Burlington Northern Santa Fe Corporation (BNI), Up 13.96% Year to Date while S&P500 drops 10%
Warren Buffett keeps buying BNI over the past year. He bought BNI at the prices between $75 to $85. As of Jan., Berkshire owns more than 63 million shares, representing more than 18% of total shares outstanding.
Why railroad biz comes back? The chief reason that the railroads' long-term prospects look so good today is that they began upgrading their operations soon after the industry was largely deregulated in 1980.
It seems that BNI is/has/will be
1) consumer monopoly biz
2) increasing up trend in earning ( Net income increased 20% in 2 years)
3) Lots of debt ( 1.5 times revenue, 12 times net income) This item does not match the excellent biz criteria from the book.
4) Return on Equity 16% ( better than 12% )
5) Able to retain earning and make more money (productivity double since 15 years ago)
6) Not much needed to be spent to maintain its monopoly
7) Reinvest efficiently ( not yet study )
8) Can adjust the price based on inflation
9) Increased market value due to hard working from retained earning.
Questions:
A. can we use this list to examine our business?
B. Can you find another turn-around consumer monopoly biz? ( remember railroad biz used to need large amounts of capital, have tough unions, and stiff competition from the trucking business)
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