Warren Buffett Wins Again: Train Traffic Is Going Through The Roof
It feels like an anachronism in this age of Internet to see a tycoon make a huge investment in an old school industry such as railroads. Even more so when it pays off in spades. However, that’s precisely what Warren Buffett did about three years ago. Now he is being rewarded.
In 2009 Berkshire Hathaway, Warren Buffett’s investment firm, bought Burlington Northern Santa Fe, a railroad company based in Texas. Mr Buffett described the purchase as an “all-in wager on the economic future of the United States”.
That bet is already paying off. In 2011 the seven largest freight railways had operating revenues of $67 billion (up from $47.8 billion in 2009). Net income was $11 billion, with returns on equity averaging 11.1%. By 2035 the demand for rail freight is expected to double. A great deal of new business is coming from shifting consumer goods. Containers are lifted off ships and trucks, loaded onto trains and whizzed to their destination. This business pays well and is growing fast. (source)