Crosshair (77.97)

Burlington Northern Santa Fe (post acquisition blurp)

November 03, 2009 – Comments (0) | RELATED TICKERS: BNI , CSX

On July 8, 2009, I conducted a thorough valuation of BNI and, for all who've listened; this idea could have generated a 32% return in your portfolio. There have been numerous articles written on the railroad industry of late, but none address the central issue of value. I applaud all who dig into the numbers to uncover potential trouble spots. But, one must never lose sight of how the market is pricing the expected growth rate. It could so happen the market is over-discounting a security, at which point an opportunity could arise. If you think you've covered yourself by throwing around P/E numbers, think again. Any valuation work deserves considerably more effort. That being said, it isn't terribly difficult (I suggest learning the basics of a discounted cash flow model and getting acquainted with the notion of margin of safety).Here is my challenge; whenever writing an article on the merits of an investment, please highlight exactly how your outlook impacts the valuation of the security. Simply stating that "margin compression could put pressure on the stock price" is absurdly undercutting the work any proper investor ought to perform.