One of the largest railroad systems
Berkshire Hathaway (BRK-B) owns and operates Burlington Northern Santa Fe Corporation, or BNSF, one of the largest railroad systems in North America. BNSF has approximately 32,500 miles of track in 28 states and three Canadian provinces. BNSF ships consumer products, coal, industrial products, and agricultural products.
Berkshire purchased the remaining stake of 77.4% of BNSF in 2009 for $26 billion, making it the company’s biggest acquisition to date. BNSF competes with the Union Pacific railroad company (UNP) in the West, where it has an approximate market share of 49%.
Investments to propel growth
Berkshire Hathaway expanded BNSF revenues by 5.6% in 2014 to $23.2 billion. BSNF faced issues because of severe winter conditions during the first quarter of 2014. These caused slower average speeds and operational issues, resulting in lower volumes and diminished growth in revenues. Berkshire added capacity in 2014 through capital investments for railroad line expansion, system improvement projects, additional equipment, and new employee hires.
BSNF will benefit from lower fuel prices going forward. But in 2014, any savings were offset by higher volumes and compensation benefits for employees. Overall operating expenses increased by 6% to $16.2 billion.
Berkshire Hathaway competes with asset managers such as Blackstone (BX), BlackRock (BLK), Goldman Sachs (GS), and Morgan Stanley (MS). Together these companies make up 5.93% of the Financial Select Sector SPDR Fund (XLF).
Berkshire also faces competition from other railroad companies including CSX Corporation (CSX), Norfolk Southern (NSC), and Kansas City Southern (KSU), all of which are part of the iShares Core S&P 500 ETF (IVV).