Warren Buffett is adding to his train set. Progressive Railroading reported today that Buffett's Berkshire Hathaway will buy controlling interest in Union Tank Car Company. Union Tank Car is presently owned by Marmon Holdings. The deal will close in Q1 2008. Union Tank Car builds, leases and repairs railroad tank cars.
As discussed here before, Buffett only invests in businesses whose fundamentals he understands. The simpler the fundamentals the better. With a weak US dollar and foreign oil approaching 100 dollars a barrel, US consumers and industry are increasingly depending on US and Canadian coal and biofuels to power homes and industry. The European Union is also buying increasing amounts of coal from the US to meet their energy needs.
Any guesses on how those commodities move to ports and to market? Here's a clue: Railroad and pipeline. Buffett spent heavily to buy into BNSF Railroad, Union Pacific and Norfolk Southern.
Berkshire Hathaway is now expanding into the rail equipment needed to move energy. This move really isn't surprising considering the level of control Railroads have on their base costs.
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