As evidence of a bullish long-term outlook for railroads, Warren Buffet's Berskshire recently increased its stake in Burlington Northern (BNI) and the CEO of Kansas City Southern (KSU), Michael Haverty, appeared on Larry Kudlow's show on CNBC Thursday evening, stating that rail transport was showing continued strength in the transport of coal, chemicals, and grains with weakness in the transport of consumer goods and housing related commodities. Berkshire paid $79.65 each to add 825,000 shares of BNI, upping its stake in the railroad to 18.9% or 64.6M shares.
The accompanying table presents the ETFI Global Railroad Index, which is a market cap-weighted index of 42 companies with a total return over the past year of -14.8%, outpacing the iShares Dow Transports ETF (IYT) at -21.6% and the S&P 500 ETF (SPY) at -40%. While five of the top seven companies are based in North America and listed for trading on the NYSE, 26 of the 42 companies are not listed for trading in the U.S. The outlook for rail transport is bullish as the industry has pricing power because there is limited ability to increase capacity in terms of new tracks. A new ETF for the global railroad industry would provide investors with a globally diversified investment option beyond just rail transport companies, including railcar makers and rail infrastructure suppliers.
The accompanying table presents the ETFI Global Railroad Index, which is a market cap-weighted index of 42 companies with a total return over the past year of -14.8%, outpacing the iShares Dow Transports ETF (IYT) at -21.6% and the S&P 500 ETF (SPY) at -40%. While five of the top seven companies are based in North America and listed for trading on the NYSE, 26 of the 42 companies are not listed for trading in the U.S. The outlook for rail transport is bullish as the industry has pricing power because there is limited ability to increase capacity in terms of new tracks. A new ETF for the global railroad industry would provide investors with a globally diversified investment option beyond just rail transport companies, including railcar makers and rail infrastructure suppliers.
$63.64 (10/31/08)
