News
- Warren Buffett Buys Burlington Northern
- 11/4/2009
Warren Buffett Buys Burlington Northern for $34B
Tuesday, November 03, 2009
PAUL KANGAS: The Oracle of Omaha has spoken and the news is good. Famed investor Warren Buffett is buying the Burlington Northern Santa Fe railroad as an upbeat bet on America's future. His Berkshire Hathaway Corporation is spending $34 billion to buy the remaining shares it doesn't already own. Erika Miller has more on why Buffett is making such a bold move.ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: There's nothing like owning your own train set. And while most people think in terms of the toy version, billionaire investor Warren Buffett is buying the real deal. Make no mistake, Buffett's purchase of Burlington Northern Santa Fe is far from frivolous. It's a calculated bet on a recovery in the railroad industry, something analyst Kevin Kirkeby says is not yet underway.
KEVIN KIRKEBY, GROUND TRANSPORTATION ANALYST, STANDARD & POOR'S: What the rails are providing is confirmation that things are stabilizing. They are not saying that things have turned the corner and we're going to have gangbuster growth.
MILLER: Buffett has been investing in railroad stocks for years and freight loadings are one of his favorite economic indicators. Though Union Pacific is bigger, analysts say Burlington Northern is the best in breed, something Buffett looks for.
KIRKEBY: He's buying the railroad that probably has the best reputation in terms of management, in terms of management who is willing to push for technology, push to try new things. So in that regard, yes, he is buying the best of the rails.
MILLER: But it's not just about the rails. Buffett says the Burlington Northern deal is quote, an all-in wager on the economic future of the United States. Investment strategist Jim Awad says that's a big vote of confidence.
JAMES AWAD, INVESTMENT STRATEGIST, ZEPHYR MANAGEMENT: I think what he's probably saying is the economy has turned. In some cases that is not reflected in the stock price. And therefore I'm going to move now because cyclically the economy has turned, secularly the economy is attractive and this particular security in my view is attractively priced and strategically well positioned.
MILLER: Whatever the motive, some say it sends an important signal.
AWAD: I think if you are a young person, you think like Warren Buffett and you invest for a 10, 20, 30-year period. And this sends a message that probably the best brains in the country are optimistic about our future and you should be too.
MILLER: Today's deal is the largest ever for Berkshire Hathaway, but already Wall Street is speculating about Buffett's next move. One analyst thinks it will be in health care, a play on the nation's aging population. Erika Miller, NIGHTLY BUSINESS REPORT, New York.
http://www.pbs.org/nbr/site/onair/transcripts/buffett_buys_burlington_northern_091103/