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Warren Buffet buys BNSF


cornelius

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Very interesting! That's a lot of money to be spending in one go, even if it isn't real "note in my wallet" money.blink.gif cool.gif I didn't realise the BNSF had $10 bn of debt, and I always assumed that UP were bigger than BNSF, dunno why.

With regard to the operation of the company, I wonder if the EMD stuff will be phased out, given Buffett's investments in GE. If it happened, I couldn't imagine it being any time soon, but it would certainly be a bit of a shake up if it did

 

cheers

 

jo

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Buffett is very "hands off" in his investments. This means he won't micro manage or force BNSF to buy GE units or anything, rather he'll let the People Who Know Stuff make the business and operational decisions.

 

He must see a real future for rail if he's prepared to spend $36 billion.

 

Cheers

David

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... He must see a real future for rail if he's prepared to spend $36 billion. ...

 

You know better than that: he must see a very large opportunity for profit from this investment. He says he is betting on the US economy, which I would read in respect of buying into rail as its' need for power, and specifically that generated from coal as oil and gas rise in price and make the US' coal reserves ever more important. It has to get from mine to generating site somehow. There's also the prospect of some federal handouts...

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There's also the prospect of some federal handouts...

The major railroads want nothing to do with most Federal money because it comes with too many strings attached. The government has already this year required the railroads to invest $10 billion in PTC with negligible return on investment. They really don't need any more Federal "help".

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So, as the Great Northern and SP&S were historical predecessors of BNSF and built by James J Hill, and that the GN and SP&S were known as the Hill Lines, I would think it only fitting that BNSF should now be known as the Buffet Line...

 

I'll get my coat, thanks...

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BNSF will be a wholly-owned subsidiary of B-H, and it will disappear from the New York Stock Exchange sometime in the first half of next year.

 

There may be more money available for investment back into the company, rather than paying millions in dividends to stockholders. Berkshire-Hathaway has a different business model that's worked well for many years; not paying dividends is part of its strategy.

 

On a personal note, I'm not anticipating major changes to either how BNSF is operated or our culture. Perhaps it's because we're so busy with work, there's not been much discussion among employees about the deal beyond the initial 48 hours of the announcement. Business as usual.

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Anyway, I saw an interview with this chap on the Beeb recently, coincidence? ;)

 

He is the second richest person on the planet, hardly surprising BBC want to interview him really. If you look at what stocks his company (or rather the company he controls) holds, over and above companies they own outright, (this list is from the 2008 letter to investors so is probably out of date, but you get the idea! )

 

Percentage of company owned

American Express Company . . . . . . . . . . . . . . 13.1%

The Coca-Cola Company . . . . . . . . . . . . . . . 8.6%

ConocoPhillips . . . . . . . . . . . . . . . . . . . 5.7%

Johnson & Johnson . . . . . . . .. . . . . . . . . . 1.1%

Kraft Foods Inc. . . . . . . . . . . . . . . . . . . 8.9%

POSCO . . . . . . . . . . . . . . . . . . . . . . . 5.2%

The Procter & Gamble Company . . . . . . . . . . . . 3.1%

Sanofi-Aventis . . . . . . . . . . . . . . . . . . . 1.7%

Swiss Re . . . . . . . . . . . . . . . . . . . . . 3.2%

Tesco plc . . . . . . . . . . . . . . . . . . . . . 2.9%

U.S. Bancorp . . . . . . . . . . . . . . . . . . . . 4.3%

Wal-Mart Stores, Inc. . . . . . . . . . . . . . . . 0.5%

The Washington Post Company . . . . . . . . . . . . 18.4%

Wells Fargo & Company . . . . . . . . . . . . . . . 7.2%

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I'm not surprised. Before the crash US rail freight was getting close to the capacity limit.

 

 

Basically Buffet has done what he is very good at - he has gone into an industry at almost the bottom of its business cycle while revenues, dividends and the share price are low and bought a company with a lot of core strength in that businesss and which is also very well placed for the future - especially as it serves some of the key low sulphur coal mining areas in the US; so it will do very well if various energy/CO2 emission regulations come in and in any case business will grow as the US economy recovers.

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