This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The Buffett Effect: A Trader's Best Friend?

OMAHA, Neb. ( TheStreet) -- Warren Buffett (check out Buffett's portfolio) is famous for saying that his preferred holding period for a stock is "forever." But much to the chagrin of the Oracle of Omaha, some short-term traders have unusually benefited from Buffett's recent big bet on the railroads.

Notably, the rail industry is not a natural for short-term trading, as the stocks typically trade in a relatively small range. Short-term traders make their big bucks on the likes of volatile stocks like AIG (AIG - Get Report), and stocks in more volatile sectors, like technology's Apple (AAPL - Get Report).

Still, short-term traders looked to rails after the news of the Berkshire Hathaway (BRK.A - Get Report) initial investment in Burlington Northern (BNI), and subsequent 100% acquisition of Burlington on Nov. 3, specifically because they knew the Buffett name would create unusual momentum in the sector.

"Buffett is the gold standard, and when the news came out on the rails, we started to punch up all of our rail trades," said Mike Bellafiore, partner at SMB Capital. "The Buffett decision becomes a momentum trade, and once the momentum starts to shift, you look to get out quick. It's literally a game of hot potato."

Indeed, UBS Investment Research argues in a controversial report on the rail industry that Buffett has caused successive mini-bubbles in the rail sector. And while the "Buffett Bubble" is open to debate, striking a quick hit on the Berkshire Hathaway's rail-love is a fact that has already booked profits for traders.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $95.18 1.64%
AIG $55.96 -1.10%
BRK.A $217,330.00 -1.30%
CNI $60.93 -0.98%
CSX $26.55 -3.00%


Chart of I:DJI
DOW 17,750.91 -140.25 -0.78%
S&P 500 2,063.37 -18.06 -0.87%
NASDAQ 4,763.2240 -54.37 -1.13%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs