Buffett Bets on the Railways
Thursday, November 05, 2009
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Ignoring seemingly better growth opportunities in emerging markets like Brazil, China & India, Warren Buffett has just made his largest investment yet - in a US railway!
The Times has an artice today contrasting the different investment strategies of Buffett and those of Asia’s main banks. The banks are swapping US dollar treasury bills for hoardes of valuable (but useless) gold. Buffett has decided to invest $34bn to take control of a very tangible product - the Burlington Northern Santa Fe (BNSF) railway. BNSF is an industrial railway - hauling heavy goods around the West of the USA.
Buffett has described his investment as an ““all-in wager” on the future of the US.
It might look like a dull investment. The growth prospects for BNSF are hardly exciting. But the investment is entirely consistent with a strategy that has made Buffett so successful.
Buffett prefers to make his investment returns from companies that have (according to his report to Berkshire Hathaway investors)
a) a business we understand
b) favourable long-term economics
c) able and trustworthy management and
d) a sensible price tag
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