UNP: Not-Ready-For-Prime-Time -- March 6, 2022

Updates

March 8, 2022: So, Cathie Wood thinks autonomous trucks (which don't exist today) and carry one container each will be a cheaper form of freight transportation than trains (which could be fully autonomous today) that can carry hundreds of containers. OMG, she's ignorant. Link here.

Original Post 

This post will be rushed and not-ready-for-prime-time but one has to do what one has to do. 

I haven't watched CNBC  in the last four or five weeks and have no intention of going back any time soon.

For several months, I did watch CNBC religiously (three particular shows, only), and not once did anyone mention UNP or any of the rails for that matter. They hardly mentioned oil. But that's another story.

As noted, I don't recall UNP ever being mentioned on the three CNBC shows I (used to) watch. 

In the past two or three days, UNP has absolutely gone ballastic. Maybe a bit of hyperbole but UNP has been incredible. 

There are two story lines here 

First.

The "stock market" is usually looking three to six months out. 

So, what's going to be shipping in three to six months? I don't follow rail loadings at all but let's guess:

• agriculture:
• wheat: think Egypt
• corn: think German hogs
  
• soybeans: think Asia
  
• energy:
• coal:
• fracking sand:
• industrial:
• automobiles:
• trucks
• military hardware 
• how is copper, aluminum, steel shipped?
  

So, more could be written and perhaps I will write more but I have to move on: movies and NASCAR coming up.

But I said there were two story lines here.

Here's the second story line.

Most of this stuff was "known" well before the Russian-Ukraine invasion. What changed? Why now. Why Thursday? Why Friday? Why last week? Why not one month ago? Why not two months from now.

It had to do with Warren Buffett's annual letter. 

Warren Buffett devoted a fair amount of space in that letter to his railroad, BNSF. 

BNSF, our third Giant, continues to be the number one artery of American commerce, which makes it an indispensable asset for America as well as for Berkshire. If the many essential products BNSF carries were instead hauled by truck, America’s carbon emissions would soar. 

Your railroad had record earnings of $6 billion in 2021. Here, it should be noted, we are talking about the old-fashioned sort of earnings that we favor: a figure calculated after interest, taxes, depreciation, amortization and all forms of compensation. (Our definition suggests a warning: Deceptive “adjustments” to earnings – to use a polite description – have become both more frequent and more fanciful as stocks have risen. Speaking less politely, I would say that bull markets breed bloviated bull . . ..) 

BNSF trains traveled 143 million miles last year and carried 535 million tons of cargo. Both accomplishments far exceed those of any other American carrier. You can be proud of your railroad.

Mr Buffett has only so much room in his letter, and to devote three paragraphs to BNSF speaks volumes. 

This is what happened. His letter came out. Analysts pored over it. They read the BNSF paragraph but they had to do their own "due diligence. That took three or four days. The letter came out Saturday. Due diligence and recommendations on PowerPoint were put together by Wednesday for the analysts to present to their hedge fund CEOs. The "deciders" heard the presentations on Wednesday or Thursday. They began buying Thursday, When there was no pull back / profit taking Friday, they bought some more. 

Time for small mom-and-pop gamers to jump in. I don't know. Read the disclaimer.

The bigger question: what can investors learn from this? Certainly UNP and BNSF aren't going to be the only winners coming out of this war. 

Disclaimer: this is not an investment site.  Do not make any investment, financial, job, career, travel, or relationship decisions based on what you read here or think you may have read here.

With regard to UNP:

• do the one-day chart:
• the five-day chart; and ,
• the one year chart.

Oh, by the way, with regard to UNP, check out its dividend history.  

One last thing regarding railroads. There really isn't much choice out there. I won't buy Canadian companies any more. Ever. Okay, maybe some exceptions. The only rail I would consider is too iffy right now, but one may want to watch it very, very closely. The Biden administration might make for a great opportunity.