Can I disagree with Buffett?
Usually I appload Buffet's decisions. Now, there is one exception. Railroads.
Here is the chart for BNI.
What do we see? A very poor investment, if we remove the oil spike of 2004-2007. If oil did not cost $70 today, this stock would still languish as helplessly as it did from 1980 to 2003. If oil falls tomorrow, the reversion to the mean will put a very ugly red spot on Buffett's scorecard. It appears that the only investment thesis going for BNI in particular, and for railroads in general is that oil will stay above $50 forever.
Railroads have always hated by investors, including WB, and for a good reason. A railroad company has to pay for its roads. A trucking company gets its roads free from the government. Why play against a competitor who enjoys government support?
And now WB suddenly reverses his position. He says his research convinced him that BNI is a fabulous investment, so much so that he doesn't even mind buying it on the peak. A quote from Munger:
"WB and I hated railroads -- capital intensive, tough unions, heavily regulated, competitors (truckers) who have an advantaged position. It was a terrible business. We did change our mind last year and went in (with Burlington Northern Sante Fe Corp.). However, we did it too late. Man is too soon old and too late smart. We have now realized that they have huge competitive advantages versus truckers."
Sorry, Mr. Munger, how about formal logic? If truckers have an advantaged position vs. railroads, then railroads cannot have "huge competetive advantages" vs. truckes. Or, if you and Mr. Buffett were whong for these 40 years, and railroads do have these huge competetive advantages vs. truckers, how come they remained such a poor investment for so long? Is it just conceivable that you might be wrong now?
What I think really happened here is Berkshire has made a bet on the price of a commodity - oil. Some analist told them that the days of cheap oil are gone, and they came to believe that it will be totally different this time around - the same belief thay ridiculed so frequently during the bubble years. An indirect supporting evidence is Buffet's reluctance to part with PTR - apparently, he doesn't think it's a cyclical.
Berkshire investors should watch carefully if Buffett continues to go against Buffett's principles.