Wouldn't it be great to have a self-made billionaire manage your money right alongside his own? Would it be even better if they didn't charge you for the service and even offered a discount if you hire them now? If you choose your investments correctly, you can come pretty close to exactly that situation today.
Berkshire Hathaway Inc. (NYSE:BRK.A) or -Berkshire Hathaway Inc. (NYSE:BRK.B), Loews Corporation (NYSE:L). and Sprott Resource Corp. (TSE:SCP) are publicly traded companies run by successful billionaire investors who keep large portions of their own wealth invested in the shares of the businesses they run and we can place our money right alongside theirs, receiving the same expert management services they insist upon for protecting their own wealth.
There is probably not an investor in the world that is not familiar with Warren Buffett and Berkshire Hathaway, his holding company. While Mr. Buffett’s original success was primarily driven by investments in the insurance industry, Berkshire Hathaway Inc. (NYSE:BRK.A) has become a multi-dimensional holding company with interests in multiple businesses and spanning a wide range of industries. While the returns have slowed in recent years, it is hard to argue with a 40-year track record of success that makes a good case for a strong buy and hold investment that will produce market beating returns over an extended period of time. Berkshire currently trades at 1.36 times book value and 12.4 times cash flow. It is not currently a cheap stock, but 12.4 times cash flow is not ultra-expensive and Warren Buffett IS the most successful investor of the last 40 years as well.
Loews Corporation (NYSE:L). might well offer a superior opportunity compared to Berkshire Hathaway at the moment based its performance over the last 20 years and its current valuation in the market. Loews is not as well known to the general public as Berkshire, but it is a very similar business model and was built by purchasing distressed assets far below replacement value and holding them until the market was willing to pay fair value for them again. The business is led by billionaire investor Lawrence Tisch and he and his family keep a large portion of their wealth in the shares of the business. Right now, the price to book ratio on Loews is 0.87 which means that you will receive a 15% capital gain if the price were to simply rise to book value. If Loews were to rise to the same premium to book value currently bestowed upon Berkshire’s share price, people who invest today would enjoy a 56% return on capital. Loews currently trades at a price to cash flow ratio of 8.4 to 1, which is very low for such a well-run business, and almost 50% below that of Berkshire. While Loews Corporation (NYSE:L) and Lawrence Tisch do not have the brand recognition of Berkshire Hathaway Inc. (NYSE:BRK.A) and Warren Buffett, there is not a great deal of difference in performance over the last 15 years. Lawrence Tisch has a long track record of acquiring valuable assets that are currently out of favor at distressed prices and then waiting for the market to recognize the real value. I am happy to place my money alongside his anytime I can do so and getting the opportunity at a substantial discount to fair value is just gravy on my potatoes.