10/17/05 by Chris Mayer
It’s always an intriguing question, isn’t it? Searching for the next Berkshire Hathaway is the investor’s equivalent of the quest for the Holy Grail. After all, an investment in Berkshire years ago would have made you very rich today.
In James Altucher’s recent book, he writes about meeting Berkshire Hathaway investors at the annual shareholder meeting. One lucky fellow bought 200 shares of Berkshire Hathaway in 1976 for about $15,000. He sold half after they doubled, in about a year. This must rank as one of the worst sell decisions of all time. But he kept the remaining shares, and today they are worth over $9 million. “One can argue that this man I had spoken to was an incredible investor,” Altucher notes. “He had turned $15,000 into $9 million over the course of 25 years – a 50,000% return!”
There will likely never be another Berkshire, simply because there will never be another duo quite like Warren Buffett and Charlie Munger. Nonetheless, the basic underlying principles that contributed to their success can be emulated, even if the whole package cannot be replicated exactly. I think most investors would not complain if they earned returns anywhere near what Berkshire has delivered.
The investment opportunity that follows is one that shares several qualities with the great Sage of Omaha’s famous holding company. In fact, the Sage himself is quite a fan of this company, which has grown to become Berkshire Hathaway’s eighth largest holding. Even so, it is by no means a household name like Coca-Cola, Wells Fargo or American Express. I would venture to say that most people have never heard of it.
Warren Buffett has called its founder “the Babe Ruth of insurance,” as he was integral to the success of industry stars such as GEICO and Fireman’s Fund. The company follows a set of Operating Principles reminiscent of Berkshire’s own Owner’s Manual and espouses many Buffett-like sentiments.
Nor does this company cater to Wall Street. It does not, for example, play the trifling game of meeting quarterly earnings estimates. Instead, the focus is properly on long-term wealth creation. Its stock price, like Berkshire Hathaway’s, has never split.
As a result, the company has attracted a truly blue-chip roster of successful corporate investors. Among them are Bruce Berkowitz of Fairholme Capital Management, Joseph Steinberg at Leucadia National Corp. and David Winters of Franklin Mutual Series. All are savvy stewards of investment vehicles that have routinely hit home runs for their shareholders.
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