Warren Buffett’s investment company Berkshire Hathaway bought 7.85 million more shares of Burlington Northern Santa Fe Corp. (BNI) on Oct. 3. Today BNI was up 5.8%, and Berkshire gained $2,100 to $121,100.
Warren Buffett continues to add to his holdings with Burlington Northern Santa Fe Corp. (BNI). He bought 1.6 million shares on 08/07, and 1.4 million shares from 8/15 to 8/16 at prices around $76.5 and $78.96. He bought 10 million more shares of Burlington Northern Santa Fe Corp. (BNI) from 8/23 to 8/27 at prices around $80. After the recent purchases, Berkshire Hathaway owns more than 60 million shares of Burlington Northern Santa Fe Corp., which is about 17.2% of the company. His most recent purchases were from exercising options disclosed on Sept. 20.
As of the end of the second quarter, Warren Buffett has more than $50 billion in cash. Burlington Northern Santa Fe Corp. has a market cap of $28.5 billion, Buffett could buy out the whole company with half of the cash in hand. We have reported that Buffett also bought two other rail companies, Norfolk Southern Corp and Union Pacific Corp. It is not reported whether Warren Buffett added to these two companies, too. He has kept the information confidential.
It is interesting that Warren Buffett once said that derivatives are financial weapon of mass destruction. He has been using options to lower his purchasing cost of stocks.
With too much money in hands, Warren Buffett’s universe of investment choice is shrunken to large companies only. That is why he has been buying companies like Wal-Mart (WMT), Wells Fargo (WFC), US Bank (USB) etc. "I've got an elephant gun, I just can't find the elephant.” He said during an interview. His purchases of railroad companies surprised a lot of his followers initially. During the Berkshire annual meeting in May, Buffett said that railroad business would never be "sensational," yet its prospects had improve. Charlie Munger, Vice Chairman of Berkshire Hathaway, commented during the annual meeting of Wesco Financial (WSC), Buffett and he himself “used to not like them because they needed large amounts of capital, had tough unions, and stiff competition from the trucking business. The paradigm had shifted. Now the railroad industry has a competitive advantage by double-stacking freight. With all of the imports from China , the U.S. has a huge amount of freight being sent across the county.”
We have seen that Buffett is buying a lot more stocks these days than the past years. He spent $11 billion in the second quarter buying stocks. The recent market pullback, especially financial market pullback certainly gives him more opportunities. We will not be surprised if he makes big purchases again.
As we enter the fourth quarter, we will soon have the third quarter contest to guess what Warren Buffett has bought during the third quarter.