Warren Buffet is arguably the greatest investor of all time but should investors put their money behind the man himself or his grand-nephew?
Dec. 17, 2021
These two companies have many similarities, not least due to familial ties. They both operate in mundane industries and use the proceeds from their insurance business to invest. However, these two companies are vastly different sizes, and we ask which stock is the better buy?
Berkshire Hathaway: Bull vs Bear arguments:
Berkshire Hathaway (NYSE: BRK.B) is an American multinational conglomerate led by an experienced duo of CEO Warren Buffett and vice chairman Charlie Munger.
Berkshire has built a company with insurance at its core, most notably Geico, which has allowed it to use the float to invest in other businesses and equities. It is highly diversified with subsidiaries from fast-food chain Dairy Queen to battery maker Duracell. The company also has an equity portfolio that includes Apple and Coca-Cola and has driven impressive returns.
Berkshire has performed well during bear markets where it could accumulate businesses or equities at lower prices, which helped fuel long-term growth. In Q3 2021, the company reported an operating income of $6.47 billion and has a large cash pile of $149 billion. This is even after buying back nearly $20 billion of its stock since 2018.
Due to the size of Berkshire, it is increasingly difficult to make investments that will make a noticeable impact which has arguably led to Berkshire’s stock lagging the market in recent years.
Boston Omaha: Bull vs Bear arguments:
Boston Omaha Corporation (NASDAQ: BOMN) is a public holding corporation founded in 2009 with a singular focus on growing book value per share.
Boston Omaha is run by co-CEOs Adam K. Peterson and Warren Buffett’s grandnephew Alex B. Rozek. Warren Buffett has previously said that Rozek has “…a good mind, a very good mind, and he certainly has good values”, which is high praise from the legendary investor.
Billboards is Its largest segment, accounting for over half of revenue in Q3 2021 as it operates 6,000 billboards. The average American spends more time out of their home daily, including 2 hours commuting, which means that they have little choice about seeing billboards, making it an attractive place for advertisers due to the captive audience.
Its other main businesses include broadband and insurance, and a common attribute between its core businesses is that it will benefit from economies of scale. While these are relatively small now, they continue to grow, and its broadband business, in particular, is contributing to its growth. In Q3 2021, revenue increased by 24.9% year-over-year, with book value per share increasing to $17.03 compared to $14.01 a year prior.
The fall in equity prices has undoubtedly impacted its bottom line as it reported a net loss of roughly $32 million. Boston Omaha is also a tiny business with a market capitalization of roughly $800 million, approximately 0.1% the size of Berkshire Hathaway, and its stock is likely to be volatile.
So, which stock is a better buy right now?
One could argue that either would be a good investment depending on your risk profile but due to its potential runway for growth Boston Omaha, it appears to be a better buy.