Burlington Northern: Another Prosaic but Lucrative Investment

Warren Buffett is famous for avoiding investments in technology, which is among the many reasons why he’s still rich and a lot of the one-time tech stars are not. His investing tastes have tended to much more prosaic investments like insurance (Geico, and a stake in the Bellevue-based Safeco spinoff Symetra) and jewelry stores (including Seattle-based Ben Bridge).

Oh yeah, and a distinctly 19th-century technologyrailroads.

But the news that Buffett (okay, technically it’s Berkshire Hathawaysame difference) wants to buy the 77 percent of Burlington Northern Santa Fe he doesn’t already own is a look forward, not back.

BNSF (the product of multiple railroads cobbled together over time, including the Northern Pacific, Great Northern and Spokane, Portland & Seattle) has a 32,000-mile network of rails from the Pacific Northwest and California across the West and Plains to the Great Lakes and Gulf Coast, well positioned for handling increased volumes of containers (from ports like Seattle and Tacoma), coal, grain, chemicals and other commodities once the economy turns, freight that rail can move more efficiently than trucks.

Plus, BNSF at the $100 a share that Buffett is offering comes less expensive than the more than $110 a share the stock fetched as recently as spring 2008.

Of course, techsters have been known to find railroads to be an enticing investment too. Occasional Buffet bridge partner Bill Gates has invested in such railroads as Wisconsin Central and Canadian National.

Bill Virgin is a columnist for Seattle Business Magazine and editor of the Pacific Northwest Rail News newletter.

Previously in Seattle Business: Warren Buffett Buys Burlington Northern.