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Warren Buffett Is Still Riding the Rails

As evidence of a bullish long-term outlook for railroads, Warren Buffet's Berskshire recently increased its stake in Burlington Northern (BNI) and the CEO of Kansas City Southern (KSU), Michael Haverty, appeared on Larry Kudlow's show on CNBC Thursday evening, stating that rail transport was showing continued strength in the transport of coal, chemicals, and grains with weakness in the transport of consumer goods and housing related commodities. Berkshire paid $79.65 each to add 825,000 shares of BNI, upping its stake in

Riding the Rails to Profits

As evidence of increased commercial interest and product development for a variety of global transport ETFs, the following ideas have been either launched or filed: Claymore/Delta Global Shipping (SEA) (Aug. launch), PowerShares Global Progressive Transportation (PTRP) (Sep. launch), and SPDR Transportation (filed with SEC). The iShares Dow Transports (IYT) is easily the most popular transport ETF with investors, with $689M in net assets as of the market close yesterday as compared to $1.8M for PTRP and $4.7M for SEA.

FreightCar America (RAIL) makes railroad freight cars with an emphasis on cars that carry coal. It is a Chicago-based company that has manufacturing facilities in Illinois, Virginia, and Pennsylvania.

Sometimes a company faces a perfect storm and gets squeezed on all sides. This is what is happening to RAIL right now. Demand is slowing down due to the economy being in the pits and material costs are going through the roof at the same time. The company said it is having a tough time passing along its costs to customers. It is forced to pay surcharges on its raw materials.

FreightCar America (RAIL) is the leading manufacturer of coal freight cars in the United States. It has a whopping 80% market share. Recently, the coal market has been in a slump taking the coal freight car market down with it. The problem RAIL is facing is with inventory backlogs which of course become worth less and less over time due to depreciation expenses. Orders are declining for freight cars which is really hurting the company. Fortunately, the company is still making money and while the latest quarter operating cash flow was negative, it seems like the worst is here. Any boo