Avoid making negative or unhelpful posts, and instead focus on providing constructive feedback and ideas that can help to move the discussion forward.
- Manlobbi
Halls of Shrewd'm / US Policy❤
No. of Recommendations: 29
We often discuss other firms that might offer a business model similar to Berkshire. Or value oriented firms which are seemingly undervalued and might offer superior returns.
But here's a question for you, that I haven't really heard discussed as such---
Ignoring the likely forward returns, and also ignoring current valuation levels, what other firms are run with a similar "style" of management?
Not "ethical" in terms of innocent-sounding business activities, though I do like a firm that won't get into a business they find odious.
I'm thinking more of the anomalous and good things about Berkshire. CEO communicates frankly and clearly and honestly, not over reliant on financial complexity or financial engineering or gearing, no stock options, patience, executive team barely compensated (compared to prevailing norms) other than their returns from the stock, longevity, run for the benefit of shareholders equally, rational (though not necessarily world beating) capital allocation. Probably teamed with conservative balance sheet. Probably not run by Bruce Flatt.
It wouldn't be so bad to have money invested in a firm like that, even if it didn't actually grow in value rapidly. Plugging away can be OK, if it's along with someone you trust.
Jim
No. of Recommendations: 4
Fairfax Financial would be my pick (and is also my largest single position)
No. of Recommendations: 0
Constellation software from Canada is one candidate tat ticks most of those boxes
No. of Recommendations: 1
Lvmh? Similar to brk in that it’s decentralized, owner operated, and acquiring companies to grow over time.
No. of Recommendations: 5
No. of Recommendations: 4
In US stocks, I would take a look at Danaher from an historical perspective. They have continually, purchased numerous ecxellent, but smaller, businesses in a field, combined/reconfigured them and then, once they have built a moat, spun them off by distributing stock in the newly created company.
If you don't mind looking further, at least three of the five Japanese conglomerates (trading companies) which Bershire invested in currently seem quite attractive.
Jeff
No. of Recommendations: 17
Fairfax Financial would be my pick (and is also my largest single position) Hmmm, I've never felt entirely comfortable with them. A bit too close to financial engineering, and a bit to keen on large macro bets, leading to multi-year stretches that look great or terrible. More hat than horse.
My first thought for the criteria I mentioned is Loews (L). They have had some hits and some misses since I first owned some in 2010, and it was certainly a very bad place to have your money between the credit crunch and the pandemic compared to a random big firm, but they always seemed rational and trustworthy. They do seem more comfortable in the oil and gas realm than I; I always do poorly there.
Right now I'm reading up on Investor AB. Sometimes called the Nordic Berskhire, though there are so many "The XXX Berkshire" firms that it becomes tiresome! Founded 1916, I think of them like a publicly listed family office's portfolio.
Some introductory links mentioned in this post on the Non-US Stocks board.
https://www.shrewdm.com/MB?pid=199718017Jim
No. of Recommendations: 9
Hmmm, I've never felt entirely comfortable with them. A bit too close to financial engineering, and a bit to keen on large macro bets, leading to multi-year stretches that look great or terrible. More hat than horse.
Yes, your view is and has been the consensus view. A primary reason we were able to acquire a large position so cheaply. The company is still quite "cheap" even at its all-time high.
I think those that half pay attention miss what has been built and will be pretty impressed with the long tenured culture that has been built here. But that realization may come at much higher prices.
But I will admit that I follow this company more closely than most people do.
No. of Recommendations: 7
Fairfax Financial would be my pick (and is also my largest single position)
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Hmmm, I've never felt entirely comfortable with them. A bit too close to financial engineering, and a bit to keen on large macro bets, leading to multi-year stretches that look great or terrible. More hat than horse.
Fairfax is also my largest position, by far. They have made a lot of macro bets in the past, most of them good, but I can understand how you wouldn't want to count on these. But in recent years, they also have very strong underwriting results, get a ton of leverage from their float, and they also have some of the favourable management practices we like with Berkshire, like low CEO pay, no use of stock options (although they have some stock incentive plans), and a long-term view. It seems to be like it has the kind of potential that Berkshire had 30 years ago, before its size ruled out most stock investments and the advancing age of its CEO made it hard to believe the stellar past results could continue for much longer.
What are you refering to with respect to financial engineering? This has been a frequent accusation by some analysts (most recently by Muddy Waters), but I can't really see any sign of it.
dtb
No. of Recommendations: 8
no use of stock options (although they have some stock incentive plans)
One thing I appreciate about their employee share ownership plans is that Fairfax purchases the shares used in compensation in the open market with cash and holds them in treasury to later dispense to employees. This is a great part of their culture - very long tenured employees, continuity of management across the insurance operation, very large employee stockholding, no dilution from employee stock ownership.
No. of Recommendations: 3
Looking at REIT preferred stocks I looked into MDV, Modiv Industrial. I ended up with both the preferred and the common. A small REIT specializing in industrial and manufacturing properties, they are well positioned for the current political times, but it was an Mungerish quote from the CEO that gained my attention. Something to the effect of "opinions are like A-holes, everyone has one but you don't necessarily want to hear from it". Not your typical earnings report. I was also impressed that they try to rent to tenants who have a solid business going foreword, not just the willingness to pay a higher rent.
Here's another recent quote: My hope is that those investors out there, who worked damn frickin hard for their money, will read this and say to themselves 'this dude is a good steward of my capital'. To paraphrase Warren Buffett, I personally have put all my eggs in one basket (over 1.11 million eggs to be exact - which is over 8% of the MDV basket), and I am watching (and thinking and strategizing and perfecting) that basket 24/7. Each day we climb the hill, each day we grind it out, and for those of you who that resonates with - then welcome to the tribe.
No. of Recommendations: 19
I just happened to be looking at Fairfax's historical results, and thought the comparison with Berkshire might be interesting.
We know Berkshire has had an unbelievable almost 20% annual growth in book value since Buffett began 60 years ago, in 1965. Fairfax only started in 1985, so it is about 20 years behind. Either the most recent 40 years have been less favourable to the stock markets, or Berkshire's size has slowed it down, or probably both, since Berkshire's book value return since 1985 is 14-15%, according to perplexity.ai, and without having done the calculation myself, this seems plausible.
Fairfax, on the other hand, has grown its book value by 18.7-18.9% in the same time period, again according to perplexity (this number includes the small dividend that Fairfax pays, about 1% currently, whereas Berkshire has paid no dividends except for once, I believe it was a 10c dividend in 1967, which Buffett now calls a 'bad dream'.)
Also, Berkshire's P/B of 1.69 is currently above its long term P:B ratio; Fairfax's ratio of 1.52, while up a bit in the past few years, is still below its long-term average.
There are other differences: Buffett likes to only swing the bat at sure things, Watsa takes some bigger swings and sometimes strikes out. Berkshire has some leverage from float, i.e. about $171b for $649b of book value at year end, whereas Fairfax has a much greater amount of float in relation to its book value, $36.9b in float for $23.0b in book value, so where Berkshire's floats provide another 26% of investable assets, Fairfax's float provides another 160%. This might make Fairfax the more dangerous investment, except that most of the float is invested in treasuries, because of insurance regulatory restrictions, so it's not as dangerous as it might seem.
As Jim says, there have been multi-year flat stretches (particularly 2010 to about 2018) where some of the macro bets and shorting went sour, and whereas Watsa has now sworn off shorting, he will undoubtedly continue to keep an eye on macro more than the 15 minutes a year that Buffett recommends.
Anyways, I just thought I would mention that, although it is true that Berkshire has a longer history to rely on, 60 years instead of 40, forty years is still a pretty long period to generate annual returns just a hair under 20%. Fairfax is small (it would be the S&P's 330th biggest company if it was based in the US), so it may still have a reasonably long runway if it can keep anywhere near its historical performance.
Regards, DTB
No. of Recommendations: 7
