Berkshire & Burlington: what a way to run a railroad.

[unclemick]

Hmmm - since he bought goodly amounts of all three - BNI, UNP, NSC, I am tempted to add some more to my UNP DRIP which I haven't canceled yet - to sort of go with my free calender.

The other two rails I'd have to think/analyze/procrastinate.

But a 'live' DRIP plan and a little mad money?

heh heh heh - why even pretend to be rational? ER is fun!

[Ronstar]

In the southwest suburbs of Chicago, the transportation industry is growing by leaps and bounds. It seems that goods from China can be more effectively delivered to points in the US by first shipping from China to west coast, then rail to Chicago, then truck elsewhere. BNI is big in the intermodal scene.

http://archive.seacoastonline.com/ne...nati/96799.htm

[greg]

Originally Posted by terminator

If memory serves me correct, BRK bought McLane (a huge distribution company) from WalMart a few years ago.

To me this is more evidence of scaling up in land transport in this country. If BRK owns even bits and pieces of what in the future could be an integrated package offered to those who need transport services . . . ka-jackpot.


Ronstar said:

In the southwest suburbs of Chicago, the transportation industry is growing by leaps and bounds. It seems that goods from China can be more effectively delivered to points in the US by first shipping from China to west coast, then rail to Chicago, then truck elsewhere. BNI is big in the intermodal scene.

RRs originally were utility like. Ya got yur franchise, ya behaved and didn't get too greedy, and the money poured in. Over the years it's sort of been warped and distorted into fragmentary entities. While it certainly isn't necessary to, um, nationalize things, I'd like to see some sort of rationalization of the process so that companies could send things a bit easier. An airline sort of hub and spoke system as mentioned above around the Chicago area might work well if scaled across the country. One wouldn't need just one national RR, but it would require a lot of cooperation among and between them and between and among the truck companies and distribution points and warehouses. Everyone could benefit. Today's computer systems are a prerequisite to this unfolding like this. Couldn't have happened before them. Maybe a positive Black Swan event? But very slowww, like the evolution of McDonald's in fast food.

Buffett may see something like this happening over the next decade or so. Right now I know many companies don't even think train; they just ship by truck (with all its ineffiencies and expenses), sometimes 3000 miles, without thinking thru other possibilities. It seems to me that if you can do something about the first fifty miles of transport to the RR and the last fifty miles from the RR and then get the RRs to do better hand offs between each other, these folks could reduce truck transport significantly and save huge amounts of fuel and shipping costs. Maybe, if they aren't already doing it.

[unclemick]

Hmmm - with utility like yields - I bought UNP in a DRIP waaay back before they cut their dividend and still had the trucking company as part of their operations.

I could say (but not with a straight face) I saw it coming before WB - but in fact I hadn't got around to selling tax wise or gotten a great passion for another dividend stock to 'make' me make the move.

I was more in the blind squirrel/acorn class - but that won't stop me from buying more and pontificating like I knew better all along.

heh heh heh - Aetna is another stock(with a div cut) like that - started acting better before I got around to consider selling.

[greg]

GE Introduces New Fleet Management Technologies for Railcars and Intermodal Assets: Financial News - Yahoo! Finance

[Nords]

Here's an interesting MarketWatch update:
Berkshire gets antitrust OK to add to Burlington stake - MarketWatch

Apparently the FTC had to approve Berkshire's intent to continue acquiring shares of Burlington, so Berkshire had to submit filings that are made public. Part of the filing was the disclosure that BRK has acquired BNI call options at an average cost of $38.62/share with a strike price of $40. The options are for a total of 7.5M shares and can be executed on 3 Oct.

I don't know the fine details of how options are executed, but I'm assuming that means BRK could buy BNI shares for $78.62 when they're currently trading at around $82. Is that the total cost or am I missing commissions & other fees?

Who would be putting 7.5M shares on the street? Would that be created by Burlington (thus diluting the rest of the shareholders) or did some institution get snookered into making this deal with their pension-fund holdings? Even for Buffett & Simpson this seems to be a bit of an aggressive trading strategy, but I'm wondering if this is an extra-credit project that's going to boost one of Buffett's wunderkind protégés ahead of his fellow CFO competitors.

You would think that a 7.5M share trade, on its own or through a market-maker, would drive the market share price down to the trade's share price. Does the promulgation of this info mean that arbs would be tempted to drive down BNI's price in advance of the 3 Oct option execution? How does this news affect trading strategies?

I'm really looking forward to BRK's November quarterly shareholder report!

[Nords]

BTW here's an update on the PetroChina selling:
"HONG KONG, Sept 20 (Reuters) - Investment guru Warren Buffett's Berkshire Hathaway Inc (BRKA) sold $41 million worth of shares in PetroChina Co Ltd on Sept. 6, making the fund's third sale of stock in Asia's top oil and gas producer announced in two months.
Berkshire sold just over 28 million shares at an average price of HK$11.47 apiece, trimming its stake in PetroChina (PTR) to 8.93 percent from 9.07 percent of the firm's free-floating shares, according to data compiled by the Hong Kong stock exchange and released on Thursday.
Berkshire built up its stake in PetroChina in April 2003 at an average price of about HK$1.60 per share, becoming the second biggest shareholder in what is now the world's second-biggest oil firm by market capitalisation, after Exxon Mobil (XOM) .
Despite his "value investing" philosophy, which advocates snapping up quality stocks at a bargain price and then holding them for decades, Buffett began selling his shares in late July, realising a gain of more than 600 percent.
He first cut his holding by 16.9 million shares in late July and sold a further 92.66 million a month later."

600% in just over four years-- what a dirty market timer.

Even worse, I've read that the Hong Kong exchange's rules require notifying them of large sales by "e-mail, fax, or mail" within a certain time limit. Berkshire complied with that requirement for one of the earlier share sales by mailing a letter from Omaha postmarked the last day of the time limit, which took two weeks to get to Hong Kong. This delayed news of the sale caused a fuss but it was really too late for anyone to do anything. (This seems to be why the Reuters article above is reporting a 6 Sep event two weeks later.) As a result of this behavior the exchange is considering modifying its rules to require more timely reporting...

[audreyh1]

Originally Posted by heyyou

John McPhee has written about railroads and their employees, and has ridden on a BN coal train from the mine to the power plant. He mentioned that hauling low sulfur coal in the West has resurrected RR lines that were dying from trucking and inefficientcy. BN is the best run RR. Of McPhee's 30? books, I don't know which one has the info. If you are a BH shareholder, reading McPhee would be informative about their new acquisition.
I agree with twaddle about the moat. They aren't making any more RR right of way. The existing right of way has visible rails and buried gasoline and communication pipelines.
If you have driven on Interstate 40 across Arizona and New Mexico, you've raced those long trains of double stacked cargo containers full of Chinese goods headed east. The locomotives may still be Santa Fe RR sunset colors, but the initials are now BNSF.

Doing the Lewis and Clark trail across the midwest - following the Missouri - we've sure seen lots of trains hauling almost nothing but coal in Missouri, Nebraska, South Dakota. I read that BNSF ships virtually 100% of the coal transported from the Powder River Basin and that right now the railroad is the constraint on how fast coal can be exported. BNSF trains seemed to dominate across most of these states.

Once we reached northern North Dakota and Montana (Great Northern RR) it looked like shipping containers (yep, mostly Asian!) being hauled from/to west coast. Still mostly BNSF! This was also the first time we saw regular passenger trains after traveling a long, long way and seeing many, many different tracks and trains.

I started looking up all this stuff because we noticed all these busy railroads and noticed how the cargo changed based on the state. We got pretty curious, especially when we crossed a large region that was hauling NOTHING BUT COAL.

Just some anecdotes/personal observations from a trip across a large chunk of Western North America.

Audrey

P.S. I'll have to check out that McPhee book. I've read several of his - great stuff - particularly the geology ones.

[unclemick]

Very interesting - especially in light of the negitive press afforded Union Pacific in the not too distant past about botched deliveries, power plants sweating running out of coal, traffic jams and other problems.

Could BNSF have stolen some of their thunder - er business?, taken advantage?

heh heh heh - Buffett bought all 3 rails in varying amounts - but I think I stick with my doggy UNP for now.