Warren Buffett and the Burlington Northern Railroad

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In 1965, Warren Buffett acquired control of a New England textile business called Berkshire Hathaway for about $10 a share. Today the stock sells for around $135,000 a share and Mr. Buffett is the second richest person in America. The stock has never paid a dividend. How does this amazing success fit the theory that the value of a stock is based on the present value of the expected future stream of dividends? Visit www.berkshirehathaway.com and get familiar with the company. Tell me what you think the future holds for the company. Read his letters to his shareholders (they are available on the Berkshire Hathaway website). In an age of hi-tech, why did he recently buy the Burlington Northern Railroad for $44 billion? How will the company fare after his inevitable departure? Moving products by rail is the cheapest way to move large amounts of goods, even cheaper than moving products by trucks. Buffett knows that the US has a poor energy policy that makes it difficult to move crude oil out of the biggest oil shale industries such as, (Bakken, Eagle Ford, Mississippian, and Utica) in the US. (Finance.yahoo.com). Rail also is able to move large amounts of coal to make electricity across the country. Buffett seems to actually have a simple investment philosophy, finding out what works and where there is a need for a service, he buys low and sells high. Buffett believes that railroads represent the future. “They're best-positioned to haul the raw material and finished goods for a nation and economy that he insists are bound to grow. Unlike trucks, trains don't have to compete on congested highways. Nor do railroads depend on strapped governments to maintain infrastructure.” Buffett also implies that, “They've already invested heavily in their infrastructure and technology, and they plan to invest more to keep up with the growing demand. “They're the only

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