BloggingStocks

My best stock ideas: Looking through Q2 and into the second half of 2008

Gary E. Sattler — 2008-04-25T14:45:00+00:00

Filed under: Forecasts, Apple Inc (AAPL), Dell (DELL), General Electric (GE), Wal-Mart (WMT), Home Depot (HD), Altria Group (MO), Commodities, Stocks to Buy, Burlington Northern Santa Fe (BNI)

I've received a few chuckles for investment directions I've suggested in the past, but if you care to review a couple of my previous generalities, I believe that my record has held up fairly well.

I submit for approval the following investment angles for the balance of 2008 and possibly beyond:

Have I suggested investments in water holdings? Yes, I do believe that I have. I believe that going long in water stocks could be an investment hedge of the decade. I also suggest a look into the desalination technology from General Electric Co. (NYSE: GE).

I'd think it's a good idea to stick with the railroads, such as Burlington Northern Santa Fe (NYSE: BNI). I claim that, with all things given, for now, railroads can't fail. Conversely, I think it's a good time to back away slowly from trucking. I think misery lies ahead there.

In retail, for investors who haven't already, I believe that it's time to exit the high end sector. Shorts sellers can probably clean up nicely on the way out. I'd look for the specialty retail stocks which are artificially high and consider shorting them now. It may be prudent to move retail bets to companies such as, Wal-Mart Stores Inc. (NYSE: WMT) for it's incredible staying power, and Overstock Com Inc., (NASDAQ: OSTK) for it's much maligned growth potential. Both these stocks could benefit greatly from the tightening consumer spending environment.

Oats and rice are ticking up, but the best rice boat may have already sailed. I'd stick with these and other commodity grains as strong short term plays, pulling the profits as contracts expire. Then I'd consider returning the initial investment for another go around. I'd play the companies which consume grain commodities with a light hand. Profits will be stretched as commodities continue to surge. One possible exception might be Altria Group Inc.(NYSE: MO), which has been beaten down badly. However, I wouldn't get caught with all my eggs in that one basket.

I fear that it may be time to back out of consumer electronics, except possibly for Apple Inc.(NASDAQ: AAPL) and Dell Inc. (NASDAQ: DELL). Yes, mobile devices are going to keep moving but I don't think there will be much profit growth there for a while. Gaming devices are still selling strong but I think their profitability is going the way of the albatross. Heavy research is required in this sector. There's not much "cutting edge" going on which I consider worthy of extra attention.

Someone will hate me for this, but I say that it's time to exit gold. Do we really need to suffer though yet another bubble burst? Smart working capital is going into real consumables. Gold is fast becoming a well oiled trap, in my humble opinion.

There may be some good speculative plays in the home improvement sector on stocks which have totally bottomed out. People are going to be staying close to home for awhile. It might be the right time to take advantage of that.

Gary Sattler is a freelance blogger with no professional stock-picking credentials (which may be an asset, depending on your point of view). With the possible exception of Overstock.com, via Vanguard Capital Management, he does not knowingly have interest in the companies mentioned in this blog post.

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As wider audience discovers U.S. railroads, perhaps you should, too

Joseph Lazzaro — 2008-04-21T17:44:00+00:00

Filed under: Stocks to Buy, Burlington Northern Santa Fe (BNI), Norfolk Southern Corp. (NSC), Union Pacific Corporation (UNP)

When a major, metropolitan U.S. newspaper discovers a investment trend or a hot sector, count on increased share demand for companies in the sector. When that paper is one of the top three dailies, in this case The Washington Post, count on even more demand.

On Monday, The Washington Post examined the resurgence of the United States' railroad sector, touching on many of the themes discussed here during the past six months, and described why the rails' services are likely to be in demand for many years.

Is it too late to get in on a rail play? Hardly. P/Es are higher, so entry point is key, hence with the above in mind, here's a revised review of the rails, with the updated Sell / Stop Loss levels. They're ranked by risk, with the top stock, BNI, being the lowest risk.

Burlington Northern (NYSE: BNI), first reviewed at $89, p/e 17. Stop Loss: $56. Current Price: $99, p/e 20. Revised Stop Loss: $72.

Union Pacific (NYSE: UNP), first reviewed at $129, p/e of 19. Stop Loss: $84. Current Price: $137, p/e 20. Revised Stop Loss: $97.

Norfolk Southern (NYSE: NSC), first reviewed at $52, p/e 14. Stop Loss: $33. Current Price: $61, p/e 17. Revised Stop Loss: $42.

CSX Corp. (NYSE: CSX), first reviewed at $42, p/e 16. Stop Loss: $27. Current Price: $60, p/e 20. Revised Stop Loss: $42.

Canadian Pacific (NYSE: CP), first reviewed at $66, p/e 14. Stop Loss: $44. Current Price: $71, p/e 12. Revised Stop Loss: $48.

Railroad stocks were out of favor on Wall Street for the longest time. After World War II, auto travel spelled the decline of civilian rail transport, and in the 1960s truck transport displaced trains as the primary freight transport method.

The rails were about set to fade into oblivion when history finally started to swing in the rails' favor. In the 1990s, the Cold War ended, and globalization started. Emerging markets became new buyers of commodities and raw materials, and railroads added new international customers. Meanwhile, the price of oil began its decade-long march higher in 2001, to the record level of $117 per barrel this year, making container transport by rail cheaper in most instances than truck transport. And suddenly, the rails had new domestic customers for finished goods, to go along with its commodity transport business.

The risks: This is not to say owning a railroad stock does not involved risks. The rails remain vulnerable to a sustained downturn in the U.S. and/or global economies, and also vulnerable to the development of a cheap, widely-available, alternate fuel source for trucks.

But absent the above, the prospects look good for the rails, long-term. Even better, urban highway congestion projections suggest that rails will play a large role in inter-city goods transport: it's hard for trucks to get goods to their destination quickly when the highways are jammed.

Or, as the late, great comedian Alan King used to say, "Why do they call it rush hour on the highways when nothing moves?"

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.

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Stocks insiders love, best blue chip stocks today & retirement wake-up call - Today in Money 4/9

Allan Halprin — 2008-04-09T08:46:00+00:00

Filed under: Hewlett-Packard (HPQ), General Electric (GE), Walt Disney (DIS), Citigroup Inc. (C), Money and Finance Today, Boeing Co (BA), Boston Scientific (BSX), Circuit City Stores (CC), duPont(E.I.)deNemours (DD), United Parcel'B' (UPS), Electronic Arts (ERTS), AMR Corp (AMR), Dow Chemical (DOW), EMC Corp (EMC), Delta Air Lines (DAL), Burlington Northern Santa Fe (BNI)

In the News:

· Boeing Delays Initial Dreamliner 787 Deliveries Until 3Q of 2009

· Delta, Northwest Airlines Could Announce Merger Next Week

· UPS Says 1Q Was Rough; Cuts Outlook

· Citi May Unload $12 Billion in Loans

· American Airlines Cancels Hundreds More Flights

· EMC to Buy Zip Drive Maker Iomega for $213M

· Circuit City Surprisingly Swings to Profit

· Grand Theft Auto IV: The Game Is On Between EA & Take-Two

· Disney to Release 10 New Animated Films Through 2012

· Protests Could Hurt Olympic Sponsors

5 Stocks Insiders Love
If corporate managers and directors are buying their company's stock, maybe you should, too. They include Boston Scientific, Hanesbrands, Dow Chemical, McMoRan Exploration and Synaptics.
Five Stocks Insiders Love - Kiplinger.com

Best Blue Chips for This Market
The best way to boost your long-term returns is to buy when prices are cheap - and here are 5 excellent bargains -- 3M, DuPont, General Electric, Hewlett-Packard and Burlington Northern Santa Fe.
The best blue chips for this market - CNNMoney.com

Retirement Wake-Up Call
New survey finds that Americans are having doubts about how to pay for their golden years. Only 18% of workers polled were very confident about saving enough money for a comfortable retirement. That's the steepest annual decline in the survey's 18-year history, and down sharply from 27% in the previous year.
Survey: Americans more worried about retirement savings - CNNmoney

10 Tips to Keep Tax Returns Safe From Theft
As millions of Americans scramble to file their tax returns, the Internal Revenue Service is deflecting concerns that its computer network is flawed, leaving sensitive taxpayer information open to wrongdoers. Here are 10 tips that are strongly recommend to taxpayers to keep your returns safe.
Ten tips to protect your tax returns as IRS confronts own flaws - MarketWatch

Save Money on Prescriptions
Do your drugs cost too much? Find out how to get well for less.
Save Money on Prescriptions - Kiplinger.com

Best in Auto Repair Service
Many drivers wonder whether to take their cars to a dealership or to an independent shop for repairs and maintenance. Dealerships tout that they're specialists and trained specifically for a certain brand of car. But independents are generally less expensive. How to decide? According to a recent survey of car owners by the Consumer Reports National Research Center new information shows that independent shops generate a higher level of overall satisfaction than dealerships.
ConsumerReports.org - Auto service: Owners prefer independents
Best Repair Satisfaction
Best Maintenance Satisfaction

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Burlington Northern (BNI) is the transportation sweet spot

Joseph Lazzaro — 2008-04-01T15:48:00+00:00

Filed under: Commodities, Agriculture, Stocks to Buy, Burlington Northern Santa Fe (BNI)

For nearly 30 years, the rails, long neglected in the United States, were considered passé. Then the globalization era dawned, with its exports and demand for commodities. Add a price of oil that's basically risen for 10 years and the results is: the rails are back. And with the above in mind, Burlington Northern (NYSE: BNI) is worth an evaluation.

With 32,000 miles of track in the western U.S. and two Canadian provinces, Burlington Northern accounts for about 45% of the west's traffic and about 23% of U.S. rail traffic.

Analysts see 2008 revenue growth of about 6-8%, down from double-digit growth a year earlier, but still healthy. Margins should remain solid, with modest pricing power. The Reuters F2008/F2009 EPS consensus estimates for BNI are $5.92/$6.81.

Even better: like the three other major U.S. railroads, BNI is in a relative sweet spot until the United States determines its energy policy for the 21st century. Or should one say 'if the United States determines its energy policy for the 21st century.' Investors will carefully note that the value Wall Street attaches to rail stocks pretty much mirrors the price of oil's ascent, due to the higher truck transportation costs implied by a higher price of oil.

The risks? Slower global growth would hurt BNI's results. Analysts are also keeping an eye on BNI's pricing power.

The First Call mean rating for BNI is Buy (16 firms), and the mean 2008 target is $96.00 (high: $105, low: $87).

Stock Analysis: Burlington Northern is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than two years should be rewarded from BNI's shares. Note: More-cautious investors may wait for BNI to pull-back to $91, but keep in mind BNI's shares may not retreat to that level. Consider a stop loss of $68 if you were to purchase shares in this company.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.

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CSX Corporation (CSX): Shares cycling in bullish 'flag' formation

Larry Schutts — 2008-03-20T11:50:00+00:00

Filed under: Analyst upgrades and downgrades, Good news, Technical Analysis, Stocks to Buy, Burlington Northern Santa Fe (BNI), Norfolk Southern Corp. (NSC), Union Pacific Corporation (UNP)

CSX Corporation (NYSE: CSX) is one of the nation's leading transportation companies, providing rail, intermodal and rail-to-truck transload services. The company's transportation network spans approximately 21,000 miles, with service to 23 eastern states and the District of Columbia. It connects to more than 70 ocean, river and lake ports. The company also has operations in real estate, resort management and equipment leasing. Burlington Northern (NYSE: BNI), Norfolk Southern (NYSE: NSC) and Union Pacific (NYSE: UNP) are competitors.

The firm pleased investors early this week, when it issued upside earnings guidance. Management now sees Q1 EPS of 70-73 cents, versus Street consensus of 63 cents. It also expects FY08 EPS of $3.36-$3.56, versus consensus of $3.05. The company boosted long-term guidance through 2010, anticipating compound annual growth in operating income of 13-15% over Y07 (10-12% prior guidance) and compound annual growth in EPS of 18-21% over Y08 (15-17% prior guidance). UBS subsequently upgraded the shares from "neutral" to "buy" and raised its price target to $66.

The stock popped into a bullish "flag" consolidation pattern on the news. Prices frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Brokers recommend the issue with three "strong buys", one "buy", nine "holds" and two "underperforms". Analysts see a 17% average annual growth rate, through the next five years. The CSX PEG ratio (1.19), Price to Cash Flow ratio (10.45), EPS Growth rate (49.12%), Operating Margin (22.49%) and Net Profit Margin (12.22%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 80% of the outstanding shares. The stock is one of those used to calculate the Dow Jones Composite and the Dow Transportation Index. Over the past 52 weeks, it has traded between $37.74 and $55.00. A stop-loss of $45.60 looks good here. Note that the firm is expected to announce Q1 results on April 16th, before the open.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.

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Rails and trucks: A look at two Buffett stocks

Steven Halpern — 2008-02-20T11:38:00+00:00

Filed under: Berkshire Hathaway (BRK.A), Newsletters, Commodities, Oil, Agriculture, Stocks to Buy, Burlington Northern Santa Fe (BNI)

With Warren Buffett in the news recently, it is timely to look at a recent report from Paul Tracy, highlighting some of the best-positioned stocks currently held by Berkshire Hathaway (NYSE: BRK.A) -- Burlington Northern Santa Fe (NYSE: BNI) and WABCO Holdings (NYSE: WBC).

Here, the editor of StreetAuthority Market Advisor explains, "Buffett looks for such factors as intrinsic value, low debt, managerial expertise, a margin of safety and an 'economic moats' that offers some sort of sustainable competitive advantage." Here's a pair of transportation stocks that fit the bill.

"While many investors fret over the current volatility in the stock market, Warren Buffett is likely busy looking for value. Historically, in volatile up and down markets, Buffett has found even more opportunities than in raging bull markets."

"Burlington Northern Santa Fe is the second-largest railroad in the U.S. Berkshire holds an 18.2% stake in BNI, recently boosting that stake by purchasing 11 million shares to bring its total ownership to more than 63 million shares. Buffett has made no secret of his desire to purchase more of the stock.

"The key to discerning competitive advantages between the major railroad firms lies in the strategic location
of their networks. Specifically, BNI has the largest network of track in a region of the western U.S.
known as the Powder River Basin, which is home to America's largest reserves of coal.

"Burlington Northern Santa Fe has picked up the lion's share of the coal shipping market for the Powder River Basin. It would be next-to-impossible for competitors to build an equivalent network in the region. In short, BNI's economic moat is wide.

"Investors often avoid the rails during economic downturns, but BNI's exposure to less cyclical business lines such as the transport of coal and agricultural products is sheltering it from the slowdown in the U.S. economy. Berkshire has been taking advantage of recent depressed prices to add to its stake in Burlington Northern.

"WABCO makes braking systems, suspension systems and transmission controls for commercial vehicles like trucks, buses and trailers. The firm operates mainly at the high-tech end of the industry, making advanced compressed air braking systems and electronic components used to aid drivers and automate functions rather than commodities like brake pads or discs.

"WBC is a new position for Buffett. Berkshire recently showed purchases of some 2.7 million shares, equivalent
to nearly 4% of the company's outstanding stock.

"WABCO has two primary avenues of growth: increasing penetration of existing products and expansion into
new markets. To the first point, in Europe the advanced control systems WBC makes account for about 2.5%
of the average truck's value. In the U.S., Japan and Korea, the average is closer to 1%. And in China and Eastern Europe, it's less than 0.5%.

"Part of this is due to EU mandates concerning electronic stability controls on trucks and busses. But there
are also other reasons -- such controls can improve the operating efficiency and service life of commercial
vehicles. This has long been an issue in Europe, famous for its sky-high fuel and labor costs.

"But in a period of high energy prices and high costs for experienced drivers and raw materials, enhanced
efficiency can mean major cost savings in all countries. As trucking firms in these nations strive to enhance efficiency, WBC's penetration in all markets should rise toward European levels.

"Moreover, WBC has established a sales force in China and has a joint venture to tackle the Indian market. And of course, Eastern Europe is a logical growth market for WBC; the company's existing commanding presence in Western Europe gives it an advantage.

"The stock trades at 11 times estimated 2008 earnings and sports a long-term growth rate of around +10%. The stock has been hit recently over fears a slowing global economy will slow sales, but WABCO's long-term growth story is still intact. Like Buffett, we feel the stock offers strong global growth potential at a bargain price."

Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.

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Earnings highlights: Exxon, Boeing, Halliburton, Sony, UPS, Honda and others

Trey Thoelcke — 2008-02-02T12:40:00+00:00

Filed under: Earnings reports, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO), Exxon Mobil (XOM), Halliburton (HAL), Sony Corp ADR (SNE), Boeing Co (BA), United Parcel'B' (UPS), U.S. Steel (X), Dow Chemical (DOW), Valero Energy (VLO), JetBlue Airways (JBLU), Burlington Northern Santa Fe (BNI), Raytheon Company (RTN)

The earnings crunch is in full swing, and here are a few of the highlights of this past week's earnings coverage from BloggingStocks:

Airgas Inc. (NYSE: ARG) beat expectations and raised its guidance.
Boeing Co. (NYSE: BA) beat estimates and said the 787 Dreamliner was on schedule.
Burlington Northern Santa Fe Corp. (NYSE: BNI) fourth-quarter profits fell on rising fuel costs.
Crane Co. (NYSE: CR) beat expectations and raised its guidance.
Dow Chemical Co. (NYSE: DOW) profits fell due to rising costs of raw materials.
Exxon Mobil Corp. (NYSE: XOM) posted the largest annual and quarterly profit ever by a U.S. company.
Halliburton Co. (NYSE: HAL) beat earnings expectations due to strong international growth.
Honda Motor Co. (NYSE: HMC) posted record earnings for the third quarter on demand for fuel efficiency.
JetBlue Airways Corp. (NASDAQ: JBLU) posted a narrower-than-expected loss.
Nissan Motor Co. (NASDAQ: NSANY) posted strong results due in part to U.S. sales of the Rogue.
Occidental Petroleum Corp. (NYSE: OXY) fourth-quarter profit surged, leading to its best yearly results ever.
Paraexel International Corp. (NASDAQ: PRXL) beat estimates and offered revised guidance.
Ratheon Co. (NYSE: RTN) posted strong fourth-quarter results and offered optimistic guidance.
RightNow Technologies Inc. (NASDAQ: RNOW) posted a loss, though revenues were up.
Sony Corp. (NYSE: SNE) posted solid results on TV sales and the game division's return to the black.
Stanley Works (NYSE: SWK) posted solid results despite the housing slump due to strength overseas.
United Parcel Service Inc. (NYSE: UPS) met earnings estimates due to a pension-related charge.
US Steel Corp. (NYSE: X) fourth-quarter and full-year profits declined on acquisition costs and job cuts.
Valero Energy Corp. (NYSE: VLO) beat expectations despite a profit decline of 49%.

For additional BloggingStocks earnings highlights, see Yahoo!, Google, Amazon, Countrywide, Merck, UBS and others and McDonald's, Kraft, P&G, Verizon, MasterCard, 3M and others.

Also, in the wake of earnings reports from Yahoo! (NASDAQ: YHOO) and Google (NASDAQ: GOOG), Microsoft Corp. (NASDAQ: MSFT) made a move for Yahoo! Rumor has Google going after AOL in response. Meanwhile, Timothy Sykes has some advice for buying stocks ahead of earnings reports.

Upcoming results to watch for include Archer Daniels Midland (NYSE: ADM), Yum Brands (NYSE: YUM), Walt Disney (NYSE: DIS), Cisco Systems (NASDAQ: CSCO), Time Warner (NYSE: TWX), and PepsiCo. (NYSE: PEP).

Visit AOL Money & Finance for more earnings coverage.

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Tuesday earnings recap: JetBlue and Burlington Northern

Trey Thoelcke — 2008-01-29T18:40:00+00:00

Filed under: Earnings reports, JetBlue Airways (JBLU), Burlington Northern Santa Fe (BNI)

Among the companies reporting on Tuesday were JetBlue Airways Corp. (NASDAQ: JBLU) and Burlington Northern Santa Fe Corp. (NYSE: BNI).

JetBlue reported a narrower-than-expected loss in the fourth quarter, and its first full-year profit in three years. It also announced that it's negotiating a deal with investor Deutsche Lufthansa AG.

JetBlue lost $4 million, or 2 cents a share, in the quarter ending December 31. It posted a profit of $17 million, or 10 cents a share, in the same quarter of 2006. An increase in traffic and operational improvements helped offset rising fuel costs. Revenue rose 16.6% to $739 million. Analysts surveyed by Thomson Financial had expected a loss of 5 cents a share on revenue of $731 million.

For the full year, JetBlue earned $18 million, or 10 cents a share, versus a loss of $1 million, break-even on a per-share basis, in 2006. Revenue jumped 20.2 percent to $2.84 billion. Wall Street had expected a 2007 profit of 7 cents per share on revenue of $2.83 billion.

Shares surged 20.24%, or $1.00, to close at $5.94. Shares had fallen to a 52-week low of $4.30 last week.

Burlington Northern's fourth-quarter earnings fell as higher fuel costs dragged down record freight revenue. The company reported earnings of $517 million, or $1.46 per share, in the fourth quarter, compared to a profit of $519 million or $1.42 per share a year ago, when more shares were outstanding. Revenue climbed 9% to $4.24 billion, on strong demand for shipping coal and agricultural goods. Analysts polled by Thomson Financial had expected fourth-quarter earnings of $1.39 per share on revenue of $4.06 billion.

For all of 2007, Burlington Northern earned $1.83 billion, or $5.10 per share, on revenue of $15.80 billion. Analysts had forecast earnings of $5.15 per share. In 2006, the company earned $1.89 billion on $14.99 billion revenue.

The company predicted that earnings per share would grow by double digits in 2008, partly due to reduced spending on expansion, but also warned that demand could shrink if the economy slows further.

Shares rose 1.8% on Tuesday to close at $84.65.

Visit AOL Money & Finance for more earnings coverage.

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Analyst upgrades: Molson Coors, Knightsbridge Tankers, Railroad sector

Eric Buscemi — 2008-01-23T12:11:00+00:00

Filed under: Analyst upgrades and downgrades, duPont(E.I.)deNemours (DD), Burlington Northern Santa Fe (BNI)

MOST NOTEWORTHY: Molson Coors, Knightsbridge Tankers and the Railroad sector were today's noteworthy upgrades:

Banc of America upgraded shares of Molson Coors (NYSE: TAP) to Buy from Neutral as they believe the company's joint venture with SABMiller (OTC: SBMRY) could nearly double North American profits and that risks are largely priced in shares.
Jefferies upgraded shares of Knightsbridge Tankers (NASDAQ: VLCCF) to Buy from Hold on valuation and finds the dividend yield attractive at 12.4%.
Bear raised the Railroad Sector to Overweight from Market Weight. The firm upgraded Burlington Northern Santa Fe (NYSE: BNI), Canadian National Railway (NYSE: CNI) and Union Pacific (NYSE: UNP) to Outperform from Peer Perform citing valuations and the belief that rail volumes are close to a bottom.

OTHER UPGRADES:

Morgan Stanley upgraded Royal Bank of Scotland (NYSE: RBS) and HSBC Holdings (NYSE: HBC) to Equal Weight from Underweight.
Goldman upgraded China Unicom (NYSE: CHU) to Buy from Neutral.
Deutsche raised DuPont (NYSE: DD) to Buy from Hold.

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Chasing Value: Scratch Berkshire Hathaway from the 2008 list

Sheldon Liber — 2007-12-27T14:47:00+00:00

Filed under: Berkshire Hathaway (BRK.A), China, Top Picks 2007, PetroChina Co Ltd ADR (PTR), Chasing Value, Burlington Northern Santa Fe (BNI)

Hey, I admit that I am infatuated with this company and the guy who runs it, Warren Buffett, I just think it has had a good run and I am a watcher at this point, not a buyer. Berkshire Hathaway Inc. (NYSE: BRK.B) was a strong candidate for inclusion on my 2008 buy list, but today is not the day.

I have written volumes about why BRK.B should be included in new portfolios and is a must on every watchlist, but I just do not see it as the bargain I did when I was promoting it at the $3,600 level. Although it does not pay a dividend, most of its stock holdings do, and Warren Buffett has been the gold standard for creating shareholder equity. If 2008 proves to be a shakey year on Wall Street, you may want to own this stock. That however, will be a reflection of the economy more than stock value.

This week it was announced Berkshire Hathaway executed a $4.5 billion buyout of Marmon. Berkshire has done a lot of buying this year. One example being its 8% stake in Burlington Northern Santa Fe (NYSE: BNI) railroad, reportedly now the largest shareholder. At the same time it has been selling other positions and completed its exit from PetroChina Co LTD ADR (NYSE: PTR) prior to a major pullback in Chinese stocks. Berkshire recognized huge gains from this sale, and it is reflected on the company's bottom line.

I think the major buying activity that Buffett engaged in during 2007 is more likely to be appreciated in late 2009 and 2010 after an absorption period. Given that the stock is currently trading at a P/E of 18.68, my money says 2008 will be flat as profits and increased return on equity are realized and the P/E moves lower to more traditional levels, usually less than the S&P average.

In a recent story when Berkshire reached new highs and was up 35% on the year, I posted Chasing Value: Berkshire Hathaway did what it's supposed to do -- go up! I have nothing bad to say about this stock, but it has had a huge run-up to an all-time high and seems like it has been given full credit for all its virtues. A repeat performance would be hard to envision. Yesterday it closed at $4,570, about 8.5% off its high. If the stock pulls back a little further, I might be a buyer again below $4,200 -- stay tuned, the opportunity may arise. In the meantime, keep watching the stock and "my pal Warren." The education is a far greater value than the stock.

To find potential opportunities and verify my track record, read Chasing Value or Serious Money.

DISCLOSURE: I currently own shares of BRK.B, and PTR.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm.

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Always lost at Monopoly? Re-coop with a railroad stock

Joseph Lazzaro — 2007-12-05T17:55:00+00:00

Filed under: Competitive strategy, Commodities, Agriculture, Burlington Northern Santa Fe (BNI), Norfolk Southern Corp. (NSC), Union Pacific Corporation (UNP)

Readers of this space know that the preference here is for large cap companies, with demonstrated business models, and favorable long-term factors, that have the resources to ride-out short-term economic downturns, including recessions.

And in this category a railroad stock represent a prudent addition to a portfolio, for investors who can tolerate moderate risk.

Pick a railroad. Virtually any railroad. Odds are, you will do fine, long-term, as the nation continues to re-discover the valuable asset - - the national treasury, really - - of its railroads. (More on that latter topic, in a future blog.)

Here are the railroad plays, ranked by risk, with the top stock, BNI, being the lowest risk. A stop/loss, if one were to buy the stock, is also listed:
Burlington Northern Santa Fe Corporation (NYSE: BNI) $89, p/e 17. Stop Loss: $56.
Union Pacific Corporation (NYSE: UNP) $129, p/e of 19. Stop Loss: $84.
Norfolk Southern Corp. (NYSE: NSC) $52, p/e 14. Stop Loss: $33.
CSX Corporation (NYSE: CSX) $42, p/e 16. Stop Loss: $27.
Canadian Pacific Railway Limited (NYSE: CP) $66, p/e 14. Stop Loss: $44.

As most investors/readers know, the railroad stocks were out of favor on Wall Street for the longest time. After world war II, auto travel spelled the decline of civilian rail transport, and truck transport displaced trains as the primary freight transport method.

The rails were seemingly about set to fade into oblivion when history finally started to swing in the rails' favor late in the last century. In the 1990s, the Cold War ended, and globalization started. Emerging markets became new buyers of commodities and raw materials, and railroads added new international customers. Meanwhile, the price oil began its decade-long march higher, to near-record levels this year, making container transport by rail cheaper in most instances than truck transport. And suddenly, the rails had new domestic customers for finished goods, to go along with its commodity transport business.

The risks: This is not to say owning a railroad stock does not have risks. The rails remain vulnerable to a sustained downturn in the U.S. and/or global economies, and also vulnerable to the development of a cheap, widely-available, alternate fuel source for trucks.

But absent the above, the prospects look good for the rails long-term. Even better, urban highway congestion projections suggests that the rails will play a large role in inter-city goods transport: It's hard for trucks to get goods to their destination quickly when the highways are jammed.

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The continental rationale for BNI's shares

Joseph Lazzaro — 2007-11-28T11:00:00+00:00

Filed under: Commodities, Agriculture, Stocks to Buy, Burlington Northern Santa Fe (BNI)

To say the bears on Wall Street have gained some momentum in late November 2007 would be an understatement.

The consensus now argues that U.S. GDP growth has slowed substantially, with growth likely to remain sub-par through at least June 2008, and the Dow's 1,400-point drop in about a month reflecting that consensus.

Nearly every sector looks vulnerable. Still, some sectors are faring reasonably well. The rails are one, and among the rails, Burlington Northern (NYSE: BNI) is worth an evaluation.

For nearly 30 years, the rails -- long neglected in the United States -- were considered passé. Then the globalization era dawned, along with its exports and demand for agricultural products and coal. Add intermodal shipments and a price of oil that's basically risen for ten years and the results is - the rails are back.

With 32,000 miles of track in the western U.S. and two Canadian provinces, Burlington Northern accounts for about 45% of the west's traffic and about 23% of U.S. rail traffic.

Analysts see 2008 revenue growth of about 7-9%, down from double-digit growth earlier this decade, but still healthy. Margins should remain solid, with modest pricing power. The Reuters F2007/F2008 EPS consensus estimates for BNI are $5.21/$5.90.

Even better: Like the three other major U.S. railroads, BNI is in a relative sweet spot until the United States determines its energy policy for the 21st century. Investors/readers will carefully note that the value Wall Street attaches to rail stocks pretty much mirrors the price of oil.

That's because Wall Street knows that if the price of oil, currently high, moves to ridiculous levels, there's not much else that can move goods around the country if trucks can't cost-effectively do so, except the rails. It's not like Europe, where they move goods 200 kilometers here, 80 kilometers there; in the U.S., it's more like 1,000 miles (or longer), which, in the era of elevated energy prices, is good news for BNI.

The First Call mean rating for BNI is: Buy [17 firms]. Mean 2008 target: $94.30 [high: $105, low: $86].

Stock Analysis: Burlington Northern is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than two years should be rewarded from BNI's shares. Appropriate Sell / Stop Loss for the shares in this company could be $56.

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Option update 11-27-07: Railroads' volatility higher on growth concerns

Paul Foster — 2007-11-27T10:08:00+00:00

Filed under: Options, Burlington Northern Santa Fe (BNI), Union Pacific Corporation (UNP)

Union Pacific (NYSE: UNP), a leading transportation company, closed at $120.92. UNP overall option implied volatility of 33 is above its 26-week average of 29 according to Track Data, suggesting larger price risks.

Burlington Northern (NYSE: BNI), an operator of 32,000 railroad route miles, closed at $80.77. BNI overall option implied volatility of 34 is above its 26-week average of 29 according to Track Data, suggesting larger price fluctuations.

Canadian National (NYSE: CNI) closed at $46.36. CNI overall option implied volatility of 33 is above its 26-week average of 26 according to Track Data, suggesting larger price fluctuations.

Daily Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

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CSX: The railroad that thinks it can

Zack Miller — 2007-11-19T09:33:00+00:00

Filed under: SEC filings, Press releases, Commodities, Burlington Northern Santa Fe (BNI)

After learning that Warren Buffett, the value investor's equivalent of A-Rod, was putting his money into U.S. Railroad firm, Burlington Northern Santa Fe (NYSE: BNI), railroad stocks suddenly became trendy. Driven by increasing consumption for commodities and transportation services, railroads have been targets for value investors for a long time. Buffett's investment put the industry back on the investment map.

So, it wouldn't be surprising to see that hedge funds are playing the same hand. CSX Corp. (NYSE: CSX), a large integrated transportation company servicing everything from ports, trucks and rails, has been in the news lately as the target of an activist hedge fund based out of London, named the Children's Investment Fund.

The fund, started in 2003 by Chris Hohn, has been very active and successful in extracting shareholder value from a variety of situations. It forced the resignation of the Deutsche Borse CEO after he refused to abandon his plan to take over the London Stock Exchange.

It seems like the CIF hit a snag with CSX, though.

In response to the Fund's demands, CSX accepted none of them. In a great response sent by the CSX Board to TCI, management makes a strong case. You can read the letter here.

The company claims:

CSX Surface Transportation comparable operating income has nearly doubled since the current management team took charge in 2004, while productivity and revenue initiatives during that period have improved the operating ratio to its best level in a decade.
In the same period, shareholders have benefited from a stock price that has risen nearly 150 percent. CSX shares have significantly outperformed all major North American railroads and the broader market.
Also in this period, safety and customer service levels have improved dramatically, as indicated by 25 percent to 50 percent improvements in most key safety and service measurements.
CSX and its advisers have held numerous discussions with TCI and corresponded with them on its ideas. The board has frequently, actively and independently assessed TCI's proposals.

The letter is a great read and insight into the dynamic between activist investors and the companies into which they invest.

Who's right? I don't know. CSX has performed pretty well and the letter makes a good case for management's position. Could it have done better? Perhaps, and maybe with TCI looking closely over its shoulder, they will continue to perform. The interesting situation is that frequently activist investors make their presence felt even without extracting any concessions from managment. The oversight is, in and of itself, an extractor of value.

The best part of the whole back-and-forth was how CSX's Board signed its response to TCI:

Very truly yours,
The CSX Corporation Board of Directors

Gotta love it.

Zack Miller is the lead equity analyst for America Israel Investment Associates, LLC., the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund. Author holds no positions in the stocks mentioned above.

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Newspaper wrap-up: Kohl's to announce partnership with Fila

Eric Buscemi — 2007-11-13T08:45:00+00:00

Filed under: Newspapers, Magazines, Berkshire Hathaway (BRK.A), Kohl's Corp (KSS), News Corp'B' (NWS), Burlington Northern Santa Fe (BNI)

MAJOR PAPERS:

The Wall Street Journal reported that Berkshire Hathaway Inc (NYSE: BRK.A) chair Warren Buffett is in a position to help companies like Ambac Financial Group Inc (NYSE: ABK) and MBIA Inc (NYSE: MBI), possibly providing relief amid the credit market turmoil; sources speculate the company could also get into the bond-insurance business.
Retailer Kohl's Corporation (NYSE: KSS) is today expected to announce an exclusive multi-year active wear licensing partnership with Fila Luxembourg S.a.r.l., a part of Fila Korea, according to the Wall Street Journal.
According to a senior executive at Telefonica SA (NYSE: TEF), the company's efforts to obtain exclusive control of Vivo have stalled, the Financial Times reported.
CEOs of CSX Corporation (NYSE: CSX), Union Pacific Corporation (NYSE: UNP) and Burlington Northern Santa Fe Corporation (NYSE: BNI) told the Financial Times that if any of the new four bills to regulate rates, that are currently being debated in congress, becomes law, accelerating investment in U.S. railroads' capacity could come to a halt.

OTHER PAPERS:

News Corp's (NYSE: NWS.A) Rupert Murdoch said the company plans to replace nearly one million paid subscribers of the online Wall Street Journal with 10-15 million "who wouldn't pay a thing." Murdoch's long-term plan is to penetrate developing markets, The Australian reported.

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Analyst downgrades: ABT, BCS, SNDK, MSW and TXN

Eric Buscemi — 2007-10-11T11:10:00+00:00

Filed under: Analyst reports, Analyst upgrades and downgrades, Abbott Laboratories (ABT), Texas Instruments (TXN), Barclays plc ADS (BCS), SanDisk Corp (SNDK), Burlington Northern Santa Fe (BNI)

MOST NOTEWORTHY: Abbott Labs, Barclays, SanDisk, Mission West Properties and Texas Instruments were today's noteworthy downgrades:

Wachovia downgraded shares of Abbott Labs (NYSE: ABT) to Market Perform from Outperform reflect several challenges to the company's key franchises. In particular, Wachovia cites the potential delay of the drug-eluting stent Xience launch in the U.S. and decelerating growth of Humira.
ABN Amro downgraded shares of Barclays (NYSE: BCS) to Hold from Buy to reflect the capital markets, lower UK bank non-interest income and higher bad debts.
Oppenheimer downgraded shares of SanDisk Corporation (NASDAQ: SNDK) to Neutral from Buy as they expect many of the advantages that drove shares to unwind in Q4 and into 1H08.
Mission West Properties (NYSE: MSW) was downgraded to Hold from Buy at Stifel, as they now believe the possibility of a sale is 50%/50% and could be pushed back to 1H08.
Think Equity downgraded shares of Texas Instruments (NYSE: TXN) to Source of Funds from Accumulate as they believe competition could hinder Q4 and 2008 growth for wireless.

OTHER DOWNGRADES:

Citigroup downgraded Xyratex Ltd (NASDAQ: XRTX) and Valueclick (NASDAQ: VCLK) to Hold from Buy.
Piper downgraded Nasdaq Stock Market (NASDAQ: NDAQ) to Market Perform from Outperform.
Lehman downgraded Burlington Northern Santa Fe Corp (NYSE: BNI) to Equal Weight from Overweight and CSX Corporation (NYSE: CSX) to Underweight from Equal Weight.
UBS downgraded Molson Coors (NYSE: TAP) to Neutral from Buy.

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Newspaper wrap-up: Buffett increases stake in BNI

Eric Buscemi — 2007-10-09T09:00:00+00:00

Filed under: Newspapers, Magazines, Apple Inc (AAPL), Burlington Northern Santa Fe (BNI)

MAJOR PAPERS:

American Electric Power (NYSE: AEP) has agreed to pay penalties totaling $15M to end a Clean Air Act lawsuit brought by the Justice Department for the EPA, reported the Wall Street Journal (subscription required).
In 1992 Ecuador left OPEC, but this month is expected to rejoin the organization, according to the Wall Street Journal.
Barron's Online's (subscription required) "Inside Scoop" section reported that Warren Buffett exercised call options to purchase 7.847M shares of Burlington Northern Santa Fe (NYSE: BNI).

OTHER PAPERS:

The UK is going to purchase 140 armored vehicles from Force Protection (NASDAQ: FRPT) for use in Iraq and Afghanistan, according to the Associated Press.
India's Reliance Retail has won the exclusive marketing and distribution rights for Apple (NASDAQ: AAPL) stores in India. The first Apple-owned store in India is scheduled to open at the end of this month, reported the Economic Times.
Independent movie studio Lions Gate Entertainment Corp (NYSE: LGF) has signed a partnership agreement with Mexican media conglomerate Grupo Televisa (NYSE: TV) to make movies and TV shows, and distribute Grupo's film library, reported the Los Angeles Times.

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Serious Money: The page on Buffett IV: Durable Competitve Advantage

Sheldon Liber — 2007-09-12T13:48:00+00:00

Filed under: Competitive strategy, Berkshire Hathaway (BRK.A), Huaneng Power Intl ADS (HNP), Serious Money, Intuitive Surgical Inc (ISRG), Burlington Northern Santa Fe (BNI), Norfolk Southern Corp. (NSC), Union Pacific Corporation (UNP)

Given investors anxiousness about the economy and hearing more gloom and doom than I think is warranted, I thought I would get back to basics with "my pal" Warren, and add to the series I started several months ago. I decided to write the series after receiving encouragement from friends and associates that read With Warren Buffett by my side ....

Today, I am writing about the concept of Durable Competitive Advantage, which is the ability to get ahead and stay ahead with a high level of certainty. It is also referred to as Sustainable Competitive Advantage.

To achieve a Durable Competitive Advantage, several factors have to be present. One is a big moat (Buffett expression) surrounding the enterprise. This usually means businesses that sell commodities where price is the primary factor in determining opportunity, have no moat as price takers. Their profit margins are not easily defendable. Another factor is barrier to entry. How easy would it be for someone to enter the same business and compete? The T-shirt business is a good example, of something without a Durable Competitive Advantage. Anyone could enter this business in one day, and they do. So unless the business has some unique concept, it does not have the promise of relatively predictable and sustainable profit margins in the future.

I have written about many companies that I think meet this criteria and if you follow my stories you have already read Volatile Markets: Huaneng Power (HNP) is my pick for the next 50 years and Intuitive Surgical jumps over 32% - where's the ceiling? I hope you can forgive my redundancy in bringing them up so often but HNP is the largest Utility in China, and Intuitive Surgical (NASDAQ: ISRG) is the world leader (and only player) in robotic surgical equipment. Both have huge Durable Competitive Advantages; they are both practically monopolies, and it would take almost insurmountable amounts of capital resources, time, political and intellectual might to try and compete.

Buffett, through Berkshire Hathaway (NYSE: BRK.A) has followed this pattern for decades and in recent years had been buying up utilities and more recently, railroads. BRK has become the largest shareholder of the Burlington Northern Railroad (NYSE: BNI) and has acquired shares of the Norfolk Southern (NYSE: NSC) Union Pacific (NYSE: UNP). Can anyone really imagine starting a new railroad? In your wildest dreams you could not conceive of buying thousands of miles of land and right-a-ways in less than decades. The capital costs would make it impossible for anyone except the government and even with the right of eminent domain this is a non-starter. Mr. Buffett has still got it. And if you want to get it too, then remember his lessons.

The following are the previous stories in the series.

Disclosure: I own shares in BRK.B, HNP and ISRG as of today's date. The railroads are all on my watch list.

To find more potential opportunities and verify my track record read Chasing Value or Serious Money.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He is on the advisory board of internet start-up CircleBuilder.com.

[photo w.marsh]

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