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Warren Buffett buys another million shares of Burlington Northern Santa Fe Corp.

January 16, 2008 | About:

Warren Buffett bought another million shares of Burlington Northern Santa Fe Corp. yesterday, according to the most recent filings of Berkshire Hathaway. Berkshire Hathaway continues buying Burlington Northern Santa Fe Corp. (BNI) in the first two weeks of 2008.

Warren Buffett continues to add to his holdings with Burlington Northern Santa Fe Corp. (BNI). In 2007 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 new year, he bought 1.7 million more shares. As of today, Berkshire owns 62.5 million shares of Burlington Northern Santa Fe Corp, which is about 17.8% of the company.

Buffett’s recent purchase prices are lower than he had paid during 2007, the recent stock market declines give him opportunities to reduce his cost basis and built more positions in the company. Today Burlington Northern Santa Fe Corp shares closed at $78.33, up 1.3%. The general market was slightly down.

As of the end of the third quarter, Warren Buffett had more than $50 billion in cash. Burlington Northern Santa Fe Corp. has a market cap of $27.6 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. He later sold both of them.

In some of his purchases, Buffett used options to buy the stocks. 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. 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 entered the new year, we will soon have the quarterly contest to best guess what Warren Buffett has bought during the fourth quarter of 2007.


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