If You Could Buy Only 1 Stock, This Should Be Your Choice

If you want to invest in the next Berkshire Hathaway Inc. (NYSE:BRK-A)(NYSE:BRK-B), buying Fairfax Financial Holdings (TSX:FFH) stock is all you need to do.

You might have heard the saying, “Don’t put all your eggs in one basket.”

Warren Buffett, the founder of Berkshire Hathaway Inc. (NYSE:BRK-A)(NYSE:BRK-B), disagrees. “Put all your eggs in one basket and watch the basket very carefully,” he recommends.

Investing in only Berkshire Hathaway stock, for example, would have made you incredibly rich. With a $500 billion market cap, however, Berkshire’s glory days are surely over.

There’s another company with many characteristics of Berkshire Hathaway, but with a $17 billion market cap. It’s run by an investing prodigy that many call the Warren Buffett of Canada: Prem Watsa.

If you decide to put all your eggs in one basket, Watsa’s Fairfax Financial Holdings (TSX:FFH) should be your choice.

Similarities galore

Similar to Berkshire Hathaway, Fairfax is essentially a holding company that invests in a wide variety of assets, from public equities to private start-ups. Watsa ability to run a holding company is beyond comparison, except against Warren Buffett himself.

After founding the firm in 1985, Watsa grew the book value per share from roughly $1 to more than $400. Through 2018, he’s grown book value by an average of 18.7% per year. The stock price has largely followed suit.

In terms of its track record and investing style, Fairfax is clearly a baby Berkshire.

Room for growth

As an immigrant from India, Watsa knows that huge opportunities lie outside of North America, particularly in regions with rising populations like India and Africa. It’s this understanding and competency that should fuel the next decade of growth for Fairfax.

For example, Fairfax Financial owns stakes in both Fairfax India Holdings Corp (TSX:FIH.U) and Fairfax Africa Holdings Corp (TSX:FAH.U). As I’ve written earlier, these areas have huge investment opportunities, but it’s difficult to capitalize without having deep connections and expertise.

“Prem Watsa has a deep network of entrepreneurs and partners in both of these regions and uses them to source attractive deals,” I wrote. “Many of these deals are private, meaning that very few outside investors can participate.”

By purchasing Fairfax stock, you get access to Watsa’s proven and resilient investment model, while also capitalizing on some of the best growth opportunities this century.

Buck the trend

Many pundits are claiming that Watsa’s reign of outperformance has come to an end. Over the last four years, for example, the stock has returned roughly 0%. Historically, though, Watsa has never made his riches during times of exuberance.

Take the 2008 and 2009 financial crisis. While equity markets around the world fell by 50% or more, Fairfax stock actually rose in value. Now that’s resiliency.

Capturing upside during bull markets is great, but avoiding 50% losses is just as important.

Over time, expect Fairfax’s returns to mimic its historical success. At $17 billion, it has plenty of room left to grow.

It’s valuation today also makes it look like a bargain. Now trading at 1.1 times book value, Fairfax stock is a relative steal versus Berkshire’s 1.4 times book valuation.

With a similar track record and greater growth opportunities, this is an ideal buying opportunity for buy-and-hold-forever investors.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool owns shares of Berkshire Hathaway (B shares). Fool contributor Ryan Vanzo has no position in any stocks mentioned. Fairfax Financial Holdings is a recommendation of Stock Advisor Canada.

More on Bank Stocks

Paper Canadian currency of various denominations
Bank Stocks

1 Magnificent Canadian Dividend Stock Down 28% to Buy and Hold for Decades

This top Canadian dividend stock is underperforming its large peers this year, but a turnaround could be on the horizon.

Read more »

data analyze research
Bank Stocks

Is BMO Stock a Buy for its 4.8% Dividend Yield?

Canadians are looking to cut back, and BMO stock is on board. But it could also be a top stock…

Read more »

Investor reading the newspaper
Bank Stocks

Is Canadian Imperial Bank of Commerce Stock a Good Buy?

CIBC is a TSX bank stock that has delivered marketing-beating gains to shareholders in the last two decades. Is the…

Read more »

Man data analyze
Bank Stocks

Where Will TD Stock Be in 5 Years?

TD stock is a good consideration for a 5.2% dividend on the recent dip. It provides upside potential, too, but…

Read more »

customer uses bank ATM
Bank Stocks

These 3 Canadian Bank Stocks Are Next in Line to Pop

Let's dive into three Canadian bank stocks that look well-positioned to continue to soar over the long term.

Read more »

a person looks out a window into a cityscape
Stocks for Beginners

Bank of Montreal vs. RBC: Which Canadian Bank Stock is the Better Buy?

Earnings season is upon us, and the Canadian banks will be reporting before you know it. So which of these…

Read more »

stocks climbing green bull market
Bank Stocks

2 Undervalued Canadian Bank Stocks to Buy Now

Here's why investing in undervalued Canadian bank stocks such as BMO and EQB can help you beat the TSX Index.

Read more »

money goes up and down in balance
Bank Stocks

Is National Bank of Canada Stock a Buy for Its 3.4% Dividend Yield?

National Bank of Canada stock has surged over 1,000% in the past two decades, if we adjust for dividend reinvestments.

Read more »