More on Buffett's purchase of Burlington Northern Santa Fe Railroad
A reader responds to my earlier post:
There are many reasons Buffett purchased BNSF. The WSJ argument is tenuous, at best. Your analysis hits on potential factor involved in his timing (he could have bought much earlier). However, since he passed the 20% ownership mark a year ago after a slow build-up (of two other railroads, as well; he didn't purchase any shares in CSX, as it is the black sheep of the big four), your conclusion that Buffett's purchase "represents a success of Obama's revitalization" gives credit a little late and to the wrong factors.
The entire railroad industry, since the days of deregulation in 1978 and 1980, and the gradual certainty and panic over waning oil supplies, has steadily improved volume, margins, and safety. On the BTS.gov site, you will find statistics for an important measure of railroad business--revenue ton miles--growing rapidly for two decades. You may also find measures of their efficiency, which also increase steadily (look at the distance a ton of freight can be transported with a single gallon of diesel). One could argue that the railroad industry has been revitalized and is performing extremely well.
Just these two statistics, when viewed by individual company, show BNSF's sizable lead over its competitors. They are best in class. They also have what Buffett frequently looks for--insurmountable competitive positions (expensive to lay track, operational efficiency, experience, brand, etc.), solid managers, and an industry that has staying power.
I would say that he has lots of other reasons that include his company and legacy, pieces that complement the powerful straw-into-gold machine he has created, and benefits from BNSF to his other companies, but the man is way more complicated than the image he portrays of himself, so I'll stop.