Buffett Boosts Bet on Burlington


Burlington Northern shares are picking up speed on Wall Street, after Warren Buffett added to his stake. A filing with the SEC late last night reveals that Berkshire Hathaway bought 1.62 million shares of the railroad between last Friday (August 3) and yesterday (August 7). During that time, the market price ranged from a high of $82.27 on Friday to a low of $78.79, also on Friday. The stock closed Friday with a loss of over three dollars a share, which works out to almost 4%.

Buffett didn't quite get the low, but he did pretty well. According to the filing, he bought 1,133,600 shares at $80.40 on Friday, another 424,300 shares at $79.45 on Monday, and topped it off with 62,400 shares at $79.78 on Tuesday.

The additional shares increase Buffett's stake to 40.65 million shares, which accounts for about 11.5% of the company. The purchases increase his holdings in Burlington by just over 4% from the 39 million shares he disclosed in April.

In May, Berkshire said it owned stakes in two other railroads: Union Pacific (10.5 million shares) and Norfolk Southern (6.4 million) .

An AP story recalls Buffett and Berkshire Vice Chairman Charlie Munger saying in May that they had been slow to get aboard railroads stocks due to the industry's dismal record, but that the rail companies had become more competitive in recent years.

Fast Money's Guy Adami blogs today on Minyanville that despite Buffett's Burlington buy, he's "not convinced that the rails are the play." But, he continues, "If Mr. Buffett's hunch about the railroads are correct then increased cash flow should lead to reinvestment into the business in the form of maintenance, upgrades and new locomotives."

That leads him to Wabtec as a "stock to watch." The Pennsylvania-based company makes a "broadrange of products for locomotives, freight cars and passenger transit vehicles" and thus would benefit from the healthier rail industry Buffett apparently sees coming.



Berkshire Hathaway's low-cost auto insurer Geico doesn't do business in Massachusetts right now, but that could change. The Boston Globe today quotes Warren Buffett as saying, "It's crazy for us not to be in Massachusetts." Ever the salesman, he added, "It's costing people in Massachusetts plenty for us not to be there."

The Globe reports that Geico and some other national insurers are avoiding the state because they can't set their own rates and risk being assigned too many high-risk drivers. Recently, however, the insurance commissioner in Massachusetts has been talking about moving to "managed competition" next year, which would give insurers the freedom to set their rates, although they would still require approval from regulators.

One possible hitch: the insurance commissioner isn't a big fan of using "socioeconomic factors such as education, occupation, home ownership, and credit history" to set rates. Geico usally does and Buffett says they make it easier for the company to match rates and risks.

But, he tells the Globe, it's not a deal-breaker. If socioeconomic factors are barred by Massachusetts, "We can adjust to it. It just means your rates won't be quite as equitable. Anything that is a level playing field, we're fine with."

Questions? Comments? Email me at buffettwatch@cnbc.com