Big investment in cars.....

U.S. rail stocks up on Buffett, Icahn stakes

By Ben Klayman
Reuters
Wednesday, May 16, 2007; 10:24 AM



CHICAGO (Reuters) - Several U.S. railroads saw their shares rise on Wednesday, the day after major investors disclosed stakes in an industry benefiting from strong pricing.

On Tuesday, Warren Buffett's Berkshire Hathaway Inc. , in filings with the U.S. Securities and Exchange Commission, revealed stakes in Union Pacific Corp. and Norfolk Southern Corp. .

That disclosure came five weeks after the billionaire said he had invested in three railroads, but only identified Burlington Northern Santa Fe Corp.

Also on Tuesday, billionaire investor Carl Icahn disclosed in SEC filings that he bought a 2.6 million share stake in CSX Corp.

British hedge fund The Children's Investment Fund also disclosed its rail holdings in filings on Tuesday. It owns 17.8 million shares of CSX, 4.3 million shares in Norfolk Southern and 2.1 million shares in Union Pacific.

The Dow Jones transportation average <.DJT> index was up 0.8 percent Wednesday morning, with shares of CSX, Burlington Northern, Union Pacific and Norfolk Southern up 0.5 percent to 1 percent.

Bear Stearns analyst Edward Wolfe in a research note pointed out the strong sector fundamentals are drawing interest from many investors, including Jana Partners.

"In addition to continued strong pricing and positive long- term secular demand fundamentals, we believe the strong run for the group so far in 2007 has been driven by newfound investor interest in the railroads," he wrote in the note.

"We have seen material stakes from well-known, long-term value investors, such as Warren Buffett; activist shareholders, such as Atticus Capital and The Children's Investment Fund; private equity firm Fortress Investment Group; and a host of other new investors in the sector," Wolfe added.

Companies' shares often rise when Berkshire discloses investment stakes. Regulators sometimes let Berkshire delay disclosures so investors cannot try to copy Buffett before he has finished buying.

Disclosure of the railroad stakes boosted shares of Burlington Northern, Norfolk Southern, Union Pacific and CSX on April 9. Burlington Northern gained the most, 6.5 percent.

Buffett generally favors companies with stable, easy-to-understand businesses that are industry leaders and whose shares appear to be undervalued.

On April 6, Berkshire had disclosed a 39.03 million share, or 11 percent, stake in railroad company Burlington Northern. Three days later, Buffett said Berkshire invested $700 million in a second railroad and slightly less in a third.

"What was a terrible business 30 years ago (is) a better business now," Buffett said at Berkshire's annual shareholder meeting on May 5 in Omaha, Nebraska, where it is based.

As of March 31, Berkshire said it owned 6.4 million shares of Norfolk Southern valued at $322 million, and 10.5 million shares of Union Pacific valued at $1.07 billion.

According to Tuesday's filings, Buffett began accumulating railroad stakes as early as last year's third quarter.

© 2007 Reuters

"HEY DETROIT GET OFF YOUR BUTTS AND COME JOIN US"

Believe in the bullet train
Even though it's a gamble, high-speed rail would help California cope with its transportation problems.
May 2, 2007


IT'S TEMPTING to write off California's bullet-train enthusiasts as overgrown kids begging Mom and Dad for cash to build the world's coolest train set; only in this case, Mom and Dad are the taxpayers, and the set would cost at least $40 billion. And yet what looks today like an overpriced toy might someday become one of the state's best weapons for fighting gridlock and pollution.

Rail boosters and transit realists have been butting heads for more than a decade over plans for a bullet train from Sacramento to San Diego, a 200-mph electric-powered rocket that could go from Los Angeles to San Francisco in 2 1/2 hours. Plans to put the train project before voters have been put off twice, and if Gov. Arnold Schwarzenegger gets his way, a ballot measure planned for November 2008 might once again be deferred. The governor also wants to slash funding to $1 million for the California High-Speed Rail Authority, which says it needs $103 million next fiscal year to keep the project on track.

The project would represent a huge gamble for state taxpayers. Even assuming that planners are right about the total price tag — a big assumption given variables such as the price of land — there are no guarantees that all the money can be raised or that rosy projections about the line's ridership and revenue would be met.

The rail authority wants to ask voters to approve $9.95 billion in bonds next year. Backers say the rest of the money would come from private investors, the federal government and other local sources. But it's possible that investors would shun such a risky project or that the federal money wouldn't materialize. California could conceivably be stuck with a partly built train to nowhere for years or decades. And there are serious questions about whether a high-speed train is such a high priority at a time when the state is already groaning under a perilous debt load and still has many infrastructure needs unfunded.

Yet critics who reject the train as a boondoggle base their arguments on the past, not the future. It's true that long-distance rail systems in this country attract anemic ridership and usually require bottomless taxpayer subsidies. But the unattractive economics of train travel won't necessarily remain that way forever.

By 2020, the projected completion date for the bullet train, gas will likely be a lot more expensive. State and federal governments by that time should be well underway in cutting back sharply on greenhouse gas emissions, probably translated into increased costs for flying or driving. (The bullet train would be emissions-free.) Train service, particularly the kind that could compete with airline travel on convenience, could be far more economically competitive than it is now.

The rail authority is in the midst of preliminary engineering and environmental work that may need to be started over from scratch if funding is pulled next year. It may not need all of the requested $103 million, but that doesn't justify cutting the project off at the ankles. Voters should get the chance to decide once and for all whether they want their tax dollars tied to the tracks.