Buffett Buys 10% of BNI

A lot of commentators have focused on the fact that Buffett's Burlington Northern purchase is at a market P/E instead of at a discount.

The second half of the story are the tremendous economics of BNI's business. Burlington Northern and Union Pacific are the two major rails west of the Mississippi and form a pricing duopoly that insures little price competition. Additionally, Burlington Northern's biggest product is inter modal freight, with much of that coming from West Coast ports.

BNI has done a good job of improving the speed and efficiency of its network over the past few years and is now probably the best run railroad.

Based on the quality of the business, it is worth more, and thus Buffett's purchase doesn't look so pricey after all.