Buffett sees a bright future in rail

OMAHA, Neb. – Warren Buffett’s company recently invested in three railroads, and in the process, Berkshire Hathaway Inc. became the largest shareholder in the Burlington Northern Santa Fe Corp., according to a company filing and a media report that the company confirmed.

The disclosure sent shares of all the major freight railroads up in afternoon trading Monday, with Burlington Northern leading the pack with a nearly 8 percent gain.

Omaha-based Berkshire Hathaway revealed in a filing with the Securities and Exchange Commission that it owned 39 million shares of Burlington Northern as of last Thursday. The cable network CNBC reported Buffett said Berkshire had also invested in two other railroads that he declined to name.

Buffett’s assistant, Debbie Bosanek, said no one at Berkshire was available Monday to discuss the company’s investments. But she said the CNBC report about Berkshire investing in two railroads besides Burlington Northern Santa Fe was accurate.

Buffett told CNBC that Berkshire had invested about $700 million in one North American railroad and slightly less than that in another railroad.

Berkshire’s investment in Burlington Northern represents 10.9 percent of the nation’s second-largest railroad.

The next largest Burlington Northern shareholder, Marsico Capital Management, holds about 32 million shares.

Buffett hinted at two major new investments as he described the performance of Berkshire’s $61.5 billion investment portfolio in his annual letter to shareholders that was released March 1. He said then that two investments with a market value of more $700 million at the end of 2006 were not named.

“We don’t itemize the two securities referred to, which have a market value of $1.9 billion, because we continue to buy them,” Buffett said in his letter. “I could, of course, tell you their names. But then I would have to kill you.”

Aside from his annual letter, Buffett rarely discusses Berkshire’s investments, so it’s not clear whether the railroad investments are the two investments he referred to.

Bear, Stearns &Co. analyst Edward Wolfe said in a research note that Berkshire’s investment in BNSF should be a positive sign for all the major freight railroads.

Wolfe said Burlington Northern has several advantages because it is seeing better volumes than its competitors, strong pricing and easing fuel prices. He has an $88 target price on the stock.

Investors seemed to agree with Wolfe’s view because shares of other major North American freight railroads were up on Monday on the New York Stock Exchange.

Shares of Burlington Northern Santa Fe rose $5.61, or 6.8 percent, to $88.33 in afternoon trading Monday after rising to a 52-week high of $93.22 earlier in the day. That’s already more than the $81.18 Berkshire paid for 1.2 million shares last Thursday.

Shares of Union Pacific Corp., the nation’s largest railroad, gained $4.04, or 3.9 percent, to $107.24 in afternoon trading in the NYSE while Norfolk Southern Corp.’s shares gained $2.02, or 4 percent, to $53, and CSX Corp. gained 95 cents, or 2.3 percent, to $41.91.

Talk to us

More in Herald Business Journal

Yansi De La Cruz molds a cheese mixture into bone shapes at Himalayan Dog Chew on Thursday, Sept. 21, 2023 in Arlington, Washington. (Olivia Vanni / The Herald)
Give a dog a bone? How about a hard cheese chew from Arlington instead!

Launched from a kitchen table in 2003, Himalayan Pet Supply now employs 160 workers at its new Arlington factory.

Cash is used for a purchase at Molly Moon's Ice Cream in Edmonds, Washington on Wednesday, Aug. 30, 2023. (Annie Barker / The Herald)
Washington minimum wage to top $16 an hour next year

Meanwhile, some salaried workers and rideshare drivers could see their earnings rise from other state-required adjustments.

Inside the new Boeing 737 simulator at Simulation Flight in Mukilteo, Washington on Wednesday, Sept. 20, 2023. (Annie Barker / The Herald)
New Boeing 737 simulator takes ‘flight’ in Mukilteo

Pilots can test their flying skills or up their game at Simulation Flight in Mukilteo.

An Amazon worker transfers and organizes items at the new PAE2 Amazon Fulfillment Center on Thursday, Sept. 14, 2023, in Arlington, Washington. (Ryan Berry / The Herald)
Amazon cuts ribbon on colossal $355M fulfillment center in Arlington

At 2.8 million square feet, the facility is the largest of its kind in Washington. It can hold 40 million “units” of inventory.

A computer rendering of the North Creek Commerce Center industrial park in development at 18712 Bothell-Everett Highway. (Kidder Mathews)
Developer breaks ground on new Bothell industrial park

The North Creek Commerce Center on Bothell Everett Highway will provide warehouse and office space in three buildings.

Dan Bates / The Herald
Funko president, Brian Mariotti is excited about the growth that has led his company to need a 62,000 square foot facility in Lynnwood.
Photo Taken: 102312
Former Funko CEO resigns from the Everett company

Brian Mariotti resigned Sept. 1, six weeks after announcing he was taking a six-month sabbatical from the company.

Cash is used for a purchase at Molly Moon's Ice Cream in Edmonds, Washington on Wednesday, Aug. 30, 2023. (Annie Barker / The Herald)
Paper or plastic? Snohomish County may require businesses to take cash

County Council member Nate Nehring proposed an ordinance to ban cashless sales under $200. He hopes cities will follow suit.

Catherine Robinweiler leads the class during a lab session at Edmonds College on April 29, 2021. (Kevin Clark / The Herald)
Grant aids apprenticeship program in Mukilteo and elsewhere

A $5.6 million U.S. Department of Labor grant will boost apprenticeships for special education teachers and nurses.

Peoples Bank is placing piggy banks with $30 around Washington starting Aug. 1.
(Peoples Bank)
Peoples Bank grant program seeks proposals from nonprofits

Peoples Bank offers up to $35,000 in Impact Grants aimed at helping communities. Applications due Sept. 15.

Workers build the first all-electric commuter plane, the Eviation Alice, at Eviation's plant on Wednesday, Sept. 8, 2021 in Arlington, Washington.  (Andy Bronson / The Herald)
Arlington’s Eviation selects Seattle firm to configure production plane

TLG Aerospace chosen to configure Eviation Aircraft’s all-electric commuter plane for mass production.

Orca Mobility designer Mike Lowell, left, and CEO Bill Messing at their office on Wednesday, Aug. 16, 2023 in Granite Falls, Washington. (Olivia Vanni / The Herald)
Could a Granite Falls startup’s three-wheeler revolutionize delivery?

Orca Mobility’s battery-powered, three-wheel truck is built on a motorcycle frame. Now, they aim to make it self-driving.

Members of Gravitics' team and U.S. Rep. Rick Larsen stand in front of a mockup of a space module interior on Thursday, August 17, 2023 at Gravitics' Marysville facility. Left to right: Mark Tiner, government affairs representative; Jiral Shah, business development; U.S. Rep. Rick Larsen; Mike DeRosa, marketing; Scott Macklin, lead engineer. (Gravitics.)
Marysville startup prepares for space — the financial frontier

Gravitics is building space station module prototypes to one day house space travelers and researchers.