Ever since the first quarter of 2007, Warren Buffetts Berkshire Hathaway has been buying into Burlington Northern Santa Fe Corp., writes Wall Street analyst Eric Kuong for GuruFocus. Buffett now owns 20.5 percent of the railroad holding company.
Warren Buffett has stated on several occasions that good investment ideas are hard to come by; 15 years ago he stated that between him and Charlie Munger, combined, they were quite happy if they could come up with one good investment idea each year. Undoubtedly, BNSF is one of those ideas, else it would not worth spending more than $5.5 billion dollars and two years to accumulate a little over 20 percent.
Warren Buffett does not buy more than 20 percent of a company from the open market easily. Breaching the 20 percent line is a big deal for Warren Buffett.
In theory, Warren Buffett can own any percentage between 0 and 100 percent. In practice, however, he seems to prefer either under 20 percent or above 50 percent; in other words, either as investments or as a controlled operating company. This is especially true in recent years.
If an idea is good enough to justify a 20 percent ownership, it might as well justify a 50 percent ownership.
Perhaps Warren Buffetts acquisition of GEICO offers a case study for what might be happening with BNSF. In his 1995 Letter to Shareholders, Buffett gave a good account of his investment love affair with GEICO. Aside from flirting with the stock as a young investor in the 1950s as the chairman and CEO of Berkshire Hathaway, he started to buy into GEICO in 1976. By the end of 1980, Berkshire Hathaway owned 33.3 percent of GEICO.
During the next 15 years, he did not make any further purchases, but his interest in GEICO grew to about 50 percent because the latter was a big purchaser of its own shares. Then, in 1995, Berkshire Hathaway offered $2.3 billion for the other 50 percent of the company and took the company private.
BNSF has also been a diligent purchaser of its own stock, according to GuruFocus data.
From December 1998 to September 2008, the companys shares outstanding shrank from 469 million to 344 million, declining at an annual rate of 2.9 percent. If the company continues to reduce its shares outstanding and/or Buffett keeps on adding to his position, it wont before too long before he owns more than 50 percent of the company.
Will that happen? Many Warren Buffett watchers are anxious to see; some of them even have some money invested along with the guru.
2009 will be an interesting year for the story to unfold.
(The preceding article was published by GuruFocus Jan. 12, 2009.)
That happens...you can bet your ass that most union represented employees wil have zero protection.
Krebs? He's long gone...a mere unpleasant dream. Barely stuck around for five years. Matt Rose is another story though. He's CEO, President, and Chairman of the Board of Directors.
Only Buffet has more power than Rosie! That's only because he owns more shares of BNI!
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Hmm. That address doesnt look right. It looks like the link pointing here was faulty.
Berkshire buys 4.3 million BNSF Corp. shares Tuesday January 20, 9:21 pm ET Buffett's Berkshire Hathaway buys another 4.3 million shares of BNSF Corp. stock
OMAHA, Neb. (AP) -- Warren Buffett's company has bought more than 4.3 million shares of Burlington Northern Santa Fe Corp. stock, increasing its stake to more than 74 million shares.
Berkshire Hathaway Inc. controls more than 20 percent of the nation's second-largest railroad. Documents filed with the Securities and Exchange Commission show Berkshire completed its latest purchases Tuesday.
Berkshire's BNSF stock is held by National Indemnity Co., one of Berkshire's insurance subsidiaries.
Berkshire owns insurance, furniture and jewelry companies, utilities and a corporate jet firm, and has major stock investments.
