Has Berkshire Hathaway ownership been good or bad for BNSF?
Jury is still out but it is probably a good thing, as BNSF is freed from stock market short-termism and so can plan longer than the next couple quarters. They also have the backing of their parent in financial deals and so can probably secure better rates.
I suggest the answer would be the same if BNSF was still on the NY Stock Exchange.
If it was doing well as a stock the owners of the stock would be happy. I think Berkshire Hathaway is happy because of the railroads contribution to its profit. I happen to own BRKB and I am certainly pleased with its appreciation.
I expect that management of BNSF is pleased to be reporting to only one voice which contributes to the bottom line as much PR-BS communication is eliminated.
JoeBlow Has Berkshire Hathaway ownership been good or bad for BNSF?
My answer: Absolutely. Consider: railroads require huge slugs of capital, both for upgrades and new equipment. Berkshire Hathaway, which is a giant cash generating machine, needs places to invest its cash, so why not on its rail subidiary, BNSF? If you look at the billions tha BNSF has pumped into its plant for capacity expansion since Berkshire bought it, and then reflect on the constraints that being a solo player (i.e., unconnected with Berkshire) would exert on capital spending, BNSF (and its shippers) come out way ahead under Berkshire ownership.
Also consider Berkshire CEO Warren Buffet's famous aphorism about wanting to businesses with "moats" around them, the moat representing a barrier to entry to any competitor. Think of BNSF's post acquisition capital outlays on capacity as not only widening and dredging the moat, but then filling with sharks and piranhas, crocodiles and stinging jellyfish, which would discourage any competitor from building a two-track mainline from LA to Chicago (yeah, I mixed and mangled a metaphor). But you get the drift...
Definitely symbiotic. Both BNSF and Berkshire Hathaway benefit.
Norm
billio JoeBlow Has Berkshire Hathaway ownership been good or bad for BNSF? My answer: Absolutely. Consider: railroads require huge slugs of capital, both for upgrades and new equipment. Berkshire Hathaway, which is a giant cash generating machine, needs places to invest its cash, so why not on its rail subidiary, BNSF? If you look at the billions tha BNSF has pumped into its plant for capacity expansion since Berkshire bought it, and then reflect on the constraints that being a solo player (i.e., unconnected with Berkshire) would exert on capital spending, BNSF (and its shippers) come out way ahead under Berkshire ownership. Also consider Berkshire CEO Warren Buffet's famous aphorism about wanting to businesses with "moats" around them, the moat representing a barrier to entry to any competitor. Think of BNSF's post acquisition capital outlays on capacity as not only widening and dredging the moat, but then filling with sharks and piranhas, crocodiles and stinging jellyfish, which would discourage any competitor from building a two-track mainline from LA to Chicago (yeah, I mixed and mangled a metaphor). But you get the drift...
Ok! The concensus on this Thread seems to definitely be in the Positive for BNSF's 'single' ownership. If in fact, an ownership structure, outside of the vaguries of 'Stock Market' centered ownership; has been good for BNSF.
Would that same type of ownership benefit other class one's as well?
If so, which, 'other' Class one might benefit in that scenario? All or none?
Or would that type of 'single' ownership create 'survivors', or destroy the industry; by taking it backwards to its roots, in the days of the railroad barons?
samfp1943 Would that same type of ownership benefit other class one's as well?
One might compare the BNSF situation to a "benevolent dictatorship." The owners (BH) want success for the railroad so it keeps generating cash.
On the other hand, we have what would have happened if CSX had been taken over by the "Children's Fund," wherein most speculation was that CSX would have been gutted and left for a wreck.
I can't say that I follow any railroad from a financial standpoint. One might opine that any business would benefit from an arrangement such as BNSF is enjoying, much less a railroad.
I think the CSX near-debacle answers the third question. It all depends on the motives/philosophy of that managing entity.
Larry Resident Microferroequinologist (at least at my house) Everyone goes home; Safety begins with you My Opinion. Standard Disclaimers Apply. No Expiration Date Come ride the rails with me! There's one thing about humility - the moment you think you've got it, you've lost it...
tree68 samfp1943 Would that same type of ownership benefit other class one's as well? One might compare the BNSF situation to a "benevolent dictatorship." The owners (BH) want success for the railroad so it keeps generating cash. On the other hand, we have what would have happened if CSX had been taken over by the "Children's Fund," wherein most speculation was that CSX would have been gutted and left for a wreck. I can't say that I follow any railroad from a financial standpoint. One might opine that any business would benefit from an arrangement such as BNSF is enjoying, much less a railroad. I think the CSX near-debacle answers the third question. It all depends on the motives/philosophy of that managing entity.
More philosophical than financial? An interesting perspective.
Would the the Ackman-led, Pershing Square assault on CPR ( and NS) been successful if it had involved two US Corporations, and not the mix of a Canadian and an American corporations? As was the The Children's Fund vs. The CSX; were the seeds of failure sown within the attempted 'overseas' take over?
samfp1943More philosophical than financial? An interesting perspective.
I think it's an apt way to view it. Pretty much anyone's view of how to run a business could be described as a philosophy. Get rich quick, or in it for the long haul?
diningcarI happen to own BRKB and I am certainly pleased with its appreciation.
Man you have a low bar for stocks to meet....
BRKB is a DOG compared to other faster appreciating stocks. I own it as well and am thinking of selling it, kind of disappointed the hype is so much more than the actual performance.
I suspect UPRR was a better buy all along because Warren didn't have the money for UPRR outstanding stock......he settled for BNSF (second best).
Man you have a low bar for stocks to meet.... BRKB is a DOG compared to other faster appreciating stocks. I own it as well and am thinking of selling it, kind of disappointed the hype is so much more than the actual performance.
Depends on where you bought it-I have a 127% gain from my purchase price.
Not enough Berkshires under Berkshire Hathaway.
Really, would it cost them THAT much to have ONE up and running? (grumble, grumble...) (Could even build a NEW one.....grumble, grumble...)
CMStPnPBRKB is a DOG compared to other faster appreciating stocks.
Which illustrates my point very nicely...
Good or bad? Either way the Company is accountable to its shareholders. As Buffett is known to be a long term value investor, I would think they'd be less inclined to worry about the short term fluctuation of the stock price and more interested in the actual performance of the Company. That is a big plus.. having educated shareholders who are actually interested in the business they own as opposed to "owners" who are more interested in syphoning off short term gains at every opportunity and who don't look at the longterm.
UlrichAs Buffett is known to be a long term value investor, I would think they'd be less inclined to worry about the short term fluctuation of the stock price and more interested in the actual performance of the Company.
And this is why I would characterize the philosophy here as good for BNSF.
billio JoeBlow Has Berkshire Hathaway ownership been good or bad for BNSF? .....Absolutely. Consider: railroads require huge slugs of capital, both for upgrades and new equipment. Berkshire Hathaway, which is a giant cash generating machine, needs places to invest its cash, so why not on its rail subidiary, BNSF?
JoeBlow
Has Berkshire Hathaway ownership been good or bad for BNSF? .....Absolutely. Consider: railroads require huge slugs of capital, both for upgrades and new equipment. Berkshire Hathaway, which is a giant cash generating machine, needs places to invest its cash, so why not on its rail subidiary, BNSF?
.....Absolutely. Consider: railroads require huge slugs of capital, both for upgrades and new equipment. Berkshire Hathaway, which is a giant cash generating machine, needs places to invest its cash, so why not on its rail subidiary, BNSF?
BNSF’s long term debt at the end of 2015 was $1.6 billion compared to $14.2 billion for UP. BNSF's interest burden is much lower, thereby positioning a better outcome for cash and cash equivalents.
Rio Grande Valley, CFI,CFII
It's important to understand the source of the railroad's strong cash flow: Very agressive pricing of disciplined service offerings. This pricing environment emerged in the early 2000s as the industry finally was able to benefit from the provisions of the Staggers Act.
But it is important also to understand that the railroad has, since being acquired by BH, sent cash (lots of it) to the parent. In that sense, BH has not invested a cent in the railroad. But, of course, BH has allowed the railroad to invest heavily in the property. Such is the bounty of strong cash flow.
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