One hundred seventy thousand dollars.
That’s roughly how much one share of Berkshire Hathaway Inc. (NYSE:BRK.A) stock is selling for these days.
Imagine if you had been one of the fortunate few to invest in Warren Buffett’s young company back in 1967, when shares were trading for $20.50. Right now, you would be sitting on a total nominal gain of 829,460%.
But nowadays, Berkshire Hathaway Inc. (NYSE:BRK.A) has, to some degree, become a victim of its own success. Buffett has often said that the company’s current size ($278 billion market cap) has made future growth more difficult.
“Size is the anchor of performance. There is no question about it,” Buffett has said. “It doesn’t mean you can’t do better than average as you get larger, but the margin shrinks.”
Of course, having too much money is a problem most of us would like to have. And I certainly don’t mean to imply that Berkshire is a bad investment.
But it does beg the question — are there any other publicly traded companies that could be the next Berkshire? Are there any companies currently on the market that share Buffett and partner Charlie Munger’s penchant for value investing, long-term holdings, and the use of insurance float to generate big returns?
While many investing firms have sought to imitate Berkshire Hathaway Inc. (NYSE:BRK.A)’s success over the years, I’d like to tell you about one company in particular that’s on track to follow the same path.
Like Berkshire, Alleghany Corporation (NYSE:Y) is an investment holding company that uses a value-oriented strategy to acquire interests in businesses and equity holdings. And, like Berkshire Hathaway Inc. (NYSE:BRK.A), it generally holds these investments for long-term periods. Through subsidiaries such as RSUI Group, Capitol Transamerica, Pacific Compensation and Transatlantic Holdings, the company sells specialty insurance and property-casualty insurance.
In 2012, the company gained exposure to the reinsurance industry through its acquisition of Transatlantic Holdings. Alleghany Corporation (NYSE:Y) also owns real estate and minority stakes in energy-related companies.
While its $6.4 billion market cap is much smaller than Berkshire Hathaway Inc. (NYSE:BRK.A)’s, Alleghany Corporation (NYSE:Y)uses a similar strategy to generate returns. It collects insurance premiums paid by customers and invests this money (called float) for its own benefit. This is the same strategy that Berkshire has successfully employed for years through such insurance holdings as GEICO and General Re.