INVESTING: What should we take away from Buffett’s railroad bet?

Say the name Warren Buffett around investors, and they get a little star-struck. For more than 40 years, his publicly traded company, Berkshire Hathaway, has torn up the performance rankings. His value-oriented, patient method is probably one of the most copied strategies in the world. The media rightfully put a lot of light on his actions, and his latest step has my attention.

When Buffett took the controls at Berkshire Hathaway in the 1960s, it was a textile firm. Today, it is a huge conglomerate of private operating companies and large holdings of publicly traded stocks. The firm owns Geico Insurance and Dairy Queen, and stocks like Coke and American Express. Berkshire’s stock is famous for never splitting (it currently sells for almost $120,000 a share), and it has suffered only one losing year in at least the last 30.

Well, the Oracle of Omaha is on the move, figuratively speaking. He is amassing a giant chunk of Burlington Northern Railroad. When it was disclosed in April that Buffett’s firm acquired more than 5 percent of Burlington, the stock jumped 7 percent to close at $88 a share. Recent stock market weakness, however, has brought the stock all the way back to about $80. According to recent regulatory filings, Buffett increased his stake to more than 15 percent, and his average cost is more than the current price. Is this the opportunity of the year?

People watch Buffett’s moves so closely in order to mirror them. That’s why Burlington jumped so much in April. A spokesman for Berkshire says that with energy costs staying stubbornly high, truckers are going to lose market share to the railways. Without looking at the balance sheet, I am going to trust Buffett’s tremendous record and assume Burlington is trading at cheap levels. But there is more to consider before jumping on Buffett’s train.

Buffett really made his mark on Wall Street when he loaded up on stocks near the 1974 bottom. Since then, his stock market moves haven’t been that stellar. The bulk of the returns for Berkshire over the last 20 years have come much more from the private companies he owns than the stocks. He understands the insurance industry better than almost anyone alive, and he makes excellent money in the field. In addition, he typically makes investments for the very long term. He might be satisfied sitting on Burlington for five years or more before it starts to return. I don’t like that kind of time frame in the equity market. His story about truckers losing share sounds good, but Burlington as a stock doesn’t captivate me right now.

Whether it is right for you on your time frame and risk tolerance you’ll have to decide. I don’t think the downside on an investment like this is that deep. But I also believe your money can work better in different areas right now. The stock market might be setting up for a solid buying opportunity sometime within the next month. If Burlington is still sitting around $80 by next March, it could be worth another look.