Dump the dog, buy the thoroughbred:

Berkshire Buys Burlington Northern in Buffett’s Biggest Takeover (Bloomberg)

Buffett’s Berkshire Sells More Moody’s (Barron’s)

Prior to the takeover, Berkshire owned 22.6% of Burlington Santa Fe.

At the end of 2008, Berkshire held 48 million shares of Moody’s. Their stake is now down to 38 million shares, or 16.1%.

Category: M&A

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23 Responses to “Buffett Sells Moodys, Buys Burlington Santa Fe”

  1. AP:

    Warren Buffett’s Berkshire Hathaway Inc. is sending a plan to split the iconic company’s Class B shares to a shareholder vote.

    Holders of the relatively low-cost shares will vote on a 50-for-1 stock split approved by the Berkshire Hathaway board, the company says.

    The Class B shares closed Monday at $3,265, a fraction of the price of Class A shares, which ended the session at $98,750.

  2. investorinpa says:

    2 thoughts on this…

    1) Railroad business can be very profitable in the long run, but I see very little upside to owning a railroad whose growth is limited by the consumption rate. It doesn’t seem to make sense to pay up for a business like this. Maybe I’m wrong, but unless there is a relatively immediate rate of increase in consumption or population, there is no upside to this.

    2) As a Berkshire B shareholder, I don’t like this move. On the short term, it may “goose” the stock value in that people see 1600 bucks as being cheaper than 3200, but what is the purpose of this? Why not split the A level instead?

  3. snapshot says:

    Invest – But I see very little upside to owning a railroad whose growth is limited by the consumption rate – Stimulus #2?

  4. ZackAttack says:

    Imagine if he’d been *really* smart and bought last fall when he took out the full-page ad exhorting us to “buy America”. Where’s the accountability for the fortunes he cost people with *that* call?

    BNI chart looks like a trendline break. He might’ve been able to get it much cheaper if he’d waited.

  5. Niskyboy says:

    Warren Buffet is a shrewd dude. He either has made a mistake, or has bought it very cheaply. My money’s on the latter. Adjust your time horizon.

  6. bsneath says:

    Smart investment. We need to export to reignite the economy. That means more carloads of coal, grains, industrial chemicals, minerals, lumber etc.

  7. ZackAttack says:

    At his age, he has no business buying an asset class with a shelf life longer than green bananas.

  8. snapshot says:

    Stimulus #2? I tend to believe he knows something we don’t know…

  9. rktbrkr says:

    We already had 2 stimuli, Bush threw out a quickie to try to hep the R candidates so the next one will be #3

  10. rktbrkr says:

    It’s the jobs, stupid!
    Johnson & Johnson announced plans to lay off as many as 8,400 employees world-wide as part of a push to save up to $1.7 billion in 2011.
    Chrysler announced 23000 union buyouts a few days ago.
    Repeat after me: “unemployment is a lagging indicator”

  11. TheUnrepentantGunner says:

    I wonder if you still get the 8% geico discount if you are a b-shareholder post split. Buffet says he doesnt pay dividends, but say a $1600 stock gets me an extra $70 a year off my auto insurance = a near 5% yield for me.

    so yes, split the b-share please!

    as for the rest, i think alot of buffet’s moves lately involve succession planning. Keep in mind that the Gates foundation is furiously converting A shares into b-shares at a more-than-steady clip, and there was a 2+% arbitrage not too long ago. So why not try to drive some liquidity in the b-shares?

  12. emmanuel117 says:

    @investorinpa

    B has always been for the small retail investors. Buffett’s just trying to maintain his image.

  13. [...] economy (and continued stimulus spending).  (The Money Game, Beanieville, Fund My Mutual Fund, Big Picture, [...]

  14. hue says:

    this is more like buying GE, than GS. Burlington needs to some tarp.

    the new American business motto, restock our way to prosperity. we don’t need no stinking consumer.

  15. Mannwich says:

    Great point, snapshot. Like Warren bought GS and WFC shares right before the big bank bailout, my guess is he knows something about stimulus 2 that is coming. ‘Tis good to be King but clearly the man’s a “genius”.

  16. KJ Foehr says:

    Oligopoly?

    from wikipedia,

    “it is one of four remaining transcontinental railroads, and one of the largest freight railroad networks, in North America. Only the Union Pacific Railroad, its primary competitor for Western U.S. freight, is larger in size. The BNSF Railway moves more intermodal freight traffic than any other rail system in the world.”
    http://en.wikipedia.org/wiki/BNSF_Railway

  17. BR,

    w.this- Dump the dog, buy the thoroughbred:

    • Berkshire Buys Burlington Northern in Buffett’s Biggest Takeover (Bloomberg)

    BNI is not NSC

    http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=Norfolk+Southern+The+Thoroughbred+of+Transportation
    ~~ past that, RRs are a good Investment, in general, beyond the fact that we’re ‘under-Railroaded’, and the sector has, already, undergone massive consolidation, 44′s ‘Carbon Tax’ will, at the minimum, prove a boon to the RR’s..

  18. KJ,

    “Oligopoly?” — Totally.

  19. GaylaC says:

    So… if you are an employee, (with a LOT of BNI shares in your 401K) would those shares be either cashed out or exchanged for BRK shares? No more BNI?

  20. madman130 says:

    Man this Buffet guy is genius or what?

    Just like his “investment” in GS and GE with impending Government bailout, he’s putting his money where more Gov bailout is coming for sure.

    Genius or just riding the gravy train?

  21. advocatusdiaboli says:

    I think he bought both to get in on a good price bump due to the next stimulus spending and to by into a major market share holder in US transportation infrastructure. As for stimulus, maybe Obama is going to craft something like the WPA and BN will get a lot of business hauling a lot of stuff around for the construction boom. But I don’t think he’s a genius–he’s been dead wrong quite a lot lately–the truth is he’s well-connected. And I’ll take that over genius any day.

    The popular media are falling all over themselves calling this a bet on America and the recovery–it’s neither. But since they don’t have the Maestro any more, they need their iconic business and economic geniuses and anyone will do. More wetware cognitive dissonance behavior apropos to BR’s earlier blog post on it.

  22. Simon says:

    Has anyone sat down and analised the railroad shares? Buffet is very smart but he is not a genius. Genius requires original thought, Buffet is a fast learner obsessed about making and keeping money. I’d be asking myself what kind of real estate assets does this rail road have? Is there a major strategic advantage this particular railroad has over other railroad stocks? As a class are railroad stocks a good bet? If you believe in peak oil clearly they are a good long term bet. In addition it’s worth remembering that railway lines are a network that connect places. The network can be used for things apart from railway cars. Many things can be placed alongside the tracks including power cables and fiber optic cables.

  23. investorinpa says:

    The federal government set aside $48 billion of the $787 billion stimulus for infrastructure improvement, some of which goes to railroads. I’m checking to see exactly what cut of the stimulus Burlington Northern gets.