The Hindu Business Line : Buffett bets on railroads

A report in Desert News suggests that Berkshire Hathaway’s Warren Buffett, the fabled investor also known as the Oracle of Omaha, has announced the biggest deal of his life: he will acquire stake in Burlington Northern Santa Fe, the railroad operator, for $26.6 billion and assume the company’s $10-billion debt.

At $100 per share he will pay a 30 per cent premium on BNSF’s market value. The deal has raised many an eyebrow.

Has Buffett finally lost his marbles, some ask, pointing out that he is tying his empire to an old economy, unionised company that transports a lot of politically incorrect coal at a time when people are salivating over smart phones and personal digital computers.

Intrinsic value

But, then, it is also true that Buffett has proved everybody wrong for the last 44 years.

Buffett belongs to the school that teaches investors to focus on intrinsic value, not the market’s latest fad and buy a company that is undervalued.

Freight railroads, therefore, will be a fact of life in a big country that will continue to trade within itself and with the rest of the world.

Next, there is a huge cost of entry into such a capital intensive industry and also the fact that, with the present focus on environment protection, railroad operations, which are three times more fuel-efficient than shipping by truck, can hope to have a brighter future and can be the preferred choice.

More Stories on : Outlook | Railways | Roadways

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Etihad sales office in Kochi

Kingfisher flies daily to Salem

QuEST launches aerospace SEZ in Belgaum

Ship graveyard mourns loss of business

‘We are guided by customers’ need for innovation and transformation’

Rains ‘derail’ Ooty toy train

Special KSRTC service to Pampa

Buffett bets on railroads