Nov. 5 (Bloomberg) -- Harry Stegmaier has been collecting railroad memorabilia for more than 50 years, so even though his 500 shares of Burlington Northern Santa Fe Corp. looked sweeter after Warren Buffett agreed to buy control of the company on Nov. 3, the railroadiana may well outperform the stock.

“I saw a Milwaukee Road menu go for more than $800 recently on Ebay,” said the 67-year-old retired history professor from Maryland. “I watched because I own a few. I paid $15 for the exact same menu in the mid-1980s.” (Milwaukee Road refers to the Chicago, Milwaukee, St. Paul and Pacific Railroad.)

High returns aren’t unusual for railroadiana. Alan Altman, who has been buying and selling railroad collectibles for more than 30 years, frequently sees a 50 percent profit.

“It has been a solid investment over the years,” said Altman, owner of Golden Spike Enterprises Inc., which hosts auctions and organizes railroadiana trade shows.

Buffett’s Berkshire Hathaway Inc. agreed to pay $100 a share, or $26 billion, for the 77.4 percent of Fort Worth, Texas-based Burlington it didn’t already own and assume $10 billion in net debt.

Stegmaier reckons he’ll sell his 500 shares at that price, for a total of $50,000, or about triple his initial investment. Still, money isn’t what motivates most railroadiana collectors.

“It’s knowing that you have a piece of history,” said Stegmaier, who has been in love with trains and railroads since he was two.

Over the years he has filled six cupboards with more than 1,000 items, some going back to the early 20th century, including china, silverware and slides.

Unique Cuisine

He frequently dines on white-and-blue china manufactured by the Baltimore & Ohio Railroad for its centennial in 1927.

“I have an eight-place set, including the silverware, napkins, menus and tablecloths,” he said. “I have the recipes from the menus and I cook from them” on special occasions.

Each railroad had a unique cuisine, Stegmaier said. He still salivates remembering the French toast and lamb chops on Burlington Northern’s Denver Zephyr from Chicago to Denver. First-class dining on the Mohawk train operated by Grand Trunk Western Railroad offered complimentary meals that included freshly baked rolls and prime rib, he said.

“It was just fantastic: Tablecloths, linen napkins, expensive menus, beautiful decor,” he said. “Now it’s all the same. The cars, the food are all the same. And there’s no china.”

He said Rock Island Railroad, the company that collapsed nearly three decades ago, didn’t have “very pretty china toward the end. I let my cats eat off of that.”

Upside Potential

Railroadiana is a highly specialized field with an upside potential and a dedicated collector base. Some buyers focus solely on cabooses; others on diesel trains, locomotives, regions or freight types such as coal and timber.

“People will collect toy trains, model trains, railroad pins, hats, china,” said David Shackelford, chief curator at the Baltimore & Ohio Railroad Museum. “Railroad photography is a huge market.”

Prices start around $25 for a common railroad pass. Antique model trains can fetch as much as $50,000 at auctions and paintings depicting train scenes peak at $100,000, according to collectors, curators and dealers.

“We have people who can barely afford to collect and we have multimillionaires,” said Altman. “A lot of them are railroad employees or had families who were in the industry.”

Vanderbilt Car

Restored private train cars, with fancy woodwork and gold details, represent the most glamorous and luxurious segment of the market. That’s how U.S. presidents and 19th-century industrial barons, including the Vanderbilts, Carnegies and Mellons used to travel, said Shackelford. President Barack Obama arrived in Washington on his inauguration day in a 1930 Pullman- built car.

While a gutted car may set you back as little as $25,000, its restoration could easily reach $500,000.

Lovett R. Smith III spent about $250,000 to buy the restored 1928 car built by Pullman for New York Central Railroad Co. Director Harold S. Vanderbilt. Smith is president and principal owner of a company called VarChandra Inc., which maintains and operates the car.

Smith, whose father was an executive with the Southern Pacific Railroad, bought the car in 1991 to offer his children the lifestyle he enjoyed while growing up. He has let others charter it, usually attached to the back of an Amtrak train.

Hedge-fund managers and corporate executives from General Electric Co. and AT&T came on board, Smith said. A three-day trip to Montreal from New York for 10 people, with a chef on board, costs $10,000 to $12,000; a cross-country trip may range from $40,000 to $50,000, Smith said.

“We’ve never had anyone get on the car without a gasp,” he said. “Once the train starts moving, it’s captivating.”

To contact the reporter of this story: Katya Kazakina in New York at kkazakina@bloomberg.net.

Last Updated: November 5, 2009 00:01 EST