JPMorgan fund bets on U.S. rail companies, follows Buffett
(Bloomberg News circulated the following story by Chris Cooper on April 7, 2010.)
NEW YORK JPMorgan Chase & Co.s railway fund is betting on U.S. freight companies such as Union Pacific Corp., CSX Corp. and Norfolk Southern Corp., following Warren Buffetts decision to take over Burlington Northern Santa Fe Corp.
The 138 billion yen ($1.5 billion) JPM Global Railway Stock Fund expects the companies to benefit from a move to carrying goods by rail instead of roads to reduce fuel costs and pollution, said Peter Kirkman, the funds lead portfolio manager. Railroads burn less diesel than trucks for each ton of cargo carried, giving operators a fuel-efficiency advantage.
Government policy will continue to move toward environmental concerns, Kirkman, who works for J.P. Morgan Investment Management Inc., said in a telephone interview from New York yesterday. Moving freight by train rather than road is highly advantageous.
Purchasing stakes in the U.S. rail companies has helped the fund gain 11 percent in value since its January start and beat the advances in Japans Topix Index and the Nikkei 225 Stock Average. The fund, which has 19.8 percent of its holdings in the U.S., was started Jan. 26 and is sold only in Japan.
U.S. rails prospects spurred Buffetts Berkshire Hathaway Inc. last year to agree to spend $27 billion to buy 77.4 percent of Burlington Northern it didnt own.
President Barack Obama earlier this year granted $8 billion for 13 high-speed train corridors across the U.S., including a portion to improve existing rail lines.
Economic Rebound
Union Pacific, the U.S. railroad with the biggest locomotive fleet, is predicting growth in freight this year amid more demand for transporting commodities as the U.S. economy returned to growth. North American railroad volume, considered a leading indicator for economic conditions, has gained 1.5 percent in the year to March 27, according to the Association of American Railroads, rebounding from a 16.2 percent slump last year.
There are only four major players and so its a fairly small market, Kirkman said. Freight transport will continue to grow.
Union Pacific fell 0.2 percent to $73.64 in New York Stock Exchange composite trading yesterday. It has gained 15 percent this year. CSX has gained 8.2 percent this year while Norfolk Southern has advanced 9.9 percent.
The fund doesnt have a benchmark. Its gains compare with an 8.7 percent increase in the Topix index and a 9.5 percent advance in the Nikkei 225 Stock Average.
