And the other railroads Warren Buffett bought are.......

Trains Magazine General Discussion
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There are a couple of possibilities. First, CSX is doing just well enough to keep sputtering along for quite a while. They may miss out on some growth, but they may be able to cherry-pick traffic on their better routes and muddle along with the rest. Second, they might be able to tap into some public money to improve things. They have started making overtures about their I-95 corridor passenger/frt upgrade using public money.

The problem for the investor is that the how, when and how much of public money make it a gamble and CSX’s stock price may be a bit rich compared to the risk. RR stock prices tend to rise and fall in lock step - investor “group think” at it’s best.

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As I read through that - I smelled a trace of Amtrak. And I mean that in only the nicest way - just muddle along, public funds, etc. So in my mind, this doesn’t bode well for CSX. But correct me if I am wrong - the eastern area needs CSX or something like it. How can you have a nation dependent on rail traffic and not have major freight in CSX territory.

43

True, but how is that (limitation) relevant? I SF could raid the SP cookie box, even through an abortive merger attempt, then what would prevent a particulary shrewd investor from doing something similar, (to one of the existing outfits) all over again?

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Which is why a shrewd investor would be less interested in owning the stock of the vanquished entity. One would want to be in the driver’s seat in such a transaction

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It’s relevant because the expectation of a merger usually drives prices up, at least for the company that’s getting bought up; the last few have driven the buyers’ share price down, at least for a couple of years after the purchase.

This distinction is important because they’re two distinctly different phenomena. Stock values have historically dropped after mergers because mergers didn’t produce the promised benefits - they led instead to service meltdowns (UP-SP, Conrail) or simple failure to realize the economies that made the merger appealing in the first place. Companies don’t expect that mergers will produce meltdowns, or they wouldn’t pursue them as a business strategy: it’s just that they have produced them in recent railroad mergers. It would be interesting to see whether merger rumors in the future drive prices up or down; my guess would still be that they drive prices up, since someone’s stock had to be purchased for a transfer of ownership.

Mergers and buyouts can be great deals - the Conrail buyout was very lucrative for the Conrail shareholders, but it just wasn’t necessarily so good in the short term for the CSX and NSC shareholders.

I don’t know the specifics on the SP-SF merger that never happened, but it seems like the obvious way SF might have made a pile on it was quietly unloading SP stock that they had pu

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Get ready for a mindblowing revelation: there is more to stock ownership than merely enjoying increased share value

There is an old operative word that rhymes with “thunder”…can you guess which word i’m thinking of?

SF peeled off the non-rail assets of SP during their brief control of said purse strings, and discarded the empty shell once they were done with it. “Wham- bam- Thank you mam-” style

Now, I have no way of knowing if WB has any such plans in mind, but I wouldn’t underestimate him either.

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But from what I remember of his past track record, I don’t think Mr. Buffet has shown those tendencies. I have never thought of him as a corporate raider - more of just a gentleman investor.

Correct me if I am wrong, please.

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No, you’re exactly right, Mookie - Warren Buffett got to be the richest man in the world by spotting equities that would appreciate at better than the going market rate. As far as Berkshire Hathaway is concerned, there’s nothing more important that stock price growth. That’s the company’s whole strategy - pick winners, and reap the benefits of good management in the form of dividends and appreciation. That’s why I’m so puzzled - Icahn, who bought CSX, does have a history as a corporate raider; Buffett does not.

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Midland:

Interesting point about Carl Icahn. He is perceived as a raider. What do you think the attitude of Zander and the Motorola BoD been if it had been WB that snapped up 3% of MOT stock rather than CI?

Some have questioned why BH is purchasing railroads now rather than a few years ago at much lower stock valuations. There is a pretty good reason why those valuations are much higher today than yesterday. The economic climate has changed dramatically in the past 5 years with energy playing a much more important role, as is the continued growth of container business as manufacturing leaves the US.

BH has expanded their investments beyond the traditional US markets also. Thus, it appears that BH is playing both the energy side and the global side in the same investments. BH prefers what is known as “economic moats” which are barriers to a company’s business. One can make the argument that at these levels of energy costs, BH has found such a moat. The drop in energy prices would lead to a washing away of that moat somewhat as

50

Further, from what I read, WB had the followign comments about railroads as investments at the BH annual meeting (paraphrased).

Railroads will never be a fantastic business. However, he does believe the competitive position of the firms has improved compared to truckers. He also believes the railroad’s competitive positioning could get better over time.

There you have it.

ed

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I am curious -

Wonder what he would consider a fantastic business…maybe computers? I really don’t know, but would be interested in finding out.

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WB has pretty much stuck to investing in things he grew up with and thus understood. About 8 years ago, in an interview, he regretted having missed the Internet boom, but then he missed the bust. Considering the large sums he has to invest, many of the fastest growing computer companies are too small fry. Also, the industry changes very rapidly and would require a lot of attention as an investment.

53

Right now OIL is the ticket!

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I am trying to think outside my box, altho’ it is a little small. But as I read this over and over, I am getting quite an education.

I must go do some reading on Mr. B and see what he likes for investments. Never paid much attention since my 30 cents won’t invest in much, but since he is a native son, I will have to spend my lunch hour getting to know him a little better.

55

More than one way to skin a cat, is there not? Who’s to say that a particularly well placed investor determined to direct the redistribution of assets that MIGHT result from a collapse/merger/resurrection…is necessarily a “raider”?

Some might call such an entity a “white knight”, depending upon perspective.

56

Well,

From what I gather, most folks invest in things that are going to be “hot” for a few years…as long as the public continues to consume the goods offer by that one business, then the value of that given business runs high…anyone consider that Mr. Buffet has bought into a group of companies that have a built in customer base, and a built in business?

Considering that he is not playing the market looking for the “get rich” investment, he has more money already than he could ever spend, if he wanted to.

After all, America has become a consumer nation, as opposed to a manufacturing nation, and all those goods have to travel…can anyone really see container traffic losing ground?

I have the feeling that you will see even more stuff being shipped in the container, and as it progresses in technological improvements, one could imaging everything from chemicals to grain being shipped that way, once it all gets standardized.

I certainly can’t see the container business losing ground, as long as the American consume demands the goods that currently is shipped that way.

Personally, I look for a long, steady increase in the container traffic, and have invested a little in both of the major players, expecting a constant return on my money.

57

I’ve heard that the next big thing will be “insourcing”

Supposedly Norfolk Southern and Rail America have partnered with Gunderson in a pilot program where new conductors will be recruited and trained in China, then brought to america to start learning their routes here. Working for half the pay.

Where does Gunderson figure into the deal, you might ask? Elementary, you see someone has to put the shackles inside the containers in which the new hires will be brought to America, and subsequently housed.[:slight_smile:]

58

OK - I did a little investigating. His biggest interest is in Financials. (Lots of insurance) Guess Financials are always going to be a fantastic investment.

But he is also into jewelry (it has been around a year or two and never seems to go out of style), food, furniture, clothing - etc., all things that we really aren’t going to go without. Oil seems to be a very small investment and PetroChina was mentioned. (that covers both the oil and China forum postings)

You need transportation for all these items, which covers Houston Ed’s comments - it is all starting to come together!

I still don’t see a flaw in any of these investments…

Mook

59

Mookie:

I will add a little bit on Warren Buffett. There are a number of excellent books out on him, my favorite is The Warren Buffett Way by Robert Hagstrom.

He has a fairly simple investment concept…but he executes it very well. First, you are correct that he is heavy into financials. The flagship company is Berkshire Hathaway, located as you know in Omaha. It is primarily an insurance company (Got 15 minutes, call Geico, but also insurance companies known as reinsurance companies which provide insurance to insurance companies for high risk, such as hurricane coverage, etc). Anyway, BH uses what is known as “float” in the insurance companies to purchase investments. Float is money which is held and generally is paid out later. Think of it this way. When you purchase insurance, you are buying protection against future claims. Insurance companies make very little off of the actual underwriting, they make their $ off of using OPM (other people’s money).

So, the float enables BH to invest. And invest they have. They own significant chunks of companies such as American Express, Coca Cola, Proctor and Gamble, The Washington Post, Wells Fargo and even PetroChina Company.

Buffett mainly looks, as others indicated, at companies he understands. He was heavily influenced by a professor named Ben Graham which believed investments should be made in companies which are selling below their value. During the early and mid part of the 20th century those types of companies could be found. Today, it is much more difficult, perhaps impossible to find a company selling for less than it’s book value.

So, Buffett looks for good companies, ran by good people, at a fair price. “All we want is to be in businesses that we understand, run by people we like, and priced attractively relative to their future prospects” (Fortune, Oct 31, 1994).

Some of the things he looks fo

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There are some interesting … Naw, make that downright fascinating comments being made under this topic. Some of them are reminiscent of …

Hey, Convicted One, do you miss TheAntiGates as much as we do? [:-^]

PoppaZ