Warren Buffett made headlines last month when he announced that his company, Berkshire Hathaway Inc. (NYSE:BRK.B), was buying Heinz. Ketchup is delicious, and a company that makes it is pretty easy for the average American to understand; we see ketchup, we get ketchup.
Some of Buffett’s other investments can be a little bit more complicated — particularly when it comes to the energy industry — but that doesn’t mean they should be off the table. In fact, Buffett has shown tremendous foresight in his energy-related deals over the past few years, and investors hip to his thinking stand to reap profits of their own.
Buffett and solar
At the beginning of this year, Berkshire Hathaway subsidiary MidAmerican Energy announced that it was buying a 579 megawatt solar plant from SunPower Corporation (NASDAQ:SPWR) for about $2.5 billion. The new plant will make a nice addition to MidAmerican’s two other solar plants that First Solar, Inc. (NASDAQ:FSLR) is building for the company in California and Arizona. These purchases will add to the subsidiary’s growing portfolio of renewables, which also includes wind, geothermal, and hydro.
The future of renewable energy looks bright, and solar is one of the many ways investors can take advantage of that trend. After all, the U.S. is slated to generate 10 GW of power from solar energy by the end of this year, so there must be something to that. But Buffett isn’t limiting his investments to solar power; he is investing in all facets of the American energy story, including oil and gas.
Buffett and oil
In 2009, Berkshire Hathaway purchased Burlington Northern Santa Fe. Buffett said he was making an “all-in wager on the economic future of the United States” at the time. That bet has paid off in spades, as only a few years later oil production in the Midwest has kept unemployment down and revitalized railroads. How? Production of the black gold has grown beyond the capacity of regional pipelines, forcing producers to use trains to get it to market — Warren Buffett’s trains, to be precise.
The Energy Information Administration has helped put this trend in context, pointing out that oil (and petroleum products) is the fastest-growing commodity-by-rail shipping movement right now:
And of course, Buffett’s railroad just happens to be the largest holder and operator of rail lines in North Dakota, the origin of all this oil. It’s estimated that 52% of oil produced in the Bakken Shale is transported out of the play via rail right now. BNSF is doing its part and expects to cart out 700,000 barrels each day by the end of this year.
Buffett and gas
But Buffett’s energy connection doesn’t end there. BNSF recently announced that the railroad will begin experimenting with natural gas as a transportation fuel this year. Instead of running on costly, polluting diesel, a select number of BNSF locomotives will run on cheaper, cleaner natural gas. BNSF is one of the country’s largest consumers of diesel, and should a complete transition to natural gas be made, it would save more than few pennies.
In the span of three years, Buffett has made three very different energy investments, illustrating the wide range of opportunities available to today’s investors. The options can be overwhelming, but that doesn’t mean investors who don’t know all there is to know about energy should sit on the sidelines.