising fuel costs.
• Crane Co. (NYSE: CR) beat expectations and raised its guidance.
• Dow Chemical Co. (NYSE: DOW) profits fell due to rising costs of raw materials.
• Exxon Mobil Corp. (NYSE: XOM) posted the largest annual and quarterly profit ever by a U.S. company.
• Halliburton Co. (NYSE: HAL) beat earnings expectations due to strong international growth.
• Honda Motor Co. (NYSE: HMC) posted record earnings for the third quarter on demand for fuel efficiency.
• JetBlue Airways Corp. (NASDAQ: JBLU) posted a narrower-than-expected loss.
• Nissan Motor Co. (NASDAQ: NSANY) posted strong results due in part to U.S. sales of the Rogue.
• Occidental Petroleum Corp. (NYSE: OXY) fourth-quarter profit surged, leading to its best yearly results ever.
• Paraexel International Corp. (NASDAQ: PRXL) beat estimates and offered revised guidance.
• Ratheon Co. (NYSE: RTN) posted strong fourth-quarter results and offered optimistic guidance.
• RightNow Technologies Inc. (NASDAQ: RNOW) posted a loss, though revenues were up.
• Sony Corp. (NYSE: SNE) posted solid results on TV sales and the game division's return to the black.
• Stanley Works (NYSE: SWK) posted solid results despite the housing slump due to strength overseas.
• United Parcel Service Inc. (NYSE: UPS) met earnings estimates due to a pension-related charge.
• US Steel Corp. (NYSE: X) fourth-quarter and full-year profits declined on acquisition costs and job cuts.
• Valero Energy Corp. (NYSE: VLO) beat expectations despite a profit decline of 49%.

For additional BloggingStocks earnings highlights, see Yahoo!, Google, Amazon, Countrywide, Merck, UBS and others and McDonald's, Kraft, P&G, Verizon, MasterCard, 3M and others.

Union Pacific (NYSE: UNP), a leading transportation company, closed at $120.92. UNP overall option implied volatility of 33 is above its 26-week average of 29 according to Track Data, suggesting larger price risks.

Burlington Northern (NYSE: BNI), an operator of 32,000 railroad route miles, closed at $80.77. BNI overall option implied volatility of 34 is above its 26-week average of 29 according to Track Data, suggesting larger price fluctuations.

Canadian National (NYSE: CNI) closed at $46.36. CNI overall option implied volatility of 33 is above its 26-week average of 26 according to Track Data, suggesting larger price fluctuations.

Daily Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

MOST NOTEWORTHY: Abbott Labs, Barclays, SanDisk, Mission West Properties and Texas Instruments were today's noteworthy downgrades:

• Wachovia downgraded shares of Abbott Labs (NYSE: ABT) to Market Perform from Outperform reflect several challenges to the company's key franchises. In particular, Wachovia cites the potential delay of the drug-eluting stent Xience launch in the U.S. and decelerating growth of Humira.
  
• ABN Amro downgraded shares of Barclays (NYSE: BCS) to Hold from Buy to reflect the capital markets, lower UK bank non-interest income and higher bad debts.
  
• Oppenheimer downgraded shares of SanDisk Corporation (NASDAQ: SNDK) to Neutral from Buy as they expect many of the advantages that drove shares to unwind in Q4 and into 1H08.
  
• Mission West Properties (NYSE: MSW) was downgraded to Hold from Buy at Stifel, as they now believe the possibility of a sale is 50%/50% and could be pushed back to 1H08.
  
• Think Equity downgraded shares of Texas Instruments (NYSE: TXN) to Source of Funds from Accumulate as they believe competition could hinder Q4 and 2008 growth for wireless.

OTHER DOWNGRADES:

• Citigroup downgraded Xyratex Ltd (NASDAQ: XRTX) and Valueclick (NASDAQ: VCLK) to Hold from Buy.
  
• Piper downgraded Nasdaq Stock Market (NASDAQ: NDAQ) to Market Perform from Outperform.
  
• Lehman downgraded Burlington Northern Santa Fe Corp (NYSE: BNI) to Equal Weight from Overweight and CSX Corporation (NYSE: CSX) to Underweight from Equal Weight.
  
• UBS downgraded Molson Coors (NYSE: TAP) to Neutral from Buy.

Recently our own Sheldon Liber has posted several very insightful columns summarizing U.S. Class 1 railroads. Here's a bit of follow up information. Winter 2006-2007 was not kind to the railroads. Burlington Northern Santa Fe (NYSE: BCI) has stated it will take an $80 million charge in first quarter 2007, approximately 14 cents per share, due to an increase in environmental compliance costs, $65 million, and the write-off of a technology system, $15 million. These charges against profits will reduce EPS to $0.96, compared to EPS of $1.09 in first quarter 2006. BNSF operates 32,000 miles of rail in 28 states and parts of Canada. It hauls more grain than any other Class 1 railroad, and hauls enough low-sulfur coal to supply 10% of total US electricity generated. Despite recent wintery problems, Warren Buffett, the Oracle of Omaha, thinks BNSF is a good bet. Berkshire Hathaway (NYSE: BRK-A) owns 40 million shares of BNSF, approximately 11% of the total shares. BNSF stock closed at $87.99, down $0.09.

Norfolk Southern (NYSE: NSC) also reported winter problems that will have a negative impact on earnings. Operating 21,000 miles of track in 22 Eastern states, Norfolk Southern saw a 4.4% decline in shipping volume in first quarter 2007 from first quarter 2006. This will result in 3% lower EPS than forecast. Norfolk Southern plans to release first quarter earnings on 25 April 2007. The stock closed at $52.74, down $0.15.

MAJOR PAPERS:

• The Wall Street Journal reported that Time Warner Inc's (NYSE: TWX) Time Inc. has sold its interest in Bookspan, a book club, to Bertelsmann for about $150M.
• According to the Financial Times, citing sources, Imperial Tobacco Group plc (NYSE: ITY) raised its bid for French and Spanish tobacco company Altadis SA to EUR47 per share from a previous bid of EUR45 per share. Bloomberg reported that Altadis rejected the sweetened takeover bid.

OTHER PAPERS:

• The Telegraph reported that Dow Jones and Company Inc (NYSE: DJ), the publisher of the Wall Street Journal, is understood to be in advanced talks to buy the London-based Financial News newspaper for about GBP27M, with a deal possibly being announced within days.
• Sanofi-Aventis ADS (NYSE: SNY) and Bristol-Myers Squibb Company (NYSE: BMY) have put there merger negotiations on hold due to a number of obstacles that are stalling the process, the French newspaper Les Echos reported.
• Cablevision Systems Corporation (NYSE: CVC) said it will appeal a court ruling over its digital video recording service, the New York Times reported, citing the Associated Press.
• The New York Times also reported that Citigroup Inc (NYSE: C) may cut nearly 8% of its work force or around 26,000 jobs.

WEBSITES:

• Barron's Online's "Inside Scoop" column reported that Warren Buffett has disclosed that his investment company, Berkshire Hathaway (NYSE: BRK.A), now owns a 10.9% stake Burlington Northern Santa Fe Corporation (NYSE: BNI), according to SEC filings.