Barreling U.S. rail stocks may run onto shaky track

Railroad share prices have run up on headline-fueled enthusiasm about the high-profile purchases. Since April, Berkshire Hathaway Inc., led by Mr. [Warren Buffett], has disclosed an 11% stake in Burlington Northern Santa Fe Corp., the U.S.'s largest railway operator based on the number of freig...

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Bibliographic Details
Published inWall Street journal. Europe
Main Author Daniel Machalaba and Desiree J. Hanford
Format Newspaper Article
LanguageEnglish
Published Brussels Dow Jones & Company Inc 13.07.2007
EditionEurope
Subjects
Activists
Capital expenditures
Hedge funds
Investments
Prices
Railroad transportation
Stockholders
Stocks
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Summary:Railroad share prices have run up on headline-fueled enthusiasm about the high-profile purchases. Since April, Berkshire Hathaway Inc., led by Mr. [Warren Buffett], has disclosed an 11% stake in Burlington Northern Santa Fe Corp., the U.S.'s largest railway operator based on the number of freight shipments. Berkshire also has taken smaller but substantial chunks of Union Pacific Corp. and Norfolk Southern Corp. Icahn Management LP and activist hedge funds including Atticus Capital LP and Jana Partners LLC -- known for throwing their weight around -- have barreled into the railroads, too. "What stands between us and better, safer, less capacity-constrained railroads isn't activist shareholders. It's complacent management teams," complains Snehal Amin, a partner at Children's Investment Fund Management LLP, a London hedge fund that owns stakes in CSX, Norfolk Southern and Union Pacific. "This isn't the time to weaken the capital base of the railroad industry," says EdwardBurkhardt, president of Rail World Inc., a regional-railroad owner. "Shareholders are going to benefit more from having the industry invest in increased capacity and competitiveness than buying back lots of stock in the short term."
ISSN:0921-9986