Alice Schroeder on Buffett's Burlington Buy

Lots of media buzz about Berkshire Hathaway's proposed purchase of Burlington Northern Santa Fe. I don't pay as much attention to Warren Buffett's buys and sells as many do. Because while I admire the man enormously, his assets are so huge that much of the investing universe is unavailable to him.

I caught an interview with Peter Schiff on CNBC yesterday afternoon. He says the railroad buy in more a play on commodities than the bullish view pushed by many in the media. I also saw Niall Ferguson on Charlie Rose on PBS last night. He said it would have been better to buy an Australian rail company because they're doing such great business related to China. I like Ferguson, but I'm tempted to not follow the specific investment ideas of economists or economic historians. And I wonder if Aussie RR companies already have their "China plays" priced in.

Bloomberg is running a good piece by Alice Schroeder on the proposed acquisition:

I admire and respect Sokol, but my comfort with him as chief executive officer is in inverse proportion to Berkshire’s exposure to financial services. Even brilliant CEOs often can’t manage such companies. The Burlington acquisition makes me a lot happier with Buffett’s choice of Sokol.

There are many other motives. Burlington is well-managed. Railroads are a bet against the U.S. dollar and in favor of higher energy costs. Railroads are a play on the trade deficit because this is how we haul all those containers of stuff imported from Asia. In recent years, they have become somewhat like electric utilities that earn a respectable return on capital.

You'll want to read the entire thing. She has some interested things to say about the gigantic stock-split in the B shares with regards to the S&P Index.

Comments

[Philip]

Here is a good article on this:

http://www.theglobeandmail.com/globe-investor/investment-ideas/features/vox/buffetts-big-rail-bet-goods-must-move/article1350542/

[John]

@Philip: Thanks for the article. Good stuff!

[Chris of Stumptown]

Brookfield infrastructure is buying assets from near-dead Babcock and Brown which includes 5100km of railroad in Australia. FYI.