Convicted One wrote: Mookie wrote: Poor CSX just seems to be a jumble that never recovered completely after all the mergers and melt downs. Well, I think that you came closer than any of the rest of these people. I think Buffett is doing this in preparation to be in the front row during the next round of mergers, and CSX simply doesn't appear to be a factor in that.
Mookie wrote: Poor CSX just seems to be a jumble that never recovered completely after all the mergers and melt downs.
Poor CSX just seems to be a jumble that never recovered completely after all the mergers and melt downs.
Well, I think that you came closer than any of the rest of these people. I think Buffett is doing this in preparation to be in the front row during the next round of mergers, and CSX simply doesn't appear to be a factor in that.
Well, that's one take - but did the railroad mergers of the Nineties add much to shareholder value? Remember, Berkshire Hathaway is an investment company - their interest lies in the rate of return they can produce for their stockholders. Given that the conventional wisdom on mergers is that they're not generally great for equity value, why would he need to get in on the ground floor before a merger? To put it another way, would you have been better off buying NS stock before they merged Conrail, or after? Look at NS's stock value on the "max" setting on Yahoo financial - save for the 1987 market crash, it was up, up, up - until 1999, and then it was two years of a sharp and marked descent; the company didn't touch its 1999 high again until 2004. If you wanted to make a profit on NS, the obvious time to buy was post-merger - NOT pre-merger. UP's price tells a similar, but less marked story - after the SP merger, a gradual drop, until it hits its pre-recovery price in 2004 - and you could argue, if you wanted to take the time to run the numbers on inflation, that it took even longer to recover the real value the stock had, pre-merger.
Per the other comments - yes, UP's rise from 60 to 120 is impressive. But NSC's rise from 20 to 58 over roughly the same period of time is significantly more impressive, and BNSF's rise from the 30s to the 90s is the best of all. The thing I don't get is, why now? I may just be snake-bit from the '90s, but I just can't believe those prices are going to keep on rising. And if you're going to use past performance as an indicator of future potential, UP comes up short of the other two.
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So what is wrong with UPRR? I bought there stock in the 60s & now it is almost $120.00 which would make me feel that the investment community thinks quite highly of UPRR since it has doubled in price in a few short years
Mookie wrote: You know - having read some of the postings on this forum, I can see why. Poor CSX just seems to be a jumble that never recovered completely after all the mergers and melt downs. But I hold out hope for them, too - just not as much as for UP.
You know - having read some of the postings on this forum, I can see why. Poor CSX just seems to be a jumble that never recovered completely after all the mergers and melt downs.
But I hold out hope for them, too - just not as much as for UP.
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I agree. It is fascinating. But we are divided on feelings about UP. With no other than an instinct, I feel UP will do well in the coming few years. I think they shot themselves in the foot not that long ago and they have learned from their mistakes. It will be slow growth, but that's the diversity in his overall holdings. Some of everything.
I think he is showing some cautious optimism in his smaller investments in the two railroads and I wish him well on the endeavor. Besides, this has to look pretty good to all 3 railroads that Mr. Buffet has invested his money in them. Can't hurt Omaha's image, either!
Mook
Mookie wrote:I think UPRR will be a good investment - but consider first that he put more into BNSF than he did in either NS or UPRR. I don't see UP going anywhere but up in the future. They will have their ups and downs, but in the long run - which is how he invests - it will be a good choice. All three as a matter of fact.
Well, they're grow as long as the business cycle is good; given a contraction, the prices will likely drop. Four years is a long run for any era, so it would make sense to me that a contraction might be coming. That being the case, why not wait to pick up the stock until the price has dropped a bit?
The other reason this is such news is that until recently, railroads haven't been a terribly good investment - they grew, but at a lower rate than the market average. If you have a chunk of money, and you're going to invest it, you want to put it where it will get the greatest return. You diversify it so that an Enron-like event can't wipe you out, but you want to put your money in the places that are going to give you the greatest possible growth within your time horizon. I can see how BNSF and NSC are good investments - what I can't see is how UP is. Will it grow as well as the other two? If past performance and known improvements are guides, my guess would be "no." So why not take that money and put it in another sector, where your rate of return would be higher? I don't know. And that's why I find this so fascinating and perplexing: Buffett is putting his money there for a reason. I don't know what it is: I would love to. What does he see? And is he making a smart bet, or a mistake?
I don't know the answer to either of these two questions, but they're absolutely fascinating.
He bought UP so he can talk the boys in Omaha into an engineer by the hour arrangement for 3985. I know I would, if I had that kind of cash. Wouldn't it be awsome if he sweet-talked NS into firing up 611 & 118.
spbed wrote: Well for sure the UPRR is double tracking the former SPRR all the way to east to El Paso. The UPRR is also opened up a connector that allows them to depart the BNSF transcon @ Edelstein & then connect to there own overland route @ Nelson which will ease the burden on the old LA&SLC since those trains using the new connector would be routed on the Sunset Route to EP then the GSR to Hutchinson KS & then the BNSF to the new connector @ Edelstein where they move onto there own track again MidlandPacific wrote: Mookie wrote: I don't own any stock in railroads, nor can I really hold my own in a stock argument - but:If I were WB, I would do exactly the same thing. He invested in what I think is one of the future movers and shakers in the railroad world - BNSF. He then invested in the biggest one, that when they get their act together, will be a top-notch investment. And I sure wouldn't argue with NS being a very good investment - albeit a little small right now. I frankly think the man did the right thing in this case, as he usually does.... MookY'know, I don't know. Michael Sol's point about timing in relation to the business cycle struck in the now-locked Buffett thread struck me as about right: why buy in after a four year growth run? The conventional wisdom would appear to be that the business cycle is going to cap out and prices will steady, drop, and at some point recover. The canny investor would want to buy close to the beginning of a period of growth, or in the trough that follows a downturn in the economy. But Buffett didn't do that. Assuming he's not simply losing it, he's making this decision on the basis of an inference about the future performance of those companies, which is itself based on some pieces of information. It would be interesting to know what that inference and the data that led to it are - because he made a series of decisions that appear to be highly counterintuitive, or at least counter to what I think he would do.See, at some level, NSC and BNSF sort of make sense - they fit his MO: both well-managed companies with histories of good performance and preparation for further growth. The only thing that's odd is, if he's making his decision on the basis of the information that causes the rest of us to value them, why's he late to the party? They've both been on an upward trajectory for four years now - it seems odd that a guy who's got the net worth to back up his reputation as the world's best stock picker is coming to BNSF and NSC a year after an amateur like me. It doesn't compute.As for UP, well, why UP? Size isn't a reliable predictor of future growth - there are very large companies like GE that do very well, but there are also very large companies like GM that don't. I'm no expert on the financials, but why exactly would he buy UP - to reopen Tennessee Pass so they can lift coal over the top of the Rockies? So they can try to see just how much traffic a railroad can squeeze over the single track LA&SL? So they can pay to haul containers (no double-stacks, please) the long way around from LA over Donner Pass? So he can add still more trains to the packed Sunset Route? So he can clear landslides in the Feather River Canyon? I'm no expert, but even at my level, I'm not seeing what he sees. And I would really like to know what that is.
Well for sure the UPRR is double tracking the former SPRR all the way to east to El Paso. The UPRR is also opened up a connector that allows them to depart the BNSF transcon @ Edelstein & then connect to there own overland route @ Nelson which will ease the burden on the old LA&SLC since those trains using the new connector would be routed on the Sunset Route to EP then the GSR to Hutchinson KS & then the BNSF to the new connector @ Edelstein where they move onto there own track again
MidlandPacific wrote: Mookie wrote: I don't own any stock in railroads, nor can I really hold my own in a stock argument - but:If I were WB, I would do exactly the same thing. He invested in what I think is one of the future movers and shakers in the railroad world - BNSF. He then invested in the biggest one, that when they get their act together, will be a top-notch investment. And I sure wouldn't argue with NS being a very good investment - albeit a little small right now. I frankly think the man did the right thing in this case, as he usually does.... MookY'know, I don't know. Michael Sol's point about timing in relation to the business cycle struck in the now-locked Buffett thread struck me as about right: why buy in after a four year growth run? The conventional wisdom would appear to be that the business cycle is going to cap out and prices will steady, drop, and at some point recover. The canny investor would want to buy close to the beginning of a period of growth, or in the trough that follows a downturn in the economy. But Buffett didn't do that. Assuming he's not simply losing it, he's making this decision on the basis of an inference about the future performance of those companies, which is itself based on some pieces of information. It would be interesting to know what that inference and the data that led to it are - because he made a series of decisions that appear to be highly counterintuitive, or at least counter to what I think he would do.See, at some level, NSC and BNSF sort of make sense - they fit his MO: both well-managed companies with histories of good performance and preparation for further growth. The only thing that's odd is, if he's making his decision on the basis of the information that causes the rest of us to value them, why's he late to the party? They've both been on an upward trajectory for four years now - it seems odd that a guy who's got the net worth to back up his reputation as the world's best stock picker is coming to BNSF and NSC a year after an amateur like me. It doesn't compute.As for UP, well, why UP? Size isn't a reliable predictor of future growth - there are very large companies like GE that do very well, but there are also very large companies like GM that don't. I'm no expert on the financials, but why exactly would he buy UP - to reopen Tennessee Pass so they can lift coal over the top of the Rockies? So they can try to see just how much traffic a railroad can squeeze over the single track LA&SL? So they can pay to haul containers (no double-stacks, please) the long way around from LA over Donner Pass? So he can add still more trains to the packed Sunset Route? So he can clear landslides in the Feather River Canyon? I'm no expert, but even at my level, I'm not seeing what he sees. And I would really like to know what that is.
Mookie wrote: I don't own any stock in railroads, nor can I really hold my own in a stock argument - but:If I were WB, I would do exactly the same thing. He invested in what I think is one of the future movers and shakers in the railroad world - BNSF. He then invested in the biggest one, that when they get their act together, will be a top-notch investment. And I sure wouldn't argue with NS being a very good investment - albeit a little small right now. I frankly think the man did the right thing in this case, as he usually does.... Mook
I don't own any stock in railroads, nor can I really hold my own in a stock argument - but:
If I were WB, I would do exactly the same thing. He invested in what I think is one of the future movers and shakers in the railroad world - BNSF. He then invested in the biggest one, that when they get their act together, will be a top-notch investment. And I sure wouldn't argue with NS being a very good investment - albeit a little small right now.
I frankly think the man did the right thing in this case, as he usually does....
Y'know, I don't know. Michael Sol's point about timing in relation to the business cycle struck in the now-locked Buffett thread struck me as about right: why buy in after a four year growth run? The conventional wisdom would appear to be that the business cycle is going to cap out and prices will steady, drop, and at some point recover. The canny investor would want to buy close to the beginning of a period of growth, or in the trough that follows a downturn in the economy. But Buffett didn't do that. Assuming he's not simply losing it, he's making this decision on the basis of an inference about the future performance of those companies, which is itself based on some pieces of information. It would be interesting to know what that inference and the data that led to it are - because he made a series of decisions that appear to be highly counterintuitive, or at least counter to what I think he would do.
See, at some level, NSC and BNSF sort of make sense - they fit his MO: both well-managed companies with histories of good performance and preparation for further growth. The only thing that's odd is, if he's making his decision on the basis of the information that causes the rest of us to value them, why's he late to the party? They've both been on an upward trajectory for four years now - it seems odd that a guy who's got the net worth to back up his reputation as the world's best stock picker is coming to BNSF and NSC a year after an amateur like me. It doesn't compute.
As for UP, well, why UP? Size isn't a reliable predictor of future growth - there are very large companies like GE that do very well, but there are also very large companies like GM that don't. I'm no expert on the financials, but why exactly would he buy UP - to reopen Tennessee Pass so they can lift coal over the top of the Rockies? So they can try to see just how much traffic a railroad can squeeze over the single track LA&SL? So they can pay to haul containers (no double-stacks, please) the long way around from LA over Donner Pass? So he can add still more trains to the packed Sunset Route? So he can clear landslides in the Feather River Canyon? I'm no expert, but even at my level, I'm not seeing what he sees. And I would really like to know what that is.
OK. And that makes sense. But it still strikes me as a modest, incremental change, and one that's a reaction to events, rather than an anticipation of them. Don't get me wrong - even BNSF's Transcon improvements are largely reaction. But there's a difference of degree, and I think that's important. And the fact that UP is late to the table doesn't tell me much about what exactly Buffett sees in it.
Limitedclear wrote: MidlandPacific wrote: I'm not knowledgeable enough about Icahn's activities to have any sense of what his investment really means for CSX. But Buffett is generally believed to invest in companies with solid management and significant long-term growth potential. Someone on the other Buffett thread observed that this is an odd moment in the business cycle to be investing in railroads - if you want to buy in, why not wait until a recession drops the price of the stock? Share value has grown for four years - it's hard to believe that's a trend that would just continue, unless the growth rates stay high.I can sort of understand why Buffett might see potential in BNSF, and in Norfolk Southern. What I don't get is, why UP? Buffet is based in Omaha. My guess is that he has connections to the company and has probably been invested in UP in smaller amounts for a long time. Note that despite his physical proximity to UP his investment in it is considerably smaller than his BNSF position.LC
MidlandPacific wrote: I'm not knowledgeable enough about Icahn's activities to have any sense of what his investment really means for CSX. But Buffett is generally believed to invest in companies with solid management and significant long-term growth potential. Someone on the other Buffett thread observed that this is an odd moment in the business cycle to be investing in railroads - if you want to buy in, why not wait until a recession drops the price of the stock? Share value has grown for four years - it's hard to believe that's a trend that would just continue, unless the growth rates stay high.I can sort of understand why Buffett might see potential in BNSF, and in Norfolk Southern. What I don't get is, why UP?
I'm not knowledgeable enough about Icahn's activities to have any sense of what his investment really means for CSX. But Buffett is generally believed to invest in companies with solid management and significant long-term growth potential. Someone on the other Buffett thread observed that this is an odd moment in the business cycle to be investing in railroads - if you want to buy in, why not wait until a recession drops the price of the stock? Share value has grown for four years - it's hard to believe that's a trend that would just continue, unless the growth rates stay high.
I can sort of understand why Buffett might see potential in BNSF, and in Norfolk Southern. What I don't get is, why UP?
Buffet is based in Omaha. My guess is that he has connections to the company and has probably been invested in UP in smaller amounts for a long time. Note that despite his physical proximity to UP his investment in it is considerably smaller than his BNSF position.
LC
Well, OK, sure - I'll grant that he can probably get in his Buick, get a cup of coffee at 7-11, and drive himself over to UP headquarters and talk to, oh, pretty much anyone he wants to see. That makes sense. But Buffett's the world's richest man, and he got that way by investing his money in companies that did very well. Buffett could, I am sure, buy all of Omaha, cash on the barrelhead, if he wanted to. The thing I don't get is why would he take his money and put it in UP, when he could put it in something else (something else in Omaha, for that matter) that would appear to the casual observer to provide him with better return on his investment.
I mean, AOL has established itself in my hometown - but I wouldn't put a dime into it. See what I'm getting at? I'm squeezing my forehead, wondering just what it is that Buffett sees in UP that the rest of us don't - or whether he's just in the process of making a Really Big Mistake.
Look at page 78 of the U.S. issue of the May 19, 2007 Economist newspaper ("The new railway barons") for a good analysis and reason for this unusual interest in railroad stocks. Or at their Web site.
Oh, and lets not forget the recent anti-trust action filed against five Class 1 railroads (BNSF, CSX, KCS, NS and UP) alleging collusion in the fixing of fuel surcharge rates. Ad adverse ruling in this case could inflict serious damage on existing railroad anti-trust exemptions and open pricing to court review.
I'm not dumping my RR stocks, but I am hedging my bets for now. I hear there are ETFs that are set up to short various sectors. I wonder if there is one for railroads yet.
Well I hold UPRR & I think with gas going skyward that the RRs are in for a huge surge of traffic as gas continues it upward spike I will continue to hold it.
MidlandPacific wrote: Limitedclear wrote: greyhounds wrote: Buffett isn't the only big time investor getting into US rail.A British fund, the "Children's Investment Fund" has just taken a half billion share of CSX. Thier message to CSX senior management is "Shape Up or Ship Out". They aparently see CSX as having great potential - and they've put up serious money based on that vision. If the current management doesn't produce there's gonna' be some changes made.There are other funds buying into US rail. It's nice to see. These guys don't invest where there is no growth potential and they will not put up with poor performance.Well, well, the geniuses of Wall Street are about to step in it again. This guy from a British Hedge Fund obviously knows very little about the current state of affairs out on the property. Customers large and small are crying out for relief from the significant price increases already put in by Class 1 railroads over the past few years. Their complaints have reached the ears of BOTH Democrats and Republicans in Congress and multiple bills are now pending seeking to impose regulation of one dsort or another upon the railroads from rates and routes to a major reauthorization of FRA into the FRSA and doubling the number of FRA inspectors (and probably fines by 2010.Into this bleak legislative environment the Wall Streeters would like to demand railroads raise prices aggressively and seek to remove executives and boards that are unwilling to engage in this reckless and dangerous course. Not good news from anyone who earns his living on the rails.When even Conservative Republican Congressmen are voicing a need for "railroad competition" WATCH OUT!! I'm unloading half of my RR shares and playing on the house's money...LC I'm wondering what to do myself - I bought BNSF and NSC when they slumped last year, but I've been watching the reregulation arguments here in DC with interest and a little alarm. I know it has the AAR worried.
Limitedclear wrote: greyhounds wrote: Buffett isn't the only big time investor getting into US rail.A British fund, the "Children's Investment Fund" has just taken a half billion share of CSX. Thier message to CSX senior management is "Shape Up or Ship Out". They aparently see CSX as having great potential - and they've put up serious money based on that vision. If the current management doesn't produce there's gonna' be some changes made.There are other funds buying into US rail. It's nice to see. These guys don't invest where there is no growth potential and they will not put up with poor performance.Well, well, the geniuses of Wall Street are about to step in it again. This guy from a British Hedge Fund obviously knows very little about the current state of affairs out on the property. Customers large and small are crying out for relief from the significant price increases already put in by Class 1 railroads over the past few years. Their complaints have reached the ears of BOTH Democrats and Republicans in Congress and multiple bills are now pending seeking to impose regulation of one dsort or another upon the railroads from rates and routes to a major reauthorization of FRA into the FRSA and doubling the number of FRA inspectors (and probably fines by 2010.Into this bleak legislative environment the Wall Streeters would like to demand railroads raise prices aggressively and seek to remove executives and boards that are unwilling to engage in this reckless and dangerous course. Not good news from anyone who earns his living on the rails.When even Conservative Republican Congressmen are voicing a need for "railroad competition" WATCH OUT!! I'm unloading half of my RR shares and playing on the house's money...LC
greyhounds wrote: Buffett isn't the only big time investor getting into US rail.A British fund, the "Children's Investment Fund" has just taken a half billion share of CSX. Thier message to CSX senior management is "Shape Up or Ship Out". They aparently see CSX as having great potential - and they've put up serious money based on that vision. If the current management doesn't produce there's gonna' be some changes made.There are other funds buying into US rail. It's nice to see. These guys don't invest where there is no growth potential and they will not put up with poor performance.
Buffett isn't the only big time investor getting into US rail.
A British fund, the "Children's Investment Fund" has just taken a half billion share of CSX. Thier message to CSX senior management is "Shape Up or Ship Out". They aparently see CSX as having great potential - and they've put up serious money based on that vision. If the current management doesn't produce there's gonna' be some changes made.
There are other funds buying into US rail. It's nice to see. These guys don't invest where there is no growth potential and they will not put up with poor performance.
Well, well, the geniuses of Wall Street are about to step in it again. This guy from a British Hedge Fund obviously knows very little about the current state of affairs out on the property. Customers large and small are crying out for relief from the significant price increases already put in by Class 1 railroads over the past few years. Their complaints have reached the ears of BOTH Democrats and Republicans in Congress and multiple bills are now pending seeking to impose regulation of one dsort or another upon the railroads from rates and routes to a major reauthorization of FRA into the FRSA and doubling the number of FRA inspectors (and probably fines by 2010.
Into this bleak legislative environment the Wall Streeters would like to demand railroads raise prices aggressively and seek to remove executives and boards that are unwilling to engage in this reckless and dangerous course. Not good news from anyone who earns his living on the rails.
When even Conservative Republican Congressmen are voicing a need for "railroad competition" WATCH OUT!!
I'm unloading half of my RR shares and playing on the house's money...
I'm wondering what to do myself - I bought BNSF and NSC when they slumped last year, but I've been watching the reregulation arguments here in DC with interest and a little alarm. I know it has the AAR worried.
Only fascists and communists hate competition.
Well, well, the geniuses of Wall Street are about to step in it again. This guy from a British Hedge Fund obviously knows very little about the current state of affairs out on the property. Customers large and small are crying out for relief from the significant price increases already put in by Class 1 railroads over the past few years. Their complaints have reached the ears of BOTH Democrats and Republicans in Congress and multiple bills are now pending seeking to impose regulation of one sort or another upon the railroads from rates and routes to a major reauthorization of FRA into the FRSA and doubling the number of FRA inspectors (and probably fines) by 2010.
MidlandPacific wrote: Union Pacific and Norfolk Southern! Now we have to figure out why.....(h/t the WSJ - after the jump)
Union Pacific and Norfolk Southern!
Now we have to figure out why.....
(h/t the WSJ - after the jump)
Ha. I beat him to the punch. I bought NS last month. My broker thought I was making a mistake, now I can't wait for our next meeting. I hope he likes crow.
The one I saw is NOT for a specific RR but for American RRing in general
CNW 6000 wrote:I saw one for UP on an ABC station this morning and I swear I saw one for WSOR the other day.
Dan
Who else besides me have seen the new TV ads for American RRs? I saw it twice this AM on CNN
PBenham wrote: Smithers, that Omaha boy Buffet is at it again, I see. Well, time to beef up my New Haven, Pennsylvania and Rock Island holdings.You are a genius, Mr. Burns.I know...yessss-I know. Now, how are my shares in the Lehigh Valley doing?
Smithers, that Omaha boy Buffet is at it again, I see. Well, time to beef up my New Haven, Pennsylvania and Rock Island holdings.
You are a genius, Mr. Burns.
I know...yessss-I know. Now, how are my shares in the Lehigh Valley doing?
Railroads are here to stay, it's a safe investment.
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