- BH and MKL have more maneuverability than BRK-A.
- BH has recent insider buying.
- EPS growth over the past 5 years is around 53%.
Warren Buffet may be the most widely respected and often emulated investor in the world. His value investing philosophy is the backbone of many investment companies and Buffet finds himself listed in the Forbes 400 every year as one of the wealthiest people on the planet.
If you wanted to simply ride his coattails, you could just invest in his flagship company Berkshire Hathaway (NYSE:BRK.A) and call it a day, however a single share of "A" stock will cost you over $190,000. Alternatively you could forgo voting rights and purchase the class "B" (NYSE:BRK.B) shares instead, but there's a bigger picture here.
At 83 years old, Buffet is unlikely to continue managing his empire for much longer. It will pass to another who may have been trained in Buffet's methods, but will also have their own philosophy as well. The Berkshire patriarch is looking more to what his legacy is rather than building his business.
The other issue is the fact that Berkshire Hathaway is big. $314 billion big. That makes it sluggish when it comes to identifying opportunities that younger, smaller companies might be able to take advantage of. It also means that it will dismiss many more good opportunities simply because Berkshire requires a tremendous amount of them in order to matter. Acquiring a $1 billion company that could generate 50% in returns over the next 5 years would make them the envy of Wall Street, but it would only make up less than a third of a percent of Berkshire's total market cap.
Markel (NYSE:MKL) is often pointed to as its successor. It's even been nicknamed "Baby Berkshire" because of its investment arm that owns more than just an insurance company but also machinery, healthcare, and other types of businesses making it diverse. As one of our "forever" stocks to own, Markel has had an exemplary performance - up more than double in the past 5 years.
While Markel is still growing, some investors would rather find a smaller Berkshire clone that's trouncing earnings all the while staying under the radar. One small cap $730 million company may be just that - Biglari Holdings (NYSE:BH).
The infamously sharp-tongued CEO Sardar Biglari draws comparisons to Warren Buffet in the way his company operates and could be a "mini-Berkshire" in its own right. The diversified holding company is known for its restaurant brands Steak n' Shake and Western Sizzlin'. In addition, the company also owns Maxim, First Guard Insurance, and several other subsidiaries under the Biglari name.
The stock looks solid from a fundamental standpoint. EPS growth this year is over 553% while earnings growth next year is expected to be 67%. Over the past 5 years, EPS growth has averaged over 53%. Sardar Biglari bought 6,076 shares in March, which investors typically translate as a positive sign that management believes in their company's future prospects.
Actions to take: The average analyst target price is $550 - a 30% premium from the stock's current price levels. Performance YTD is -16% presenting a buying opportunity for value investors.
Risks to consider: As an aggressive acquirer of other companies, Biglari is ideal for long-term investors as undervalued companies can take time to fully realize their intrinsic value. A careful watch on debt levels is important, as it allows Biglari to continue making acquisitions.