In this piece, we’re going to have a battle of the greats, with Canada’s own Fairfax Financial Holdings (TSX: FFH) going head to head against none other than the legendary Berkshire Hathaway (NYSE: BRK.B). Shares of both insurance and investment holding firms are fresh off an incredible 2023 of gains. With sights set on the new year, questions linger as to whether the two financial heavyweights can keep up their rallies from here.
At writing, shares of FFH and BRK.B are up around 52.5% and 14.7%, respectively, over the past year. Though Fairfax has been much hotter than Berkshire of late, it’s worth noting that both plays are within a stone’s throw (around 2% or less) of reaching new all-time highs.
Without further ado, let’s see if Warren Buffett’s Berkshire Hathaway or Prem Watsa’s (also known as the Canadian Warren Buffett to some savvy investors) Fairfax Financial Holdings stands taller this January.
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Fairfax Financial Holdings
Fairfax stock has been one of Canada’s hottest stocks over the past three and a half years. Since its lows in 2020, the stock has gained an incredible 260%. Though Fairfax’s incredible run was due in part to a turning of the tides, you simply cannot look past the improving underwriting performance. In many ways, Fairfax is showing why it’s one of Canada’s most robust financials.
Additionally, Prem Watsa has continued to invest wisely. With a nose for value and a track record that really speaks for itself, I’d argue now is still a good time to invest in Watsa and company. The stock may be on a hot streak, but shares aren’t expensive.
Actually, they still look cheap as dirt at 7.6 times trailing price-to-earnings. That’s an absurdly depressed multiple that suggests earnings are outpacing the pace of stock price appreciation. Can Watsa pull off another year of impressive gains? I have no idea, but I wouldn’t bet against the man, especially not at today’s modest multiples.
At this juncture, FFH stock stands out as a momentum and value play.
Berkshire Hathaway
Berkshire Hathaway is the legendary firm that really needs no introduction. Led by the brilliant Warren Buffett, Berkshire is on a mission to continue delivering for its long-time shareholders in 2024. Though Berkshire lost the great Charlie Munger (Buffett’s right-hand man), Berkshire Hathaway remains an intriguing value option for the new year.
If you’re of the belief that a recession is on the way, Berkshire stands out as an interesting bet, given its substantial cash position. If stocks plunge, Berkshire will be ready to buy stocks at great deals, which, in turn, will help propel the stock over the long run. What can Berkshire pick up that will help power earnings growth? It has plenty of options, but don’t expect it to move unless there’s a steal of a deal!
Berkshire’s run is for the long term, and as Berkshire and Buffett enter 2024 with considerable sums of cash, investors would be wise to look to the firm as a means of playing it defensive.
Better buy: Fairfax or Berkshire?
It’s too hard to choose between the two. I’d argue there’s a case for owning both right now. In fact, I think new investors ought to as shares continue trending higher in the new year.
