Berkshire Hathaway (BRK.A) (BRK.B) has acquired a 38.6% equity stake in Pilot Flying J, North America's largest operator of travel centers, that will grow to a majority stake by 2023, the two companies said in a statement Tuesday, Oct. 3.
Berkshire said Pilot Flying J is an "industry leader and a key enabler of the nation's economy." But it's not Buffett's first foray into U.S. transportation-skewed stocks.
Through Berkshire, Buffett invested in U.S. airline stocks including American Airlines Group Inc. (AAL) , Delta Air Lines, Inc. (DAL) , Southwest Airlines Co. (LUV) and United Continental Holdings Inc. (UAL) .
Berkshire wholly owns Burlington Northern Santa Fe LLC, one of America's largest railroads. Berkshire also has holdings in shipper United Parcel Service, Inc. (UPS) and truck manufacturer WABCO Holdings Inc. (WBC) .
Buffett's holdings in transportation stocks suggest he's bullish on the U.S. economy -- that is if his words aren't suggestive enough.
"Whenever I hear people talk pessimistically about this country, I think they're out of their mind," Buffett said at a Forbes event last month.
Betting on transports translates into a bet on the overall economy, many analysts contend, and vice versa. While Buffett's transports firms would get a boost from an increase in trade, the strength of those transport stocks could also predict economic strength.
According to the widely followed Dow Theory, the Dow Jones Transportation Average, which has constituents from airline, trucking, shipping and railroad industries, should move in the same direction as the overall Dow in a strong economy.
If the transportation average were declining but the Dow had not yet reversed gains, it would suggest shippers in the transportation average have fewer goods to move. That would then mean industrial producers aren't selling as much.
But the Dow transports hit its third record high in as many days last week and continued gains, snagging its second-highest price ever Tuesday.
Buffett's bullish bets on transports and U.S. equities suggest he doesn't see economic activity slowing. While Pilot Flying J deals more in servicing the drivers and shippers who work for the companies Berkshire invests in, there's always room for growth.
Pilot Flying J CEO Jimmy Haslam appeared with Buffett on CNBC Tuesday, praising Buffett's investing style. "[He's a] long term investor. Hands off. He truly wants us to run the company, he wants us to maintain the culture and, of course, if there is an opportunity for the company to grow substantially, he has plenty of capital," Haslam said.