(The Associated Press circulated the following story by Josh Funk on April 9.)
OMAHA, Neb. — Warren Buffett’s company recently invested in three railways, and in the process, Berkshire Hathaway Inc. became the largest shareholder in the Burlington Northern Santa Fe Corp., according to a company filing and a media report that the company confirmed.
The disclosure sent shares of all the major freight railways up in afternoon trading Monday, with Burlington Northern leading the pack with a nearly eight per cent gain.
In Canada, Canadian National Railway Co. jumped more than five per cent, while CP Rail Ltd. of Calgary also gained ground.
Montreal-based CN Rail, Canada’s largest rail carrier, rose $2.60 to close at C$53.50, a gain of 5.11 per cent in trading of more than 3.6 million shares on the TSX. CP Rail rose $2.01 to $66.10, a jump of 3.1 per cent, in trading of more than 682,000 shares.
Omaha-based Berkshire Hathaway revealed in a filing with the U.S. Securities and Exchange Commission that it owned 39 million shares of Burlington Northern as of last Thursday.
The cable network CNBC reported Buffett said Berkshire had also invested in two other railways that he declined to name.
Buffett’s assistant Debbie Bosanek said no one at Berkshire was available Monday to discuss the company’s investments. But she said the CNBC report about Berkshire investing in two railways besides Burlington Northern Santa Fe was accurate.
Buffett told CNBC that Berkshire had invested about US$700 million in one North American railway and slightly less than that in another railway.
Berkshire’s investment in Burlington Northern represents 10.9 per cent of America’s second-largest railway.
The next largest Burlington Northern shareholder, Marsico Capital Management, holds about 32 million shares.
Buffett hinted at two major new investments as he described the performance of Berkshire’s $61.5 billion investment portfolio in his annual letter to shareholders that was released March 1.
He said then that two investments with a market value of more than $700 million at the end of 2006 were not named.
“We don’t itemize the two securities referred to, which have a market value of $1.9 billion, because we continue to buy them,” Buffett said in his letter.
“I could, of course, tell you their names. But then I would have to kill you.”
Aside from his annual letter, Buffett rarely discusses Berkshire’s investments, so it’s not clear whether the railway investments are the two investments he referred to.
Bear, Stearns & Co. analyst Edward Wolfe said in a research note that Berkshire’s investment in BNSF should be a positive sign for all the major freight railways.
Wolfe said Burlington Northern has several advantages because it is seeing better volumes than its competitors, strong pricing and easing fuel prices. He has an $88 target price on the stock.
Investors seemed to agree with Wolfe’s view because shares of other major North American freight railways were up on Monday on the New York Stock Exchange.
Shares of Burlington Northern Santa Fe rose $5.61, or 6.8 per cent, to $88.33 in afternoon trading Monday after rising to a 52-week high of $93.22 earlier in the day.
That’s already more than the $81.18 Berkshire paid for 1.2 million shares last Thursday.
Shares of Union Pacific Corp., the largest U.S. railway, gained $4.04, or 3.9 per cent, to $107.24 in afternoon trading in the NYSE while Norfolk Southern Corp.’s shares gained $2.02, or four per cent, to $53 and CSX Corp. gained 95 cents, or 2.3 per cent, to $41.91.
The U.S. shares of Canadian National Railway Co. gained $2.16, or 4.9 per cent, to $46.45 on the NYSE, while Canadian Pacific Railway Ltd.’s U.S. shares gained $1.59, or 2.9 per cent, to $57.35.
Berkshire’s Class B shares rose $6.90 to $3,632 and its Class A shares rose $50 to $108,899 in afternoon trading Monday on the New York Stock Exchange.
Berkshire owns furniture, insurance, jewelry and candy companies, restaurants, natural gas and corporate jet firms and has major investments in such companies as The Coca-Cola Company and Anheuser-Busch.