Which Railroad Does Warren Buffett Own? - Financhill

Which Railroad Does Warren Buffett Own?

Which Railroad Does Warren Buffett Own? Railroads played a crucial role in America’s development. Having a train station in town helped locals access the goods they needed. Railway stations helped companies decide where to build factories. With a nearby railway, every company – from a family-run farm to a massive manufacturer – had an easier way to ship its products.

Railroads continue to help the country thrive. Trains still offer a fast, low-cost way to move materials.

Not all types of railroads earn profits, though. Unfortunately, passenger trains have suffered for decades. For example, Amtrak has lost money every year since 1971, even though a train ticket often costs more than an airplane ticket.

The importance of railroads hasn’t gone unnoticed by some of the world’s top investors. Warren Buffett, the billionaire owner of Berkshire Hathaway and one of the most successful investors alive, owns BNSF Railway Company.

Warren Buffett BNSF Acquisition

Warren Buffett’s company Berkshire Hathaway purchased 77.4% of BNSF shares for $100 each on November 2, 2009. Berkshire Hathaway already owned 22.6% of the company, so the acquisition gave it total ownership of BNSF.

The purchase had a value of about $44 billion, making it the largest acquisition in Warren Buffett’s career. The transaction also meant that Berkshire Hathaway purchased $10 billion of BNSF’s outstanding debt.

Berkshire Hathaway has an impressively diverse investment portfolio that includes companies in:

  • Insurance
  • Clothing
  • Transportation
  • Media
  • Real estate
  • Manufacturing
  • Financial products
  • Energy

The company is also a majority and minority shareholder in hundreds of companies. Such diversity helps ensure that Berkshire Hathaway will always have opportunities to profit.

Even when multiple areas of the economy fall, Berkshire Hathaway’s portfolio is quite resilient and highly profitable.

Companies acquired by Berkshire Hathaway include:

  • Duracell
  • Fruit of the Loom
  • GEICO
  • PacifiCorp
  • United States Liability Insurance Group

The earliest acquisition took place in 1967 when Berkshire Hathaway bought National Indemnity Company. It has continued adding to its long list of acquisitions since then.

Why Did Warren Buffett Buy BNSF?

Warren Buffett bought BNSF because he believes that railways play a crucial role in the success of America’s economy.

Buffett doesn’t believe in short-term investment strategies that can lead to quick profits. Instead, he takes a long-term perspective that involves purchasing a company and improving its performance over the years.

Buffett says that he considers buying BNSF an “all-in wager on the economic future of the United States.”

It’s important to consider that buying BNSF does more than help Berkshire Hathaway earns returns from within the railway industry. It also gives Buffett opportunities to make his other investments more valuable.

With more efficient railways, companies that need to distribute products all over the country can improve their profits. By purchasing BNSF, Buffett made an investment that helps streamline the supply chain processes of his other businesses.

Analysts have several theories about why Warren Buffett bought BNSF. One theory posits that the cost to build a railway today and jump through the municipal and state hurdles would be too high to justify. So looking to the future, little competition beyond existing railways is likely to ensue. 

And railways will always be in need so with demand steady and no further competition, prices can rise over time which will lead to ever more profits flowing to Berkshire.

Does Warren Buffett Own Union Pacific?

Berkshire Hathaway has a huge amount of cash that lets it invest in practically any business. Even in May 2020, when much of the economy struggled with the COVID-19 pandemic, Berkshire Hathaway had $137 billion in cash.

So far, Warren Buffett and Berkshire Hathaway have not chosen to purchase Union Pacific. Interestingly, Union Pacific’s stock price fell to a nearly three-year low in March 2020. COVID-19 contributed to a steep decline that forced the stock’s value to $117.84 on March 20, 2020.

Despite this opportunity, Berkshire Hathaway does not appear to have made an investment in the company.

There have been rumors for years that Warren Buffett would buy Union Pacific. That hasn’t happened. Perhaps he doesn’t want to buy a railway that will compete with BNSF. Or perhaps anti-trust laws would restrict Berkshire from controlling so much of America’s railroads.

Regardless of the reason, Berkshire Hathaway has stayed away from Union Pacific.

What Is the Largest Railroad Company?

Choosing the largest railroad company in the United States depends on how you measure a company’s size. Union Pacific has a greater value than BNSF. Some estimates put Union Pacific’s overall value at more than $105 billion. BNSF’s value is about half that.

When it comes to length, though, BNSF manages to beat Union Pacific. Not by much, though. BNSF’s length comes to about 32,500 miles. Union Pacific is about 400 miles shorter.

The larger size may help explain why Warren Buffett chose to purchase BNSF over Union Pacific. Then again, he could have preferred BNSF because of its lower purchase price. By purchasing BNSF, Berkshire Hathaway got a longer railway at less than half the price of Union Pacific.

Which Railroad Does Warren Buffett Own: The Bottom Line

Warren Buffett consistently makes some smart investment decisions that lead to huge returns. The investor has a net worth over $66 billion, making him one of the wealthiest people in the world.

Warren Buffett currently owns one railroad, BNSF. Buffett has stated that buying BNSF represents a belief in the future of the U.S. economy.

Although the U.S., North American, and global economies grow and shrink, railroads will play crucial roles in supply chains for decades. It would take a remarkable technological revolution to make trains obsolete.

Maybe that day will eventually come. Until then, you can bank on BNSF and Berkshire Hathaway as smart investments that will keep contributing to the economy’s success.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.

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