This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
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
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

Berkshire or Rail Volume: Which Is King?

Stocks in this article: BNIUNPCSXKSUCNI

NEW YORK ( TheStreet) -- Pop-quiz, hotshot: Which is more important to the short-term fortunes of railroad stocks, rail volume data or Warren Buffett?

To many sector watchers, there is no debate; the primacy of rail volume data is irrefutable. But it's a testament to the power of Berkshire Hathaway's (BRK.A)acquisition of Burlington Northern (BNI) that it may have derailed convention long-term sector wisdom -- at least temporarily.

Indeed, even though the November acquisition had an immediate and potentially negative secondary impact -- some institutional investors will be forced to divest Berkshire holdings once Burlington's stock is folded within it -- buy-and-hold railroad investors received a big wish in the form of a big boost to the railroad industry. Reinvestment is likely to come in the true railroad stocks left on the landscape, anyway, stocks which investors also hope will benefit from Buffett's bet.

Be careful what you wish for, though: the law of unintended (market) consequences has resulted in fears of mini-bubbles in the rail sector being triggered by Buffett's bet, as outlined in a UBS Investment Research report on the market reaction to Berkshire Hathaway's three major moves related to Burlington.

While the UBS report argues that momentum investing in the stodgy railroad sector led investors to price levels beyond what the fundamentals were able to justify, some of the leading institutional investors respectfully disagree. Even as they accept the empirical nature of the UBS data, they just don't agree with the conclusions reached about Warren Buffett's ability to inflate -- and deflate -- the sector .

Rick Paterson, the UBS analyst in charge of the research, said the team spoke with a range of institutional investors after it released the report, and there was definitely a divide in the reaction. "Most of my institutional clients read it, and a lot were surprised by the analysis and tended to agree, as it triggered their memory around these events. About 40% were not in agreement," Paterson said.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,827.75 +12.81 0.07%
S&P 500 2,072.83 +5.80 0.28%
NASDAQ 4,787.3170 +29.0650 0.61%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs