“The Next Berkshire: The One Forever Stock That Could Make You Rich”

By Travis Johnson, Stock Gumshoe, March 20, 2007

It should come as no surprise that after only a couple weeks of posting my teaser sleuthing on this site, I’m already on my second “next Berkshire Hathaway” — as I’ve written on my other blog several times, and been guilty of myself, the search for the next Warren Buffett is one of the most evergreen pursuits in all of investordom.

This time it’s a little different — I posted Navellier’s tease about the next Warren Buffett a week or so ago, but this time it’s not the next Buffett but the next Berkshire Hathaway (a fine distinction), and it’s a tease from a different newsletter service.

Courtesy of Capital & Crisis, an advisory service I’ve not heard of before, comes the tease for a stock pick by Chris Mayer.

The scene is set clearly, as with all “next Berkshire” stocks — imagine investing in Berkshire Hathaway just thirty or so years ago, and watching your thousands turn into mllions.

And here are a few of the choice teaser quotes from the ad (there are more — this one is probably too easy to spend much time on):

“This is as close to “hands-free,” no-worries investing as you’ll ever get.”

Like “looking backward through a telescope at Berkshire itself in the 1970s.”

“Read this company’s ‘Operating Principles’ – part of its annual report – and you’ll feel like you’re reading pages ripped right out of the even more famous Berkshire Hathaway Owner’s Manual”

And then the more specific teaser clues:

Buffett owns over $800 million in shares of this company, already having more than doubled his money (this is a bit out of date, Berkshire’s holdings in this one are nearly a billion as of the last Berkshire Annual Report)

The head of the company engineered a massive turnaround for this firm, then retired, then came back to help them again when they were in a spot of trouble. He’s called the “Babe Ruth of his industry.”

This stock “Protects You From Mischief and Manipulation on Wall Street” and gives you “Real Cash Back.”

That last one, the “real cash back,” is a bit misleading — that refers to the very high book value of the shares, much of which is in cash. The company doesn’t actually give you any of it — or much of it, I should say, since they do have a small dividend of 1.5%.

And probably the last clue we really need: Book value stands (as of the writing of this email, I guess) at $382 per share.

Wow! Amazing! What kind of stock could have that kind of book value?

Well, since we’re talking about a big Buffett investment, it won’t surprise you to hear that the stock price isn’t managed or split — so it’s trading up around $550 at the moment. If you look at it like that, that the company is trading at roughly 1.3X book, it’s not as impressive (though it’s still pretty good). And they’ve got plenty of cash, about $1.5 billion of it as of the last filing, or roughly a quarter of their $6 billion market capitalization.

So this one “Forever Stock?” The Stock Gumshoe put all those clues into his thinkomatic and tells you that Capital & Crisis’ promised “Next Berkshire” is …

White Mountains Insurance (WTM)

I’ve actually looked at this company before as part of my personal portfolio musings, and decided that I prefer both Berkshire Hathaway itself and Markel (MKL) in the insurance space. Part of the reason for this is that the Babe Ruth of WTM, Jack Byrne — who also turned GEICO around decades ago and appears to be trying to whip his son, Patrick Byrne of Overstock.com, into shape — isn’t going to be a Director forever, and White Mountains continues to make small insurance acquisitions but hasn’t diversified into the kind of profitable non-insurance investments we see from Berkshire and Markel.

That’s not to say that I have anything against WTM — I don’t, and I don’t expect anyone will be terribly disappointed with a investment in this very solid insurance company … it’s certainly not a scam pick or a totally misleading one like some that I see in my email spam. But I don’t personally see the next Berkshire Hathaway here.

But thanks to your friend the Stock Gumshoe, you at least know who Chris Mayer thinks will be the next Berkshire … and you didn’t have to subscribe to anything to find out.