(The following report by jared A. Favole appeared on the Wall Street Journal website on November 7.)
NEW YORK — Stock sales by the top brass of Burlington Northern Santa Fe Corp. are a cause for concern, but investors who plan to be on board for the long haul should pay more attention to stock purchases by investing guru Warren Buffett of Berkshire Hathaway Inc., one analyst says.
Burlington Northern Chairman and Chief Executive Matthew Rose, Chief Financial Officer Thomas Hund and Chief Operating Officer Carl Ice recently reported selling 122,000 shares of the Fort Worth, Texas, railroad for $10.5 million, according to filings with the Securities and Exchange Commission.
“I think these guys taking profits could mean the short-term outlook is looking fuzzy,” said Ben Silverman, who analyzes and rates insider transactions for InsiderScore.com. “If you look at management comments recently…this makes sense.”
Two weeks ago, despite high fuel costs and housing-market weakness, Burlington Northern posted an 8.4% increase in third-quarter net income thanks to firm pricing, improved yields and strong shipments of agricultural products. Company executives, however, said unit volume is expected to be off slightly in the fourth quarter amid slowing economic growth and weakness in markets sensitive to the housing slowdown.
Mr. Rose said he had concerns in the near term about how the economy, housing markets, high fuel prices and general consumer softness would affect the railroad company but remained optimistic about the company’s future. Burlington Northern also said it expects flat earnings per share in the fourth quarter, compared with a year earlier.
A Burlington Northern spokesman said it is company policy not to discuss insider stock transactions.
Mr. Silverman said given the cautious comments from the company when it reported its earnings, executives are “putting their money where their mouth is” with their stock sales. “If the CEO is going to be frank with those comments about the economy, and then going out and selling stock, I think he’s being honest,” Mr. Silverman said.
Mr. Silverman, however, said past sales by these executives haven’t signaled a pending drop in the company’s stock price, and investors should find comfort in the fact that Mr. Buffett, known for holding investments for a long time, has increased his stake in the company.
Mr. Buffett first disclosed holding an 11% stake, or about 39 million shares, in Burlington Northern in April. Early last month, he reported boosting his stake to 60.8 million shares, or 17.2%.
Burlington Northern shares were at $87.24 on the New York Stock Exchange yesterday, up 2%, or $1.74. The shares, which have traded at more than $94 a share in recent months, are up about 7% since the first report of Mr. Buffett’s stake.
Mr. Buffett wasn’t available to comment.
Mr. Silverman estimates that Mr. Buffett paid $78 to $82 apiece for his shares. The Burlington Northern executives recently sold their shares for an average price of $86.82, according to data provided by the Washington Service, a research service.