Value Investing News

While everyone is hyped up about Buffets interest in railways heres one that most havent heard of: Toll NZ is the only (monopoly) rail operator in New Zealand.... Third Avenue owns 10.01%. Is a great long term business as the NZ govt wants to move more freight by rail rather than road. Also the parent (Toll Ltd) who own 84%, have tried to take it private in the past and are still keen to take it private... but Third Avenue holds a blocking stake so a real good price will have to be offered.

Been long OC since shortly after emergency and did think about if Buffet would be interested. One has to consider the price he paid for John Mansville vs what he would have to pay for OC. Also if I recollect correctly it seems that with JM there existed an eager seller of a controlling stake while OC ownership is diversified and it doesnt look like the distressed debt/hedge funds are running for the door yet. Anything is possible but personally while I was a buyer at ~$26 Im not a buyer at ~$33

Various boards have been running contests on which stocks were the "mystery" stocks. I thought it might be Owens Corning. Buffett would be vary familiar with the business since BRK owns Johns Manville.

I am surprised that Buffett has never bought rail stocks before. They do have a quasi monoply around their rail area. I guess their capital requirements, and labor rules kept him away.

I'm pretty sure Burlington Northern Santa Fe (BNI) derives a greater proportion of its revenue from coal than many of its peers. From the most recent annual report:

Coal contributed about 20 percent of BNSF freight revenues. BNSF moved an annual record 287.2 million tons of coal in 2006, up 10.8 percent from the previous annual record of 259.2 million tons set in 2005. BNSF also responded to the rising value of Powder River Basin coal in global energy markets. Capacity expansion projects included 19 miles of new second main track and 18 miles of new third main track on key coal routes.

And from the 10-K:

In 2006, the transportation of coal contributed about 20 percent of freight revenues. BNSF is one of the largest transporters of low-sulfur coal in the United States. More than 90 percent of all BNSF's coal tons originate from the Powder River Basin of Wyoming and Montana. These coal shipments were destined for coal-fired electric generating stations located primarily in the North Central, South Central, Southeast, Mountain and Pacific Northwest regions of the United States. BNSF also transports coal from the Powder River Basin to markets in Canada and the eastern United States. Demand for Powder River Basin coal has increased substantially over the past 20 years, due to its relatively low sulfur content, abundant reserves, relatively inexpensive mine production, and competitive delivered cost to power plants.

And from Morningstar:

Burlington Northern Santa Fe is one of the better-operating North American railroads, though not the best. However, its proportion of business from coal, agricultural products, and intermodal--three freight groups that we expect to continue to perform well in an economic downturn--is higher than that of any of its peers, making it one of the railroads we'd like to own over the long haul.

BNI's Rail Network:

You can see a map of the company's rail network on page 29 of the PDF (8 of the document) of the 2006 annual report – available at the investor relations section of the company's website. But, to give you a quick visual image think of a railroad that covers the U.S. west of St. Louis with a focus on the central states (i.e., not the West Coast).

Geoff,

Thanks for spotting this breaking news about Buffett's purchase of Burlington Northern Santa Fe stock. I need to do some homework on this conmpany, since I know very little about it. I'd be very interested in Burlington Northern if its network covers key low sulfur coal producing regions. Does anyone here know off of the top of their head?