Warren Buffett and the Railroads

Berkshire Hathaway had bought Burlington Northern Santa Fe for $26.5 million in 2010, a railroad company, and a historical first due to being the biggest acquisition he had ever found. Warren Buffett has capitalized off of his stock in this company, which is paying off very well. Its value has been augmented by the increase in oil production. Oil had cost around $50 a barrel in 2015. Railroad stocks can be very good investments when you are as knowledgeable as Buffett. Buffett had paid $100 a share for Burlington Northern, which had traded at $77 before the announcement.

Buffett doesn’t always use common thinking when he is buying a stock like the Burlington Northern Santa Fe company. When he bought this company, fuel prices were up 120% since the March 2009 lows, unemployment was at 9%, and shipping rates had been 1/10th of their previous (2008), highs. This is what Buffett felt he had to buy on instinct. Buffett has also bought shares of Union Pacific Corporation, with their $14.1 billion surpassing Burlington Northern’s $14 billion. Rail shipping is going to be a popular investment in the future. There will not be a new railway built in the United States, forever.

As a fan of railroads, he let go of Norfolk Southern and Union Pacific. Burlington however, compared to the other companies mentioned, is 160 years old with 32,000 miles of railroad tracks, 6,700 trains, 220,000 freight cars, and 4,000 Nebraska based employees. When the acquisition of Burlington was made, Berkshire had earned a network that stretched 32,000 miles or 52,300 kilometers across 28 states in the U.S. and Canada. Buffett may have skeptics when he makes a decision like this, but the proof is in the fortune he has earned for himself. Berkshire Hathaway may have the ability to employ more people as a result.

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