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'Fast Money' Recap: Buffett's Big Bet

The trading panel analyzed Buffett's acquisition of Burlington Northern.

By David Tong November 03, 2009

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NEW YORK (TheStreet) -- The markets were mixed Tuesday despite Warren Buffett's big railroad bet.

The Dow Jones Industrial Average was up 76.71, or 0.79%, to 9,789.44, while the S&P 500 added 6.70, or 0.65%, to 1,042.88. The Nasdaq rose 4.09, or 0.205%, to 2,049.20.

Karen Finerman said on CNBC's "Fast Money" TV show that themarket did get a lift from Buffett's $34 billion deal to buy Burlington Northern Santa Fe (BNI).

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Tim Seymour also thought it had a big impact on the market considering all the talk about the government pulling back on the stimulus.

For a breakout of some stocks from a recent "Fast Money" TV show,check out Dan Fitzpatrick's "3 Stocks I Saw on TV."

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Pete Najarian said the deal also makes another Buffett name, Union Pacific (UNP), attractive because of its exposure to coal and the western U.S.

Najarian also noticed that the stocks involving grain, coal and fertilizers also were affected by the deal.

Seymour said he doesn't think there are any other deals in the rail sector because there isn't anyone with the kind of cash that Buffett has to pull it off.

Joe Terranova said that the choice of Burlington Northern made sense because it adds global commerce to his portfolio.

Lee brought in Peter Schiff, president of Euro Pacific Capital, to comment on Buffett's latest acquisition. Schiff said the Burlington deal was essentially a commodity play. He said as oil prices go up, trucking becomes less competitive and railroads become more of a logical choice to move raw materials.

Schiff said he doesn't see Buffett's move as being bullish on America as it is an inflation hedge.

Whitney Tilson, managing partner of T2 Partners, called it a typical Buffett deal in which the Oracle of Omaha bought a high-quality business that generates predictable, sustainable cash flows. He said Buffett could do the deal because of his low cost of capital.

He said buying Burlington is like buying a utility. He also said the 50-to-1 split in Berkshire Hathaway HLD B (BRKB) makes the shares affordable for retail investors at about $65 a share. Terranova said he would buy the stock, describing it more like a capital markets ETF.

Melissa Lee shifted the discussion to gold, which surged to $1,085 an ounce. Seymour said the reason for the surge was the sale of International Monetary Fund of 200 metric tons of gold to India, making it the eighth largest holder of gold in the world.

Seymour said the deal should be viewed as a move by India to diversify away from the dollar. He also said there was pressure on the dollar today after Australia's reserve bank raised interest rates again.

Lee noted that Cisco (CSCO) reports Wednesday and that investorswill be waiting to hear what its CEO John Chambers has to say in his commentary.

Najarian said there's more room to the upside for the stock if there's even "a glimpse of hope." Despite Morgan Stanley's downgrade of the semiconductor space today, Terranova said he still liked NetApp (NTAP), Broadcom (BRCM) and Novell (NOVL).

Clay Jones, CEO of Rockwell Collins (COL) appeared on the show. Hetold the panel that the company is not for sale. On the contrary, he said it is operating quite well in the segments the company is in.

He said there is a good case to be made that the government will retain the "base" defense budget of $500 billion. He also said the company is doing well in overseas markets such as India and the MiddleEast.

Lee brought out a S&P chart that screened the next possible acquisitions for Buffett. Finerman, though, said Buffett might just use his money to help another company like Kraft Foods (KFT) buy Cadbury (CBY). Najarian said he didn't see anything on the list that he thinks Buffett would buy.

-- Written by David Tong in San Francisco

To watch replays of Cramer's video segments, visit the Mad Money page onCNBC.

"Check out "'Fast Money'Portfolios of the Week" on Stockpickr every Thursday.

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