Supply Chain News Bites - Only from SCDigest

-August 28, 2007


Supply Chain Stocks: Warren Buffett Keeps Adding to Railroad Portfolio


With Burlington Northern and other Rail Carriers Well off 52-Week Highs, is there Opportunity for Investors, or Just Bad News for Rail Shippers?


By SCDigest Editorial Staff


Billionaire investor Warren Buffett of Berkshire Hathaway filed reports this week indicating that he has continued to add to his earlier investments in railroad stocks.

Earlier in the year, Buffett disclosed Berkshire Hathaway had invested in Burlington Northern, Norfolk Southern, and Union Pacific. (See Increased Investment in Rail Carriers by Legendary Warren Buffett a Sign of Carriers’ Pricing Power.)

This week came news that Buffett has added to his Burlington Northern stake, acquiring another 10.1 million shares, increasing Berkshire’s ownership of the railroad operator to nearly 14.8% from 11.9%.

Do Buffett’s actions indicate the rails may be a good investment for others? Maybe. Amid a big selloff on Wall Street today, Burlington Northern’s stock price was down under $79 per share despite the Buffett news, which generally sends the stock prices of companies Berkshire invests in soaring. The stock price is also off nearly 20% from its 52-week high of $95.47 per share.

As we noted at the time, Buffett likes to invest in stocks that have a strong level of pricing power, something that has certainly been true of the rail stocks the past few years, and a trend Buffett likely expects will continue.

Maybe that’s bad news for rail shippers, but potentially interesting news to those who might consider investing in the rails.

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