The is an excerpt from The Globe Mail. The author, George Athanassakos, is a professor of finance and holds the Ben Graham Chair in Value Investing at the Richard Ivey School of Business, University of Western Ontario. The center is behind the annual Value Investing Conference in Toronto during the week of Fairfax’s annual meeting.
The title of the article ask a question that has been asked frequently in the value investing circle. Berkshire or Fairfax? In the 80s and 90s the question would have been more interesting. For the last 10 years Fairfax had its up and down. The last five years have clearly been a disappointement. But lately Fairfax’s Prem Watsa seemed to have refocus and has changed direction since Trump got elected. Fairfax’s has repeatedly been labeled the Warren Buffett of the North. As for the future, Fairfax is much smaller than Berkshire. BRK is dealing with a too big issue. It’s sitting on a growing $100 billion. There are not many targets.
Like I said the article is asking a fun question. However I find the article a little short and lacking substance. But it’s still interesting.
Excerpt from The Globe and Mail
By George Athanassakos
Here’s an intriguing question for value investors: If you had to choose between the two, which stock would you pick – Fairfax Financial Holdings Ltd. or Berkshire Hathaway Inc.?
Fairfax follows a Ben Graham approach, which involves looking for obscure and unattractive stocks (that is, companies in financial distress, with a low price-to-earnings ratio and low expected growth). Berkshire Hathaway, on the other hand, looks for stocks that have barriers to entry and a sustainable competitive advantage. The former puts less emphasis on quality investing, while the latter makes quality investing a key ingredient of their investment process. It all then boils down to which approach can produce better long-term investing results. Put simply, do lower-quality value stocks produce better long-term performance than higher-quality value stocks?
So, Fairfax or Berkshire Hathaway? Based on the above qualitative and quantitative evidence, I dare to predict that, going forward, Fairfax’s stock may have a better long-term performance than Berkshire Hathaway’s, given Fairfax’s orientation toward the Ben Graham (lower-quality) type of value stocks.
George Athanassakos is a professor of finance and holds the Ben Graham Chair in Value Investing at the Richard Ivey School of Business, University of Western Ontario.
Full article here from The Globe and Mail