Warren Buffett To Sell Union Pacific & Norfolk Southern Stakes (UNP & NSC)

Following Warren Buffett & Berkshire Hathaway's announcement of their Burlington Northern (BNI) purchase, we now see that he is set to make another round of moves in the railroad industry. As of last portfolio disclosures, Buffett owned shares in Burlington Northern, Union Pacific, and Norfolk Southern. Upon his impending acquisition of BNI, we now see that Berkshire Hathaway will sell their entire remaining 9.5 million shares of Union Pacific, a 2% stake in the company. Additionally, they will also sell their entire Norfolk Southern position of 1.9 million shares (or 1% of the company).

They will liquidate these positions between now and the impending transaction date for their BNI purchase as the news was revealed recently by Matthew K. Rose, chief executive of Burlington Northern. Buffett already owns 22.6% of BNI and will purchase the rest of the shares for $100 per share in cash and stock. In terms of other recent activity out of Buffett, we also saw that he has yet again sold shares of Moody's (MCO), his third sale this year. For more resources on Warren Buffett, check out Warren Buffet's recommended reading list, as well as the top 25 Warren Buffett quotes. Stay tuned next week as new disclosures (form 13F) will be filed with the SEC and we will update Berkshire's other portfolio activity.

Warren Buffett Sells Moody's Shares Again (MCO)

While the dominant headlines yesterday centered around Warren Buffett & Berkshire Hathaway's (BRK.A) acquisition of Burlington Nothern Santa Fe (BNI), we wanted to highlight one of his other recent moves. Having already trimmed his stake in Moody's (MCO) a few times prior, legendary investor Warren Buffett has sold even more shares of the ratings agency. On October 28th, 2009, Buffett sold 1,133,027 shares at a price of $24.8637. Additionally, he sold 19,600 shares the next day at a price of $25.2728 per share. This brings his total ownership to 38,066,685 shares. These sales are in addition to other transactions he completed back in the beginning of September where he sold 794,388 shares between $26-27. While he has obviously been selling shares, we need to highlight that he does still indeed own quite a sizable chunk of the company. We simply take note because he has now made multiple sales within a few months. Buffett is an iconic American investor and we've compiled some compelling resources on him for those interested. You can check out Warren Buffet's recommended reading list, as well as the top 25 Warren Buffett quotes.

Buffett's actions will certainly be to David Einhorn's liking. Einhorn's hedge fund Greenlight Capital has been publicly short Moody's and McGraw Hill (MHP) and we've covered his short thesis in-depth with his presentation on the curse of the Triple-A. It will be interesting to see if Buffett is slowly but surely making his way toward the exit, or if he is merely reducing his stake to a more 'comfortable' level given the potential risks associated with this name.

Lastly, we'd be remiss if we didn't cover the recent news that Buffett will acquire Burlington Northern Santa Fe for $100 per share, a nice premium above $75 where shares had been recently trading. Berkshire Hathaway already owns 23% of BNI so this move obviously makes sense. After all, we noted way back in October of last year that Buffett was selling puts on BNI in an attempt to capture more shares. Speaking on the deal, Buffett said, "It’s an all-in wager on the economic future of the United States, I love these bets." He is definitely staying true to the piece he penned back in the market panic last year about buying American. This activity in the railroad sector instantly reminds us of the once hedge-fund-favorites Union Pacific (UNP) and CSX (CSX). While many hedge funds dumped these names in the wake of the economic crisis, it will be interesting to see if any of them flock back like vultures now that Buffett has snatched up one of the dominant players in an oligopoly of an industry.

Taken from Google Finance, Burlington Northern is "a holding company. The Company, through its subsidiaries, is engaged primarily in the freight rail transportation business. BNSF Railway Company (BNSF Railway) is the Company’s principal operating subsidiary. BNSF Railway operates various facilities and equipment to support its transportation system, including its infrastructure and locomotives and freight cars. It also owns or leases other equipment to support rail operations, including containers, chassis and vehicles. Support facilities for rail operations include yards and terminals throughout its rail network, system locomotive shops to perform locomotive servicing and maintenance, a centralized network operations center for train dispatching and network operations monitoring and management in Fort Worth, Texas, regional dispatching centers, computers, telecommunications equipment, signal systems and other support systems."

Moody's is "a provider of credit ratings and related research, data and analytical tools, quantitative credit risk measures, risk scoring software, and credit portfolio management solutions and securities pricing software and valuation models. The Company operates in two segments: Moody’s Investors Service (MIS) and Moody’s Analytics (MA). The MIS segment publishes credit ratings on a range of debt obligations and the entities that issue such obligations in markets worldwide, including various corporate and governmental obligations, structured finance securities and commercial paper programs. The MA segment develops a range of products and services that support the credit risk management activities of institutional participants in global financial markets. These offerings include quantitative credit risk scores, credit processing software, economic research, analytical models, financial data, securities pricing software and valuation models."

Warren Buffett is Buying American

If you haven't heard about it yet, Warren Buffett recently addressed the public with an editorial piece in the NY Times. Here is an excerpt,

"THE financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.

So ... I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.

Why?

A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.

You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy.

Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.

Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: 'I skate to where the puck is going to be, not to where it has been.' "

It should also be noted that each time he has addressed the public like this in the past, it has seemingly marked a market top or bottom. But, with the caveat that he is usually a few months early. As I wrote about recently, Buffett has been selling puts on Burlington Northern (BNI). Also, Buffett recently sat down to talk with Charlie Rose in an interview about the economy and market. All this, combined with Berkshire's Goldman Sachs (GS) and General Electric (GE) buys have made him quite a busy man. You can read the rest of his NY Times editorial here.

Warren Buffett Sells Puts on Burlington Northern (BNI)

Boy, has Mr. Buffett been busy lately. His most recent escapade includes selling puts on Burlington Northern (BNI). Buffett already has a massive position in BNI (owns 18% of the company) and apparently he likes it enough and wants to add more. A Berkshire Hathaway filing on October 8th showed that Buffett had sold puts on BNI for $7.02 an option with a strike of $80. He sold 1,309,524 shares of put options that are exercisable before 12/08/08. With BNI shares making a round-trip from where he bought them last year, Buffett seems keen to pick some up. He has essentially drawn lines in the sand at $80 and $73 for BNI.

Buffett clearly has deemed BNI a solid value at $80 a share and is keen to load up whenever it hits that pricepoint. He has essentially bet that the odds of BNI trading significantly below $73 a share are pretty slim. So, he sits back and collects the premium from the options and then happily buys the shares where he wants if he is exercised upon.

Main point here is that Buffett = still bullish on BNI. And, he loves it at $80 or less. Looks like Warren is starting to warm up to derivatives after all.

UPDATE: Buffett was doing it again.