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What Buffett's BNI Buy May Mean for Other Rail Stocks

Warren Buffett’s Berkshire Hathaway announced Tuesday it will acquire the remaining 77 percent stake in Burlington Northern Santa Fe that it doesn't already own. Art Hatfield, a transportation analyst with Morgan Keegan, shared his insights on the decision.

“This is a great value for Burlington shareholders,” Hatfield told CNBC. “This is an egregious valuation at these price levels.”

Hatfield said Buffett’s move to buy the railroad company signifies a “huge bet” on the future of America and is something that “everybody should be looking at very optimistically” over the next five to 10 years.

Buffett has been "a big advocate of this industry for a while,” said Hatfield.

“Initially, he had invested across the board, but he seemed to like the management best at Burlington and has made a big bet here. I don’t see anybody else stepping up and making a further acquisition. Legally, he couldn’t go after anybody else, there’d be serious anti-trust situations with him trying to go after Union Pacific or potentially even going after Transcontinental.”

Hatfield recommended Kansas City Southern to investors and said the company is a potential acquisition candidate in the future.

“They’re very well positioned geographically, their business mix is very strong and that’s a name that could prove to do extremely well and probably outperform fundamentally the other companies in the group over the next couple of years,” he said.

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Disclosures:

No immediate information was available for Hatfield or his firm.

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