[Berkshire Continues To Increase Stake in BNI]

"Forget Commodore, Wang, Atari, Acclaim, Polaroid, hundreds of airlines, hundreds of car makers, etc.  How many companies in the DJIA today existed 100 years ago?  or even 30 years ago?"

 

 

Forget Penn central too in 1970

[Berkshire Continues To Increase Stake in BNI]

another minus:

 

BNI: 9 billions dollars of debt versus 11,5 Billon dollars net worth

UNP: 7-8 Billions dollars debt versus 15,4 net worth.

 

Maybe UNP has less risk  (specialy in time of crisis) and is less expensive than BNI.

 

 

[Berkshire Continues To Increase Stake in BNI]

UNP and BNI are in the same business, same zones. Why is UNP a lot less expensive ? Is there a Buffett premium ? Is BNI better managed ? But how to prove it except to say it is better managed because Buffett bought it?

 

 

[Berkshire Continues To Increase Stake in BNI]

another minus: the high cost of oil was mentionned by Buffett or Munger (I don't remember) as a competitiv advantage. So the krach of oil prices signals a decrease in this competitiv advantage. How much is the intrinsec value of the business affected ?

so

1) they are increasing their fares

2) Their competitive advantage is affected by the decrease in oil prices.

How long can it last?

[Berkshire Continues To Increase Stake in BNI]

I think it is a usefull question to ask, because as we like Buffett, we unconsciously find that his investments are good ideas and try to rationalize them by all sorts of good reasons. We start with the conclusion. Therefore I prefer to focus first on the minuses, it helps me to have a balanced view on the subject.

 

 

 

 

 

 

 

 

 

 

[Berkshire Continues To Increase Stake in BNI]

ok for the pluses. But what about the minuses ? As Berkowitz likes to say: what could kill this idea?

 

For instance: they are increasing their rates while their customers suffer, it doesn't create a lot of goodwill. How long can they apply this strategy? Is their earning power somewhat superficial ?