The Oracle’s New Train Set
Christmas came early this year for the “Oracle of Omaha”, Warren Buffett. The Berkshire Hathaway CEO, recently, completed his big acquisition ever, with the purchase Burlington Northern(BNI), a railroad , for a strapping $26 billion, in cash.
This a typical transaction for Mr. Buffett, who is a student of famed value investor Benjamin Graham. In addition to a pure value investment, there is also a green investment angle as well. Railway and trucking are the major avenues of shipping within the United States. Ironically, rail is much more environmentally friendly. One of BNI major sources of revenue is derived from coal shipments, which adds another clean environment component to this mega purchase.
The BNI deal was truly a Buffett special. Axioms for value investing are high cash flow, relatively low debt levels and healthy future revenue projections.
However dividends have grown by a 20.88% over the lasts five years. Plus BNI only utillizes 28% of it overall capital structure, and the average 2 yr growth is 10.45% with operating margins of 21.71%.
Berkshire Halthway, still has plenty of cash and a world of investment ideas. Becton Dickerson(BDX) is a company that fits the Oracle’s investment philosopphy. Becton Dickerson is a medical device and supplies, who mainly cater to institutional clients. Operating Margins are above 23%, dividend growth over the last 5 yrears is 17% and theyonly utize 10% of the overall capital structure on debt. BDX could prove to be a worthy for additonal investment by Buffett.
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