Enjoyed this podcast (1 hour) featuring an expert on UNP and nice overview of rails, history, meaning of Class 1, regulation, intermodal, Hunter Harrison, PSR v. No PSR, differences between UNP v. BNSF, operating ratio/margins, ROE, risk/reward outlook, future, rails v. trucks. Worth a listen imo.
https://www.joincolossus.com/episodes/88720526/reustle-union…
Does it make you want to buy or add to UNP?
“Does it make you want to buy or add to UNP?”
BRK dominates my equity portfolio so feel as though this gives me enough exposure via BNSF. I just feel my appreciation and understanding of rail/ BNSF, oligopoly, moat and its longevity has been heightened. Valuation is 4-5x what it was in 2009! Seems well appreciated by BRK owners but not as much by the media and talking heads imo.
UNP 5 yr chart shows steady growth until recent dip. Rails are sensitive to the economy and are expected to dip in a recession. Recent chart shows UNP bottomed mid July and now is recovering along with other stocks.
It could be a good time to buy. Or is this a bear bounce with more bad news to come?
Who knows?
Speaking of rails…
“Freight Rail Unions and Carriers Running Out of Time to Avoid Strike That Could Cripple National Supply Chain”
https://nebraskapublicmedia.org/en-gb/news/news-articles/fre…
Excerpt:
“…Wesley Boyce is an assistant professor of practice at the University of Nebraska Lincoln’s School of Business. He said with supply chains still recovering from pandemic disruptions, a strike or lockout would hurt basically everyone.
“It’s very much in everyone’s best interest to avoid a strike,” Boyce warned. “We’d have a mega, majorly negative impact on railroads, a majorly negative impact on workers. Consumers would very much feel the pain.”
Boyce added that if a strike were to go forward, industries most dependent on freight rail, such as the auto industry, would suffer most.
“We’ve already gone through a time where it was very difficult to get something like an automobile. But [a strike] would bring us back to, at least, the worst of that,” he said.
In fairness to the rail carriers, Boyce said they’re just doing what any business would: increasing their value.
“What they’re doing, though, is cutting less profitable routes. They’re sometimes closing facilities. They are running fewer trains that are actually longer or carrying more cargo, you could say, all while laying off workers and asking those that remain to do more.”
Boyce doesn’t think the sides will come to an agreement in this case, but they may not have to.
Because freight rail is so important, Congress has the power to mandate an agreement between unions and management. A rail strike in 1991 lasted only one day before Congress forced employees back to work…”
this was quite interesting especially how the operating margins have improved over time.
Since UNP and BNSF are quite similar in terms of revenue etc. (close enough anyhow) and UNP
has a market cap of $150B, I’m curious why several here value BNSF around $90-$100B?
I agree 35-40% margins seem pretty stout! I like Bloomstran’s Semper Augustus BNSF valuation of 115-135B (Dec. 2021). I would think it reasonable to expect valuation 125-145B by year end based on 9% or so earnings growth and the UNP comp.
Granted it is a different division but I was pleasantly surprised to see BRK value BHE at 87B so BNSF may be even more valuable in BRK’s mind than many believe.