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

Warren Buffett's Surprise Natural Gas Investment

NEW YORK ( TheStreet) -- Natural gas is an interesting topic for Warren Buffett.

As I mentioned at the start of the week, one of the bad news bullet points found in this year's Berkshire Hathaway letter to shareholders related directly the battered fuel source. As the Oracle of Omaha pointed out, his company has already been forced to write down a substantial portion of his $2 billion bond investment in Energy Future Holdings, a Texas-based utility firm, as natural gas prices have plummeted. Calling it a "big mistake," Buffett notes that if the fuel's prices continue to crumble, the carrying value of the Berkshire bet could be wiped out entirely.

At the same time that natural gas is causing the investor's Energy Future Holdings investment to sour, growing activity in this corner of the energy sector is acting as a boon for another notable component of the Berkshire Hathaway Investment Empire, the Burlington Northern Santa Fe Railroad.
Warren Buffett

When Buffett announced his decision to spend more $26 billion to purchase the remaining 77% of BNSF railroad in late 2009, some fans who had monitored the investor's buying habits over the decades were left scratching their heads.

Whereas Buffett had historically shown preference for undervalued companies that had a great deal of upside potential, BNSF's size ensured that any upside action would likely be slow and steady. Rather than looking for a short-term pop, however, the Nebraska native stated that the railroad investment was considered an "all in bet" on the United States that would ultimately benefit Berkshire Hathaway for decades to come.

Living up to Buffett's hopes, BNSF has managed to take advantage of the nation's economic recovery. In his shareholder letter, Buffett likens U.S. rail to an economic circulatory system. Being responsible for 37% of the total inter-city rail freight, BNSF is highlighted as the largest artery.

Burlington Northern's reach across the U.S. has helped it gain attractive positioning for specific industries like energy. In the past, I have highlighted the railroad's heavy involvement in the coal industry. However, as Bloomberg points out this week, the railroad also has a staggering lead over many of its competitors when it comes to taking advantage of growing activity in the Bakken shale formation.
1 of 2

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
CP $144.25 0.00%
FCG $4.86 0.00%
IYT $141.07 0.00%
AAPL $93.74 0.00%
FB $117.58 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs