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Is This a Baby Berkshire Hathaway Inc. (BRK.B) or Not?

Editor’s Note: A previous version of this post stated that Leucadia had an interest in Fortescue Metals Group and Inmet Mining. This has been corrected.

Leucadia National Corp. (NYSE:LUK) has often been called a baby Berkshire Hathaway Inc. (NYSE:BRK.B). It does have many similarities to Berkshire Hathaway Inc. (NYSE:BRK.B) and even has a 50-50 joint venture with them in the Berkadia Commercial Mortgage company. But where do the similarities end?

Berkshire Hathaway Inc. (NYSE:BRK.A)The Berkshire mini-me?

They are both diversified holding companies; they both have veteran investors as Chairmen, Ian Cumming and Warren Buffett. Both Buffett and Cumming write interesting, insightful and even entertaining Letters to Shareholders. Sometimes Cumming’s letters are laugh out loud funny.

Unlike Berkshire Hathaway Inc. (NYSE:BRK.B), Leucadia National Corp. (NYSE:LUK) is quite volatile as you can see from the chart, yet has outperformed Berkshire Hathaway Inc. (NYSE:BRK.B) and the overall market. But when it goes down, it really goes down.

In one of those inimitable Letters to Shareholders, Cumming explains 2008, “In 2008, Leucadia reported a loss of $2,535,425,000 after tax, which is $11.00 per share fully diluted. In 1992, following a fire in Windsor Castle and marital problems for most of her children, the Queen of England in a speech marking the 40th anniversary of her Accession referred to the past year as ‘annus horribilis.’ 2008 was just such a year.”



BRK.B Total Return Price data by YCharts

Since that “annus horribilis,” Leucadia has turned things around, increasing EPS from $0.10 in 2011 to $3.49 in 2012. With first quarter EPS of $1.10 it looks like they’ll top 2012. Total revenue for 2012 came in at $7.15 billion. At the end of the first quarter in 2013 it’s on track to surpass 2012 with revenue so far of $2.14 billion.

Leucadia offers a yield of 1.00% at a 12% payout ratio. (Berkshire has no yield) and has a five star CAPS rating. So does Berkshire Hathaway Inc. (NYSE:BRK.B). There the similarity ends. Leucadia has one-twentieth the market cap of Berkshire Hathaway Inc. (NYSE:BRK.B) at $9 billion to $262 billion. And Leucadia has a much smaller trailing P/E at 9.93 to Berkshire’s 16.75.

Leucadia, like Berkshire, has big hedge fund adherents; Bruce Berkowitz of Fairholme has been holding and adding to Leucadia for a 5.15% stake in Leucadia. Keynote speaker Whitney Tilson again recommended Berkshire as a buy at the Value Investing Congress.

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