It’s no secret that Warren Buffett loves railroads — five years ago, his Berkshire Hathaway (BRK.B) ponied up $34 billion to acquire Burlington Northern Santa Fe.
Some observers thought the “Oracle of Omaha” was off his game, making such a huge investment in a 150-year-old industry in the depths of the Great Recession. But the last laugh was Buffett’s as railroads’ fortunes have soared on shale oil transport and growth in intermodal containerized freight.
Since Buffett added BNSF to BRK’s portfolio in 2009, railroads have experienced a paradigm shift in their business models. Railroad stocks took their lumps during the recession as weaker merchandise shipments could not compensate for power companies’ reduced demand for coal. But as the economy recovered, shippers embraced rail’s economic value proposition — since railroads can move a ton of cargo 425 miles on a single gallon of fuel.
So what does all this mean for investors? Buffett’s ongoing love of the prospects of railroad stocks signals an opportunity for individual investors, too. Here are three railroad stocks to ride now: