Warrant Buffet buys Burlington Northern / Santa Fe Railroad

Discussion in 'Money, Investing & Precious Metals' started by Von Helman, Nov 4, 2009.

  1. Von Helman

    Von Helman A very simple man

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    I really think Warren Buffet is onto something regarding his recent 34 Billion dollar purchase of Burlington Northern / Santa Fe Railroad. He went out on a limb and I am sure it will pay off for him.

    Although overall all freight and rail transport numbers are down like most sectors of the economy, this was the right time to buy into or actually buy a railroad. Railroads are still a safe investment as they will once again become strong and when the price of fuel skyrockets again like it will, railroads will then begin to make record profits.

    This is an area where if I was into investing I would invest in any rail company that had good overland routs or as in this case Santa Fe is one railroad that operates in Mexico, only adding the ability for newer profits over time.

    link

    Warren Buffett's Berkshire Hathaway buying Burlington Northern -- latimes.com
     
  2. Canadian

    Canadian Well-Known Member

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    Buffet has been seen as a can't fail investor but he isn't bulletproof. He has messed up a few times lately. He also completely missed making money in the tech boom because he "didn't understand computers." Putting your money "all in" on rail in these times is very risky.

    The U.S. is starting to go through hyperinflation. This means a weak U.S. dollar will prevent the importation of expensive goods from overseas. This means less cargo transported by train. Buffett has a great track record but I'm not so sure this time. The market is not anywhere near the bottom yet and he's buying. Very out of character for him. I'll watch this one. Curious how it will turn out.
     

  3. Von Helman

    Von Helman A very simple man

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    Well I have been following railroads now for a while and although I agree with you regarding hyperinflation and other things regarding the economy but I think when hyper inflation does hit and fuel prices are affected the cost of doing business via rail will be much better than by truck.

    Rail lines have never been a bad investment, and I agree with you Buffet hasn’t always been 100% right but he’s not the second richest man for nothing
     
  4. rwc1969

    rwc1969 Well-Known Member

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    I think his company did it for the potential property value, not the railroad itself.
     
  5. Canadian

    Canadian Well-Known Member

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    Now that makes sense.
     
  6. pills

    pills Well-Known Member

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    To me this is the number one rule of investing. If you dont understand something and cant find someone to explain it to you that you trust then stay away.
     
  7. Canadian

    Canadian Well-Known Member

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    He's friends with Bill Gates. If there's anyone who could explain computers to him - it would have to be Bill Gates. They hang out together yet he only owns a handful of Microsoft stock. I think since he's of an older generation that didn't have computers he may not trust computers as much as younger people do.

    I know many older business people who still do not have computers. The highest level of technology they know is the telephone and the fax machine.

    I think as smart as he is he missed out on a huge opportunity by completely ignoring the tech boom. It wouldn't have been that hard for a guy who is that smart to learn how computers work.

    Here's a picture of them hanging out together.

    [​IMG]

    The tech boom was one of the fastest periods of financial expansion in human history. I'm sure in retrospect Warren must feel he could have done better if he was willing to learn a little about technology. However, it's not like he's broke or anything. He really doesn't need to make more money anyway.
     
    Last edited: Nov 8, 2009
  8. Safari 7

    Safari 7 Member

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    I saw Warren & Bill on the Tooob, and Warren was adamant that by buying the railroad he was betting that

    * The demand for goods will continue to rise
    * Freight will be an increasing (cost) challenge, and
    * Rail is the most efficient way of moving things.

    Of course the relatively cynical view that he's after the real estate has some historical support...
     
  9. set2survive

    set2survive Active Member

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    He bought the railroads because he knows that even if the economy falls totally on it's face, the railroads will still be running because he knows that the government will keep them going no matter what because they are absolutley essential infastructure. Almost everything else could be dieing out but he will still be raking in the government cash.
    Obviously he is no fool and people like him usually don't show all their cards ;-)
     
  10. sailaway

    sailaway Well-Known Member

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    Alot of companies with products do this, especially fast food places. The burgers they sell only make the payments and they make more as the property values go up. DBT bought up all kinds of Coal fields in W.V. Their equiptment side of the business supplied what they needed to mine the coal and their parts dept. supplied the maintenance materials they needed. This did all change when they sold out though, I would imagine although the equiptment side of the Co. was in financially bad shape the realestate side fared well.