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Railroad stocks not fazed by Berkshire's planned sale
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Railroads not Fazed by Berkshire's Planned Sale
Warren Buffett's Berkshire Hathaway plans to sell all of its holdings of Union Pacific and Norfolk Southern due to the planned purchase of Burlington Northern. The two stocks appear unfazed by the announcement, and actually look ready to surge higher. Normally a sale of this magnitude from someone like Warren Buffett will not cause an increase in a stock's price.
Berkshire plans on disposing of these holdings between now and the purchase date of Burlington Northern. According to a filing from June 30, 2009, Berkshire owns 1.9% of Union Pacific and .5% of the outstanding shares of Norfolk Southern. Obviously, these are huge positions for one company to own, but rather small when viewed as a percentage of the total outstanding shares.
Northern Southern to Move 8% Higher
Using technical analysis and looking at a daily chart of Northern Southern, or NSC, it's clear the stock wants to continue higher. Last week it broke out of an inverse head and shoulders pattern that has a target priceof $56 per share, or 8% higher over the close on November 10. This price target will likely be met prior to Berkshire's planned sale.
Bullish for now, but Union Pacific may Move Lower in 2010
A daily chart of Union Pacific looks less bullish than Norfolk Southern, but still suggests higher prices are on the way. Union Pacific, or UNP is trading in an expanding broadening wedge pattern. This chart suggests, UNP should test the upper trend line near the $67 level, which is also 8% higher over the closing price on November 10. These patterns are generally found at the top of big moves, and suggests lower prices longer term. Once this upper trend line is met, Union Pacific may see a big correction in eary 2010. Perhaps Berkshire's sale will have an impact on these rail road stocks; it might just be months down the road.
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