Warren Buffett's $34 billion purchase of Burlington Northern Santa Fe(BNI) sent the transports up 4.5% at the open Tuesday, and iShares Dow Jones U.S. Transportation Index (IYT) up 4.7%. At 11.38% of IYT as of yesterday's close, BNI is the largest holding in the ETF.
Shares of BNI gained more than 28%, and with the deal valued at $100 per share, shares have only about 3% more to go. BNI's advance accounts for nearly 3% of IYT's gain, and the halo effect lifted other railroads such as Union Pacific(UNP) and CSX(CSX) by 5.5% and 6.5% in early trading. Those two firms account for 8.12% and 4.92%, respectively, of IYT's assets.
As the economic slowdown cut into the profits of major railroads, traffic dropped and shares fell. The slowdown, however, has been an optimum time for railroad executives to reexamine their business models, and operators have been boosting efficiency even while worrying about the bottom line. ...
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