03/30/09 - 01:53 PM EDT
Jon "DRJ" Najarian, co-founder of OptionMonster.
Berkshire Hathaway(BRK.A Quote - Cramer on BRK.A - Stock Picks), which owns 22% of Burlington Northern(BNI Quote - Cramer on BNI - Stock Picks), is being chatted up as a potential buyer of Burlington Northern along with Chinese railroad operator Guangshen Railway(GSH Quote - Cramer on GSH - Stock Picks).
Guangshen Railway is trading down 71 cents to $16.11 today, which we could attribute to the 3.4% selloff in the broader market as easily as the rumor of its interest in Burlington Northern. Berkshire, led by Buffett, is also down 4.8%.
So let's break down the three Vs to see if Burlington Northern could indeed become part of the recent takeover wave:
Volatility: Implied volatility peaked at 55% in early March and stood at 47% Friday. Today, Burlington Northern April calls spiked up to 65% again, well surpassing the March highs. May implied volatility stood at 63%.
Volume: Normal full-session stock-trading volume over the last three months has been 4 million shares, but in the first two hours alone today 2.3 million changed hands.
Valuation: Current valuation of Burlington Northern is $20 billion, and our models indicate that a takeover would be at least $26 billion, which is a tough raise right now.
Berkshire Hathaway Annual Letter to Shareholders 2008 - Read the latest Berkshire Letter
Daily Forex Updates - Daily Forex data, commentary & tools to help make trading Forex easy
Share Investor Blog - Stockmarket & Business commentary
Share Investor New Zealand Business News- Get more business news
Shareinvestor.net.nz - Discuss this topic further
Recommended Amazon Reading
Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage by Mary Buffett
Buy new: $16.47 / Used from: $13.50
Usually ships in 24 hours
Kindle 2: Amazon's New Wireless Reading Device (Latest Generation)