DealZone

Warren Buffett, American Railroad Baron

November 3, 2009

Following in the greatest of capitalist traditions, the Oracle of Omaha announced plans to buy up the shares he doesn’t already own in one of the country’s biggest railroads, Burlington Northern Santa Fe. And in an egalitarian, if unexpected, move, he said he would split his Class B stock to the tune of 50-to-1, making it possible for just about anyone to own Berkshire Hathaway’s traditionally lofty shares.

The railroad purchase is a bet on the future of America, Buffett said, and it’s his biggest acquisition ever. It values the railroad at $34 billion, and the price of $100 a share is a premium of nearly 32 percent. The premium vaults the railroad into the top spot by market cap, surpassing Union Pacific.

Buffett also owns stakes in other railroads, so it will be interesting to see if his move stirs any antitrust comments from Washington. Idiomatically, there is something profoundly rural in the Americana of Buffett’s latest bet; much more so than Berkshire Hathaway’s mainstay insurance business.

Comments
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This perhaps one of the smartest guys on the planet when it comes to investing. Sure he lost billions last year, but he made billions more that he kept. I believe it was Warren that once said (paraphrasing), “I made all my money in a down market, I just didn’t realize it at the time”. Warren is the type of guy that when he hits a brick wall he buys bricks. Folks I’d be taking advantage of the Class B Berkshire shares at a 50 to 1 split. They may never be this affordable again. The class A is over $100,000 a share and not affordable to most Americans. Some will say it’s a risk because of his age, but I promise you he has trained his replacements in his philosophy. Warren is truly a remarkable guy.

 

This is a good thing. Moving commodities is always happening no matter if the economy is up or down. I am sure it was well researched before they moved forward and I do not expect any major changes.

Posted by f belz | Report as abusive
 

Interesting article. It’s hard to believe that railroads were considered dinosaurs back about thirty-five years ago. The times, they do change!

Please, it’s spelt baron. I doubt you thinking of Clarence Barron!

Posted by Gotthardbahn | Report as abusive
 

Over the last 10 years , investing in Gold was a better investment than BRK. This might be an historical event in American business.

 

God Bless you Warren for getting the RR’s going. This is the backbone of America. Not only helping the environment but decreasing our dependence on oil. We need more Warren Buffett’s in this country
Schar

Posted by Scharlene | Report as abusive
 

Hopefully passenger trains will have fair competition against freight trains. It is a very romantic concept, other countries should also restore and reactivate their rail systems. It will also give long haul trucks and plains a break.

Posted by Casper | Report as abusive
 

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