by
David Fessler, Energy and Infrastructure Expert
Thursday, November 5, 2009: Issue #1131
Last Sunday morning, I embarked on a spirited 60-mile bike ride with a few like-minded 50-somethings. Our route took us along the beautiful Delaware River. The Delaware – named after the Indian tribe that crossed its waters – defines the north-south border between New Jersey and my home state of Pennsylvania.
As we stopped to enjoy the view, we heard the unmistakable whistle of a steam locomotive. We looked up and there it was – New York, Susquehanna and Western's number 142 – a steam locomotive pulling a line of cars along the Delaware.
One hundred years ago, engines like this – and the rails they ran on – were the backbone of the railroads. When it came to freight and passenger transportation in the United States, railroads were the only game in town.
Flash forward to this week. Warren Buffett – one of the most astute investors in the world – has placed a big bet. He's gone "all in" on America's future and bought a railroad company.
So what does this mean for the railroad industry – and what's the best way to profit from it?
Warren Buffett: Railroad Bull
"Railroads can (move freight) in a very cost effective way, and they do it in an extraordinarily, environmentally friendly way.
"Burlington Northern Santa Fe last year moved a ton of goods 470 miles on one gallon of diesel. It releases far fewer pollutants into the atmosphere, saves enormously on energy consumption, and diminishes highway congestion."
So said Warren Buffett in a CNBC interview after announcing that Berkshire Hathaway (NYSE: BRK.A) would pay $100 a share for the 75% of Burlington Northern Santa Fe Corporation (NYSE: BNI) that it didn't already own.
Ever the optimist, Buffett said the decision to make the investment was easy:
"Rails last year moved more than 40% of all the ton-miles of goods in the country. They moved more than all those trucks… just the four big railroads. It's a very effective way of moving goods.
"I believe that this country will prosper and you'll have more people moving more goods 10, 20, 30 years from now and the rails should benefit.
