Recently, there has been a lot of interest in railroad stocks. Their barrier to entry is undeniable. In the 1800s, the government gave land to the railroads in order to link the country together. Today, this would be a near impossible action. It is nearly if not totally impossible for new competitors to enter the market place.
Burlington Northern Santa Fe Corp, Union Pacific Corp, Canadian National Railway and Norfolk Southern Corp will be reviewed.
Of interest is that 3 of the 4 stocks discussed here are holdings of Warren Buffett. It appears that he is collecting a basket of railroads.
In 1980, the rails were deregulated with the Staggers Rail Act. This is when Railroads became much more efficient at running their business since their hands were no longer tied or atleast the ties were loosened.
The major regulatory changes that Staggers Act made are as follows:
* A rail carrier could establish any rate for a rail service unless there was no effective competition for that carrier.
* Rail shippers and rail carriers would be allowed to establish contracts subject to no review, unless the it was determined that the contract service would interfere with the rail carrier's ability to provide common carrier service.
* The scope of authority to control rates to prevent 'discrimination' among shippers was substantially curtailed.
* Across-the-board industry wide rate increases were phased out.
* The dismantling of the collective rate making machinery among railroads begun in 1976 was reaffirmed, with railroads not allowed to agree as to rates they, respectively, could perform on their own systems, and were not allowed to participate in the determination of the rates on traffic in which they did not effectively participate.
- source
And more recently, people have been more interested in using rails due to their cost efficiency and to an extent, their environmental image. GE is constantly improving their locomotives, making them more and more efficient. Also, diesel trucks require 3-4 times more diesel fuel to transport goods.
The catalysts for growth are in place. And the alternatives are less efficient.
A review of the top 4 railroads in terms of market cap is as follows.
BNI - Burlington Northern Santa Fe Corporation
Burlington North/Santa Fe through its subsidiary The Burlington Northern and Santa Fe Railway Company operates one of the largest railroad networks in North America. This vast network covers the western two-thirds of the United States stretching from major Pacific Northwest and Southern California ports to the Midwest Southeast and Southwest and from the Gulf of Mexico to Canada. Burlington Northern Santa Fe Corp. has a market cap of $27.28 billion; its shares were traded at around $78.85 with a P/E ratio of 14 and P/S ratio of 1.6. The dividend yield of Burlington Northern Santa Fe Corp. stocks is 1.9%. Burlington Northern Santa Fe Corp. had an annual average earning growth of 8.1% over the past 10 years.
Burlington Northern Santa Fe Corporation will present its third-quarter 2009 earnings on October 22, 2009 in a Webcast at 4:30 p.m. BNSF plans to issue its earnings press release at approximately 4 p.m. EDT.
BNI recently sold $750 million of senior notes. The original deal was increased from an originally planned $500 million. Barclays, Goldman Sachs, and Wells Fargo were the joint book running managers for the sale.
The following Gurus hold UNP
George Soros owns 55,900 shares as of the quarter that ended on 06/30/2009, which is 0.16% of the $2.61 billion portfolio of Soros Fund Management LLC.
Ron Baron owns 59,000 shares as of the quarter that ended on 06/30/2009, which is 0.04% of the $11.99 billion portfolio of Baron Funds.
Kenneth Fisher owns 982,838 shares as of 06/30/2009, which accounts for 0.29% of the $24.67 billion portfolio of Fisher Asset Management, LLC.
Prem Watsa owns 2,088,000 shares as of 03/31/2009, which accounts for 2.9% of the $5.21 billion portfolio of Fairfax Financial Holdings, Inc.
Warren Buffett owns 76,777,029 shares as of 06/30/2009, which accounts for 11.53% of the $48.95 billion portfolio of Berkshire Hathaway.
Chris Davis owns 224,224 shares as of 06/30/2009, which accounts for 0.03% of the $51.82 billion portfolio of Davis Selected Advisers.
Tweedy Browne owns 1,334,954 shares as of 06/30/2009, which accounts for 5.82% of the $1.69 billion portfolio of Tweedy Browne CO LLC.
Prem Watsa owns 2,088,000 shares as of 06/30/2009, which accounts for 2.95% of the $5.21 billion portfolio of Fairfax Financial Holdings, Inc.
Wallace Weitz owns 204,900 shares as of 06/30/2009, which accounts for 0.98% of the $1.54 billion portfolio of Weitz Wallace R & Co.
PRIMECAP Management owns 100,000 shares as of 06/30/2009, which accounts for 0.02% of the $48.26 billion portfolio of PRIMECAP Management.
Jean-Marie Eveillard owns 15,000 shares as of 06/30/2009, which accounts for 0.01% of the $8.91 billion portfolio of Arnhold & S. Bleichroeder Advisers, LLC.
UNP - Union Pacific Corporation
Union Pacific Corp. consists of one reportable segment rail transportation and the company's other product lines. The rail segment includes the operations of the corporation's wholly owned subsidiary Union Pacific Railroad Company and Union Pacific Railroad Company's subsidiaries and rail affiliates. The company's other operations include the trucking product line as well as the other product lines that include technology self-insurance activities corporate holding company operations and all appropriate consolidating entries. Union Pacific Corp. has a market cap of $29.51 billion; its shares were traded at around $57.38 with a P/E ratio of 13.9 and P/S ratio of 1.7. The dividend yield of Union Pacific Corp. stocks is 1.8%. Union Pacific Corp. had an annual average earning growth of 1.7% over the past 10 years.
Union Pacific is slated to release earnings on October 22, 2009.
One common indicator of the economy is to see what is going on with railroads since they connect the US together. In a recent statement, the Rob Knight (CFO) said that “We do see a few signs of hope" and that "Recent economic indicators point to continued stabilization".
The following Gurus hold UNP
Kenneth Fisher own 1,698,424 shares as of the quarter that ended on 06/30/2009, which is 0.36% of the $24.67 billion portfolio of Fisher Asset Management, LLC.
PRIMECAP Management owns 5,069,093 shares as of 06/30/2009, which accounts for 0.55% of the $48.26 billion portfolio of PRIMECAP Management.
David Williams owns 3,750,000 shares as of 06/30/2009, which accounts for 3.57% of the $5.47 billion portfolio of Columbia Value and Restructuring Fund.
Warren Buffett owns 9,558,000 shares as of 06/30/2009, which accounts for 1.02% of the $48.95 billion portfolio of Berkshire Hathaway.
Richard Aster Jr owns 278,000 shares as of 06/30/2009, which accounts for 0.73% of the $1.98 billion portfolio of Meridian Fund.
Tweedy Browne owns 1,490,783 shares as of 06/30/2009, which accounts for 4.6% of the $1.69 billion portfolio of Tweedy Browne CO LLC.
John Keeley owns 112,086 shares as of 06/30/2009, which accounts for 0.1% of the $5.82 billion portfolio of Keeley Fund Management.
NWQ Managers owns 4,772,861 shares as of 06/30/2009, which accounts for 1.68% of the $14.8 billion portfolio of NWQ Investment Management Co.
Dodge & Cox owns 699,358 shares as of 06/30/2009, which accounts for 0.05% of the $66.88 billion portfolio of Dodge & Cox.
Steve Mandel owns 1,951,597 shares as of 06/30/2009, which accounts for 1.38% of the $7.37 billion portfolio of Lone Pine Capital.
Jean-Marie Eveillard owns 37,500 shares as of 06/30/2009, which accounts for 0.02% of the $8.91 billion portfolio of Arnhold & S. Bleichroeder Advisers, LLC.
CNI - Canadian National Railway
Canadian National Railway Company a Canadian corporation operates the larger of Canada's two principal railroads and the only coast-to-coast railroad network in North America. The company's rail network serves major ports in Canada and includes strategic connections to the United States through the Chicago gateway Detroit and other major cities. Canadian National Railway Company Fully has a market cap of $22.52 billion; its shares were traded at around $47.51 with a P/E ratio of 15.1 and P/S ratio of 3.1. The dividend yield of Canadian National Railway Company Fully stocks is 2%. Canadian National Railway Company Fully had an annual average earning growth of 37.6% over the past 5 years.
Union Pacific is slated to release earnings on October 20, 2009.
On September 24, 2009, CNI announced the completion of the $100 million multi-year construction project to reconfigure and modernize its Memphis rail classification yard. “This project transformed an aged, inefficient rail yard into a state-of-the-art, effectively designed major terminal capable of handling existing and future traffic quickly and efficiently,” said CN executive vice-president Claude Mongeau, who will succeed retiring president and chief executive officer E. Hunter Harrison on Jan. 1, 2010. “Today's yard can handle nearly double the traffic the old facility could in a 24 hour period.”
The new Memphis yard is CN's second largest classification yard in the United States. It has a capacity of more than 3,100 freight cars with 45 tracks in the classification yard. It also has 12 receiving and departure tracks ranging in length from 5,000 to 10,000 feet. The revised operation can handle 35 or more freight trains per day.
The following Gurus hold CNI
George Soros owns 7,700 shares as of the quarter that ended on 06/30/2009, which accounts for 0.01% of the $2.61 billion portfolio of Soros Fund Management LLC.
Bill Gates owns 8,399,653 shares as of 06/30/2009, which accounts for 4.82% of the $7.49 billion portfolio of Bill & Melinda Gates Foundation Trust.
NSC - Norfolk Southern Corp.
Norfolk Southern Corp. a Virginia-based holding company owns two major freight railroads Norfolk Southern Railway Company and Norfolk Western Railway Company which operates in numerous states the District of Columbia and the Province of Ontario. (Company Press Release) Norfolk Southern Corp. has a market cap of $16.3 billion; its shares were traded at around $43.26 with a P/E ratio of 11.9 and P/S ratio of 1.6. The dividend yield of Norfolk Southern Corp. stocks is 3.1%. Norfolk Southern Corp. had an annual average earning growth of 9.7% over the past 10 years.
Regarding the green theme, note that NSC recently rolled out an electric locomotive for use in its Pennsylvania rail yard. NSC plans on later using a diesel electric hybrid locomotive for long haul trips.
More information on the electric locomotive can be found here:
http://www.nscorp.com/nscportal/nscorp/Media/News%20Releases/2009/batteries.html
The following Gurus hold NSC
Kenneth Fisher owns 2,243,531 shares in the quarter that ended on 06/30/2009, which accounts for 0.34% of the $24.67 billion portfolio of Fisher Asset Management, LLC.
Brian Rogers owns 500,000 shares in the quarter that ended on 06/30/2009, which accounts for 0.14% of the $13.63 billion portfolio of T Rowe Price Equity Income Fund.
David Dreman owns 70,420 shares as of 06/30/2009 which accounts for 0.08% of the $3.12 billion portfolio of Dreman Value Management.
Richard Aster Jr owns 9,300 shares as of 06/30/2009 which accounts for 0.02% of the $1.98 billion portfolio of Meridian Fund.
David Dreman owns 70,420 shares as of 06/30/2009, which accounts for 0.08% of the $3.12 billion portfolio of Dreman Value Management.
Richard Aster Jr owns 9,300 shares as of 06/30/2009, which accounts for 0.02% of the $1.98 billion portfolio of Meridian Fund.
Tweedy Browne owns 780,300 shares as of 06/30/2009, which accounts for 1.74% of the $1.69 billion portfolio of Tweedy Browne CO LLC.
PRIMECAP Management owns 1,575,442 shares as of 06/30/2009, which accounts for 0.12% of the $48.26 billion portfolio of PRIMECAP Management.
Warren Buffett owns 1,933,000 shares as of 06/30/2009, which accounts for 0.15% of the $48.95 billion portfolio of Berkshire Hathaway.
Jean-Marie Eveillard owns 17,500 shares as of 06/30/2009, which accounts for 0.01% of the $8.91 billion portfolio of Arnhold & S. Bleichroeder Advisers, LLC.
Dodge & Cox owns 14,950 shares as of 06/30/2009, which accounts for less than 0.01% of the $66.88 billion portfolio of Dodge & Cox.
Burlington Northern Santa Fe Corp, Union Pacific Corp, Canadian National Railway and Norfolk Southern Corp will be reviewed.
Of interest is that 3 of the 4 stocks discussed here are holdings of Warren Buffett. It appears that he is collecting a basket of railroads.
In 1980, the rails were deregulated with the Staggers Rail Act. This is when Railroads became much more efficient at running their business since their hands were no longer tied or atleast the ties were loosened.
The major regulatory changes that Staggers Act made are as follows:
* A rail carrier could establish any rate for a rail service unless there was no effective competition for that carrier.
* Rail shippers and rail carriers would be allowed to establish contracts subject to no review, unless the it was determined that the contract service would interfere with the rail carrier's ability to provide common carrier service.
* The scope of authority to control rates to prevent 'discrimination' among shippers was substantially curtailed.
* Across-the-board industry wide rate increases were phased out.
* The dismantling of the collective rate making machinery among railroads begun in 1976 was reaffirmed, with railroads not allowed to agree as to rates they, respectively, could perform on their own systems, and were not allowed to participate in the determination of the rates on traffic in which they did not effectively participate.
- source
And more recently, people have been more interested in using rails due to their cost efficiency and to an extent, their environmental image. GE is constantly improving their locomotives, making them more and more efficient. Also, diesel trucks require 3-4 times more diesel fuel to transport goods.
The catalysts for growth are in place. And the alternatives are less efficient.
A review of the top 4 railroads in terms of market cap is as follows.
BNI - Burlington Northern Santa Fe Corporation
Burlington North/Santa Fe through its subsidiary The Burlington Northern and Santa Fe Railway Company operates one of the largest railroad networks in North America. This vast network covers the western two-thirds of the United States stretching from major Pacific Northwest and Southern California ports to the Midwest Southeast and Southwest and from the Gulf of Mexico to Canada. Burlington Northern Santa Fe Corp. has a market cap of $27.28 billion; its shares were traded at around $78.85 with a P/E ratio of 14 and P/S ratio of 1.6. The dividend yield of Burlington Northern Santa Fe Corp. stocks is 1.9%. Burlington Northern Santa Fe Corp. had an annual average earning growth of 8.1% over the past 10 years.
Burlington Northern Santa Fe Corporation will present its third-quarter 2009 earnings on October 22, 2009 in a Webcast at 4:30 p.m. BNSF plans to issue its earnings press release at approximately 4 p.m. EDT.
BNI recently sold $750 million of senior notes. The original deal was increased from an originally planned $500 million. Barclays, Goldman Sachs, and Wells Fargo were the joint book running managers for the sale.
The following Gurus hold UNP
George Soros owns 55,900 shares as of the quarter that ended on 06/30/2009, which is 0.16% of the $2.61 billion portfolio of Soros Fund Management LLC.
Ron Baron owns 59,000 shares as of the quarter that ended on 06/30/2009, which is 0.04% of the $11.99 billion portfolio of Baron Funds.
Kenneth Fisher owns 982,838 shares as of 06/30/2009, which accounts for 0.29% of the $24.67 billion portfolio of Fisher Asset Management, LLC.
Prem Watsa owns 2,088,000 shares as of 03/31/2009, which accounts for 2.9% of the $5.21 billion portfolio of Fairfax Financial Holdings, Inc.
Warren Buffett owns 76,777,029 shares as of 06/30/2009, which accounts for 11.53% of the $48.95 billion portfolio of Berkshire Hathaway.
Chris Davis owns 224,224 shares as of 06/30/2009, which accounts for 0.03% of the $51.82 billion portfolio of Davis Selected Advisers.
Tweedy Browne owns 1,334,954 shares as of 06/30/2009, which accounts for 5.82% of the $1.69 billion portfolio of Tweedy Browne CO LLC.
Prem Watsa owns 2,088,000 shares as of 06/30/2009, which accounts for 2.95% of the $5.21 billion portfolio of Fairfax Financial Holdings, Inc.
Wallace Weitz owns 204,900 shares as of 06/30/2009, which accounts for 0.98% of the $1.54 billion portfolio of Weitz Wallace R & Co.
PRIMECAP Management owns 100,000 shares as of 06/30/2009, which accounts for 0.02% of the $48.26 billion portfolio of PRIMECAP Management.
Jean-Marie Eveillard owns 15,000 shares as of 06/30/2009, which accounts for 0.01% of the $8.91 billion portfolio of Arnhold & S. Bleichroeder Advisers, LLC.
UNP - Union Pacific Corporation
Union Pacific Corp. consists of one reportable segment rail transportation and the company's other product lines. The rail segment includes the operations of the corporation's wholly owned subsidiary Union Pacific Railroad Company and Union Pacific Railroad Company's subsidiaries and rail affiliates. The company's other operations include the trucking product line as well as the other product lines that include technology self-insurance activities corporate holding company operations and all appropriate consolidating entries. Union Pacific Corp. has a market cap of $29.51 billion; its shares were traded at around $57.38 with a P/E ratio of 13.9 and P/S ratio of 1.7. The dividend yield of Union Pacific Corp. stocks is 1.8%. Union Pacific Corp. had an annual average earning growth of 1.7% over the past 10 years.
Union Pacific is slated to release earnings on October 22, 2009.
One common indicator of the economy is to see what is going on with railroads since they connect the US together. In a recent statement, the Rob Knight (CFO) said that “We do see a few signs of hope" and that "Recent economic indicators point to continued stabilization".
The following Gurus hold UNP
Kenneth Fisher own 1,698,424 shares as of the quarter that ended on 06/30/2009, which is 0.36% of the $24.67 billion portfolio of Fisher Asset Management, LLC.
PRIMECAP Management owns 5,069,093 shares as of 06/30/2009, which accounts for 0.55% of the $48.26 billion portfolio of PRIMECAP Management.
David Williams owns 3,750,000 shares as of 06/30/2009, which accounts for 3.57% of the $5.47 billion portfolio of Columbia Value and Restructuring Fund.
Warren Buffett owns 9,558,000 shares as of 06/30/2009, which accounts for 1.02% of the $48.95 billion portfolio of Berkshire Hathaway.
Richard Aster Jr owns 278,000 shares as of 06/30/2009, which accounts for 0.73% of the $1.98 billion portfolio of Meridian Fund.
Tweedy Browne owns 1,490,783 shares as of 06/30/2009, which accounts for 4.6% of the $1.69 billion portfolio of Tweedy Browne CO LLC.
John Keeley owns 112,086 shares as of 06/30/2009, which accounts for 0.1% of the $5.82 billion portfolio of Keeley Fund Management.
NWQ Managers owns 4,772,861 shares as of 06/30/2009, which accounts for 1.68% of the $14.8 billion portfolio of NWQ Investment Management Co.
Dodge & Cox owns 699,358 shares as of 06/30/2009, which accounts for 0.05% of the $66.88 billion portfolio of Dodge & Cox.
Steve Mandel owns 1,951,597 shares as of 06/30/2009, which accounts for 1.38% of the $7.37 billion portfolio of Lone Pine Capital.
Jean-Marie Eveillard owns 37,500 shares as of 06/30/2009, which accounts for 0.02% of the $8.91 billion portfolio of Arnhold & S. Bleichroeder Advisers, LLC.
CNI - Canadian National Railway
Canadian National Railway Company a Canadian corporation operates the larger of Canada's two principal railroads and the only coast-to-coast railroad network in North America. The company's rail network serves major ports in Canada and includes strategic connections to the United States through the Chicago gateway Detroit and other major cities. Canadian National Railway Company Fully has a market cap of $22.52 billion; its shares were traded at around $47.51 with a P/E ratio of 15.1 and P/S ratio of 3.1. The dividend yield of Canadian National Railway Company Fully stocks is 2%. Canadian National Railway Company Fully had an annual average earning growth of 37.6% over the past 5 years.
Union Pacific is slated to release earnings on October 20, 2009.
On September 24, 2009, CNI announced the completion of the $100 million multi-year construction project to reconfigure and modernize its Memphis rail classification yard. “This project transformed an aged, inefficient rail yard into a state-of-the-art, effectively designed major terminal capable of handling existing and future traffic quickly and efficiently,” said CN executive vice-president Claude Mongeau, who will succeed retiring president and chief executive officer E. Hunter Harrison on Jan. 1, 2010. “Today's yard can handle nearly double the traffic the old facility could in a 24 hour period.”
The new Memphis yard is CN's second largest classification yard in the United States. It has a capacity of more than 3,100 freight cars with 45 tracks in the classification yard. It also has 12 receiving and departure tracks ranging in length from 5,000 to 10,000 feet. The revised operation can handle 35 or more freight trains per day.
The following Gurus hold CNI
George Soros owns 7,700 shares as of the quarter that ended on 06/30/2009, which accounts for 0.01% of the $2.61 billion portfolio of Soros Fund Management LLC.
Bill Gates owns 8,399,653 shares as of 06/30/2009, which accounts for 4.82% of the $7.49 billion portfolio of Bill & Melinda Gates Foundation Trust.
NSC - Norfolk Southern Corp.
Norfolk Southern Corp. a Virginia-based holding company owns two major freight railroads Norfolk Southern Railway Company and Norfolk Western Railway Company which operates in numerous states the District of Columbia and the Province of Ontario. (Company Press Release) Norfolk Southern Corp. has a market cap of $16.3 billion; its shares were traded at around $43.26 with a P/E ratio of 11.9 and P/S ratio of 1.6. The dividend yield of Norfolk Southern Corp. stocks is 3.1%. Norfolk Southern Corp. had an annual average earning growth of 9.7% over the past 10 years.
Regarding the green theme, note that NSC recently rolled out an electric locomotive for use in its Pennsylvania rail yard. NSC plans on later using a diesel electric hybrid locomotive for long haul trips.
More information on the electric locomotive can be found here:
http://www.nscorp.com/nscportal/nscorp/Media/News%20Releases/2009/batteries.html
The following Gurus hold NSC
Kenneth Fisher owns 2,243,531 shares in the quarter that ended on 06/30/2009, which accounts for 0.34% of the $24.67 billion portfolio of Fisher Asset Management, LLC.
Brian Rogers owns 500,000 shares in the quarter that ended on 06/30/2009, which accounts for 0.14% of the $13.63 billion portfolio of T Rowe Price Equity Income Fund.
David Dreman owns 70,420 shares as of 06/30/2009 which accounts for 0.08% of the $3.12 billion portfolio of Dreman Value Management.
Richard Aster Jr owns 9,300 shares as of 06/30/2009 which accounts for 0.02% of the $1.98 billion portfolio of Meridian Fund.
David Dreman owns 70,420 shares as of 06/30/2009, which accounts for 0.08% of the $3.12 billion portfolio of Dreman Value Management.
Richard Aster Jr owns 9,300 shares as of 06/30/2009, which accounts for 0.02% of the $1.98 billion portfolio of Meridian Fund.
Tweedy Browne owns 780,300 shares as of 06/30/2009, which accounts for 1.74% of the $1.69 billion portfolio of Tweedy Browne CO LLC.
PRIMECAP Management owns 1,575,442 shares as of 06/30/2009, which accounts for 0.12% of the $48.26 billion portfolio of PRIMECAP Management.
Warren Buffett owns 1,933,000 shares as of 06/30/2009, which accounts for 0.15% of the $48.95 billion portfolio of Berkshire Hathaway.
Jean-Marie Eveillard owns 17,500 shares as of 06/30/2009, which accounts for 0.01% of the $8.91 billion portfolio of Arnhold & S. Bleichroeder Advisers, LLC.
Dodge & Cox owns 14,950 shares as of 06/30/2009, which accounts for less than 0.01% of the $66.88 billion portfolio of Dodge & Cox.
