Burlington Northern Santa Fe Corp (BNI)

NicieNicie (36.81) Submitted: 8/22/07 10:54 PM : Start Price: $80.54 BNI Score: -30.77

BNI is a wonderful company. If every other big American RR co. were run as well and as efficiently (and there are only six others), we'd be seeing more profitability, cleaner and more efficient diesel locomotives, fewer citizen complaints about pollution and blocking roads, and fewer "minor" derailments.


BUT -- be aware that the RR's are a "mature cyclical" by nature and that the P/E in the mid-teens, while rosy for a stock with growth potential (drug, consumer staples) belies the fact that RR's aren't a terribly good investment most of the time. By historical criteria, BNI's shares are overpriced (so are most of the others), unless we expect miracles of transportation, depending on bumper crops and burgeoning container boxes.


Railroads have HUGE capital requirements, upgrading the motive power, advertising, drawing new logistics, and most of all fixing the constantly-pounded main lines. This usually frustrates the RR because they can't pay the dividends they'd like.


Merely IMHO my favorite roads are BNI and Canadian Pacific (CP), which shares many of BNI'a operating virtues. But look how close to annual max they are trading, and please take a wait-and-see attitude.

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