Leucadia National Corp. (NYSE:LUK) has often been called a baby Berkshire Hathaway Inc. (NYSE:BRK.A). It does have many similarities to Berkshire and even has a 50-50 joint venture with them in the Berkadia Commercial Mortgage company. But where do the similarities end?
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.A), Leucadia National Corp. (NYSE:LUK) is quite volatile as you can see from the chart, yet has outperformed Berkshire 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 National Corp. (NYSE:LUK) 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. There the similarity ends. Leucadia National Corp. (NYSE:LUK) has one-twentieth the market cap of Berkshire 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 Hathaway Inc. (NYSE:BRK.A), has big hedge fund adherents; Bruce Berkowitz of Fairholme has been holding and adding to Leucadia National Corp. (NYSE:LUK) for a 5.15% stake in Leucadia. Keynote speaker Whitney Tilson again recommended Berkshire as a buy at the Value Investing Congress.
One reason hedge funds like both are their huge insider holds. Leucadia National Corp. (NYSE:LUK) Chairman Cumming owns 18,726,054 shares and CEO Richard Handler owns 11,184,168 shares. Warren Buffett owns 26,675,175 shares of the Berkshire A stock.
Another reason to like Leucadia is it is still trading below book as it has since 2011. Meanwhile, Berkshire Hathaway Inc. (NYSE:BRK.A) is trading significantly above book with Berkshire A shares closing above $168,000 on June 21 with book at $120,505.