Warren Buffett has a proven model for success. He applied that model perfectly with his holding company Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B).
What most investors don’t realize is that Berkshire isn’t the only game in town. Some businesses have copied the strategy to produce incredible long-term results, yet they still fly under the radar.
When you look closely, Buffett is likely a huge fan of the stock below.
This guru is the next Buffett
The general public is well aware of investing greats like Warren Buffett, but names like Prem Watsa are little known. That’s too bad, as Watsa has posted double-digit annual returns since 1986. A few thousand dollar investment would now be worth a cool $1 million.
“Watsa, who may be a virtual unknown … is fast building a reputation as an investment wizard,” reported the Economic Times.
“For the long-term investors, the returns have been off-the-charts,” said Mohnish Pabrai, another famous investment manager. “If you had joined Prem 25 years or so ago, when they started, the stocks have gone from single digits … to nearly $400 today. They did really well over that period.”
Buffett loves to track book value to determine how well Berkshire has performed. Watsa does the same for this holding company.
“For the past 25 years, the book value of Prem Watsa’s Fairfax Financials has compounded a cumulative 24,424%, versus 979.7% for the S&P500,” explained one analyst. “His performance is spectacular and he ranks among the best investors in Canada and in the world.”
I’m not the first to point out Watsa’s similarities with Buffett. Many already call him the Warren Buffett of Canada.
“I think the comparisons are fair because there are a number of intersections points,” added Pabrai. “They are different people obviously, but I think they have got quite a bit in common. They have got some very good success behind them.”
This is the stock to buy
So, Watsa is the heir-apparent to Buffett. But how do you capitalize on his success?
As with Buffett, Watsa has a publicly traded holding company, Fairfax Financial (TSX:FFH). Like Berkshire, Fairfax owns a bunch of insurance businesses that throw off regular cash. Buffett is in charge of investing that cash at Berkshire. Watsa has the same role at Fairfax.
Watsa is highly incentivized to perform well for shareholders. He owns nearly 50% of the stock. For everyday shareholders, there’s not much else to do apart from staying patient, letting Watsa do all the heavy lifting.
Should you buy right now?
By purchasing Berkshire shares, you outsource your investment decisions to one of the greatest investors of all time: Warren Buffett. By purchasing Fairfax stock, you’re trusting your capital with Watsa.
Why choose Watsa over Buffett?
First, Watsa is 20 years younger than his Berkshire counterpart. This gives you decades of additional runway. Second, Fairfax’s market cap is 90% smaller. This should allow it to grow much faster than Berkshire.
Finally, Fairfax trades at a much cheaper price. FFH stock trades at a 27% discount to book value, while Berkshire trades at a 35% premium.
Few people are paying attention to Watsa, but he’s already well on his way to becoming the next Warren Buffett.
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The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). The Motley Fool recommends FAIRFAX FINANCIAL HOLDINGS LTD and recommends the following options: short January 2023 $200 puts on Berkshire Hathaway (B shares), short March 2021 $225 calls on Berkshire Hathaway (B shares), and long January 2023 $200 calls on Berkshire Hathaway (B shares). Fool contributor Ryan Vanzo has no position in any stocks mentioned.