Re: Spending A Lot Too
Author: mook
Date: 11-10-2014 - 15:26
When you're spinning off the kind of cash the stories talk about, and you're "private" as in don't have to worry about the stock market and next quarter's analyst projections, you can spend money on capital improvements. Now will they spend money on getting enough employees to run all the trains they need to move?
In principle, as a "private" company, BNSF can spend like a drunken sailor as long as Warren's oversight isn't dimmed by it. Ultimately, the limiting factor is how much of Berkshire's portfolio BNSF is. At current values, it looks like it's a nontrivial piece, but still a relatively small one, so as long as the insurance companies are printing cash too BNSF probably doesn't have much to worry about.
UP may need to watch out - they still have the stock market to worry about, and their investors want dividends and capital gains EVERY QUARTER. Spending money on the railroad is only OK as long as those dividends and gains keep coming.
What ever happened to the stories that the railroads (at least, the Class 1's) couldn't make enough to cover their cost of capital?