Editor's note: This morning brought the news that Berkshire Hathaway's (BRK.A) Warren Buffett made a deal to purchase freight rail titan Burlington Northern Santa Fe (BNI). Within moments, our RealMoney contributors were providing their take for subscribers.TheStreet.com has always believed that offering a wide variety of opinions and viewpoints -- rather than a monolithic "house view" -- helps readers make better-informed investment decisions. In that spirit, we bring you the thoughts of our varied stable of RealMoney contributors, who offer analysis of stocks and the markets from all angles. ETF blogger Don Dion started the ball rolling with his post announcing the deal:
Buffett Makes Bold Move With RailsColumnist Sham Gad followed up, wondering about the implications for truckers:
By Don Dion
7:40 a.m. EST Warren Buffett is making a big bet on economic recovery with his purchase of Burlington (BNI) and splitting his BRK.B shares 50-to-1. Very bullish sign for our country and the market.
Buffett Finally Makes His Elephant Deal
By Sham Gad
8:10 a.m. EST After years of saying Berkshire (BRK.A) would love to make an elephant deal, Warren Buffett is paying $34 billion ($44 billion including debt) for Burlington Northern (BNI). Clearly, Buffett views this as an excellent long-term value-creating acquisition for Berkshire -- his willingness to split the shares to make this happen is proof positive. While I believe Mr. Buffett's comments that this is a bold bet on the long-term recovery of the U.S., I can't help but read between the lines: Does this mean that the long-term future for the trucking industry may be a lot tougher than we think? After all, rail transport of goods is the cheapest form of land transportation. Overall, Buffett's bet should emphasize the favorable long-term outlook for the U.S. economy -- with emphasis on the phrase "long-term."
BNIBob Marcin examined Buffett's recent track record:
By Jim Cramer
8:31 a.m. EST So Burlington (BNI) gives up, too! Wow, how will this one be spun? "Buffett makes a huge mistake?" "Buffett doesn't have a clue?" "Buffett hates everything but the rails?" "Buffett's lost his mind?" I like the last one. Meanwhile, I am blown away. Forgive me for thinking this is BULLISH. I know I am probably misreading the situation.
Rendell and Buffett and RailroadsDoug Kass took up the thread in a response to Jim Cramer:
By Bob Marcin
9:09 a.m. EST Rendell gets the issues of overleverage, poor infrastructure, small biz credit crunch, a gutted manufacturing base, sticky unemployment, etc. Buffett, giddy with deal, gives us the happy talk. As for Buffett's deal record, very spotty lately: Goldman ( GS), excellent; GE ( GE), awful; utility purchases, OK; building materials such as carpet, manufactured homes, wallboard, etc. in 2005-2006 era, terrible. Warren's a classy guy, but I am not following him in the rail business. Stocks should be rallying big on the recent good macro news and deals. But the average stock still gets killed on down days and doesn't participate much on up days. What's up with that?
Memo to Jim "El Capitan" CramerGrange Johnson had a somewhat dour outlook for Berkshire:
By Doug Kass
9:23 a.m. EST In response to your post on the Berkshire/Burlington deal -- as we all know, it's how markets react to news that is important. Sometimes the reaction is even more important than the news itself. For now, the reaction is quite muted -- particularly in the face of the market's drubbing over the last 10 days. Jim, this muted reaction is not a conspiracy of the shorts; it's a fair representation of the collective view of the longs and shorts for now. Nor is it, as you facetiously wrote, a misread of the situation. It might be a clear signal that the market's health is changing -- and not for the better.
Deals, Deals and More Deals
By Grange Johnson
9:26 a.m. EST The market has quickly gone from overbought to oversold, and the futures look wretched again today. But we have Black & Decker (BDK) bought by Stanley ( SWK), Burlington (BNI) (an ubercyclical) bought by the Oracle, and even small-cap wonder Diedrich Coffee ( DDRX) bought by Peet's ( PEET). These are positive signs for the market, and I think we will rally soon. One stock that might be a short is Berkshire (BRK.A), as the last time Buffett issued a lot of stock was for Genre, and the result wasn't pretty for Berkshire holders. Long DDRX
Buffett Rescues the Transports -- for NowTim Melvin examines the rail suppliers for possible investment themes:
By Don Dion
11:20 a.m. EST Monday's close of 3599.84 for the Dow Jones Transportation Index was the lowest closing value since Aug. 17 of this year. The 3600 level has formed a support line since August, which has been tested four times, including yesterday. Things were looking less than rosy for the index, which had been diverging from the Dow Jones Industrial Average. Contra the transports, the industrials had been the strongest of the major indices. The developing question was whether the Dow would turn down or the transports move up. Thanks to Warren Buffett, we have an answer. Buffett's $34 billion purchase of Burlington Northern Santa Fe sent the transports up 4.5% at the open and the iShares Dow Jones U.S. Transportation Index ( IYT) up 4.7%. BNI is the largest holding in IYT, at 11.38% as of yesterday's close. Shares of BNI gained more than 28%, and with the deal valued at $100 per share, shares only have about 3% more to go. BNI's advance accounts for nearly 3% of IYT's gain, and the halo effect lifted other railroads such as Union Pacific ( UNP) and CSX ( CSX) by 5.5% and 6.5% in early trading. Those two firms account for 8.12% and 4.92%, respectively, of IYT's assets. FedEx ( FDX), which makes up 10.72% of the index, was up 1.4% early, and UPS ( UPS), 8.37% of the index, had a small gain of 0.3%. I would not buy shares of IYT here until there's a follow-through. While today's move could hold and the technical picture has improved, there needs to be broad support for transportation stocks. A Buffett-fueled rise in the rail sector is not enough.
By Tim Melvin
12:26 p.m. EST If Warren is right about the future of the economy in general and railroads in particular, it is time to start looking into the companies that supply equipment and rails to the industry. The nation's railroads need to be repaired and rebuilt to handle the type of traffic he is talking about. Companies like LB Foster ( FSTR) are going to be worth watching here for an entry point. There will be increased demand for locomotives and freight cars as well. This makes companies like Trinity ( TRN) and Greenbrier ( GBX) worthy of investigation. As the talking heads on the television just stated there is also an implied bullish bet on coal involved when you bet on the railroads.
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