5 Stocks Better Than Berkshire Hathaway

Without a doubt, Berkshire Hathaway (NYSE: BRK-B  ) stands alone as the most successful financial holding company in history. Thanks largely to the leadership of Warren Buffett, Berkshire's per-share book value grew by an astounding average of 19.7% annually from 1965 through 2012 -- good for an unbelievable total gain of nearly 587,000%.

But while I wholeheartedly believe Berkshire will continue to outperform the wider market going forward, even Buffett has admitted Berkshire's enormous capital base will make it nearly impossible to duplicate his past rate of return. What's more, though Berkshire is comprised of a wide range of profitable underlying businesses, much of its success can be attributed to Buffett's knack for investing in the stocks of other great long-term oriented companies.

With that in mind -- and in no particular order -- here are five stocks I believe offer better future returns than Berkshire Hathaway.

1. Apple  (NASDAQ: AAPL  )
Despite Apple's relentless chorus of skeptics, it's hard to ignore the fact this tech titan currently trades for a mouth-watering 9.3 times trailing earnings and just 8.3 times next year's estimates. When you subtract the nearly $145 billion (yes, with a "b") in cash on Apple's balance sheet, which is nearly 38% of Apple's entire market cap, its trailing price to earnings ratio drops to a ridiculous 5.8. 

In addition, I can't wait to see how shares of Apple will fare later this year when the company finally unveils whatever "exciting new product categories" CEO Tim Cook promises are in the works. In the meantime, patient long-term investors can benefit from Apple's recently boosted dividend and $60 billion buyback authorization.

2. Walt Disney (NYSE: DIS  )
While Apple might be the king of mobile computing, Disney has the world of entertainment covered through both its theme park operations and ownership of the Disney Channel, ABC Family, SOAPnet, and significant stakes in ESPN and A&E Networks. Of course, by way of acquisition, Disney also lays claim to animation whiz Pixar, comics legend Marvel Entertainment, and Star Wars and Indiana Jones creator Lucasfilm.

Disney may be a bit pricier than both Berkshire and Apple at 20 times trailing earnings but, thanks to the enormity and diversity of its creative property, the House of Mouse sports a moat no drawbridge can cross.

3. Markel (NYSE: MKL  )
While I've made no secret of my fondness for Markel, I'm certainly not the only investor to compare the strategy of this much smaller financial holding company and its CIO, Tom Gayner, to that of Berkshire Hathaway and Warren Buffett. So what does Markel have offer that Berkshire doesn't?

Size, for one -- or lack thereof, anyway. With its market capitalization under $5 billion, Markel is more than 50 times smaller than Berkshire. Assuming Gayner can even partially replicate Buffett's success -- and noting he has already helped Markel's book value per share increase at a 16% clip over the past two decades -- it's safe to say Markel has plenty of upside left. 

4. Whole Foods (NASDAQ: WFM  )  
As one of my newest personal holdings, I was happy when investors soured recently on shares of Whole Foods after the organic grocer posted "disappointing" quarterly results back in February.

Even so, I wholeheartedly agreed with fellow Fool Alyce Lomax when she asserted nothing had happened to significantly alter the company's incredible long-term growth story. To the contrary, this morally sound, cash-rich business remains solidly profitable as management steadily grows its number of locations, which they hope to eventually almost triple to 1,000 in the U.S. alone. And, like Apple, patient Whole Foods shareholders can happily collect a 1% dividend while they wait for the stock to rebound.

5. Under Armour (NYSE: UA  )
Lastly, I'm offering Under Armour as my final "better than Berkshire" stock. And yes, I'm aware comparing this tiny $6 billion performance apparel company to the diversified behemoth that is Berkshire may seem odd.

So why Under Armour and not a global athletic and shoe juggernaut like $56 billion Nike? Similar to my reasoning for Markel, Under Armour's comparatively small size comes into play.

Even better, as I noted just a few days ago, Under Armour's focus on continued innovation has helped it maintain at least 20% year-over-year revenue growth for the past 12 consecutive quarters. In addition, while Under Armour's first-quarter international revenue grew 41% from the same period last year, domestic revenue still represented more than 93% of the company's total sales, leaving lots of toe room for the aspiring shoe maker to grow.

Foolish final thoughts
When the rubber hits the road, I'm convinced the stocks above represent five fantastic businesses which should be able to beat Berkshire's performance over the long haul -- that is, if Berkshire doesn't buy them first.

Heading to Omaha
On May 4, Berkshire Hathaway will be holding its epic annual meeting in Omaha, and the Fool will be there to bring you everything you need to know from this "Woodstock for Capitalists." Simply click here to follow along with all of the Fool's coverage.


Read/Post Comments (7) | Recommend This Article (17)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 29, 2013, at 12:59 PM, JohnCLeven wrote:

    Berkshire is a better buy than DIS based on similar growth rates and BRK.B having a cheaper valuation.

    Berkshire is a better long -term buy than AAPL, bc Berkshire is virtually certain to be earning significantly more $ 10 years from today. AAPL is not, where they're gonna be in 10 years is virtually unpredictable.

    UA is priced in such a way that they'll need to execute almost perfectly to have a better 5yr or 10 yr return than BRK.B. It's possible, but no margin of safety.

    WFM is not as pricey as UA, but still pricey. They can beat BRK.B, but again they'll need to grow at about twice the rate of BRK.B, which might require 20% growth.

    Seems like you picked a bunch of hot, trendy companies, at least 2 of which are pretty expensive.

    I'll take BRK.B, even at today's prices, over those 4 over the next 5-10 years. Idk enough about MKL to comment on it.

    Best of luck.

  • Report this Comment On April 29, 2013, at 8:37 PM, showme wrote:

    I can only agree with JohnCLeven. These picks for a "Better than BRK" article are designed to cause conversation, but not serious conversation.

  • Report this Comment On April 30, 2013, at 2:14 PM, TempoAllegro wrote:

    I totally disagree. While I do think both Berkshire and Apple are good investments on their own merits, the article is quite clearly laying out reasons why Apple is, or has recently been, a good place for new investing money right now relative to Berkshire. And then he even goes on to explain why a similar, smaller company, Markel, would be better then Berkshire itself going forward. Then he does it again when discussing Under Armour vs. Nike.

    Furthermore, I am not sure which planet or era JohnCleven comes from, but let's face facts - the vast majority of investors are not going to buy either Apple shares or Berkshire shares today and hold on to them for ten long years! Don't lecture me on "buy and hold" either. It should be amended to "buy to hold," which means you will adjust as the situation merits, and a much more reasonable time frame is 3 to 5 years. In fact, the average holding time is about 6 months these days, I believe.

    Still, JohnCleven, I do believe your comments have substance as you are discussing the kinds of companies they are in their various forms - whole foods is too pricey for a supermarket, Under Armour is too expensive for a shoe company. But to say they are a bunch of hot an trendy companies is going a bit far because Berkshire itself is getting pricey too of late and is also made up of classy companies in their own right - a little bit of IBM, GS, for example, and they have their own food companies - Sees and Dairy Queen. And Apple ain't so trendy these days, have you heard?

    I believe this article is quite helpful - what is not serious is the attitude of some of the people making comments. If the title of the article gets my attention, so much the better. Lighten up, gents.

  • Report this Comment On May 01, 2013, at 4:02 PM, JohnCLeven wrote:

    @Tempo

    I found your accusations about my being an extraterrestrial with a "not serious attitude" pretty funny.

    1) You're argument that most people only hold a stock for about 6 months only increases the importance of a longer term buy and hold strategy.(really more like buying and monitoring, holding implies that you don't do anything while you own)

    If everyone else is thinking short term, and i'm thinking long term, that will give me more advantages than disadvantages. I don't care what other's are doing bc I know that companies like Coca-Cola, and Norfolk Southern, and UPS are going to be earning way more $$$ in 10 years than they do today.

    2) Berkshire, at it's current price of 1.3x book value, is fairly valued if not undervalued. The book value of this company will grow in the high single digit to low double digit range for at least the next decade. If you factor in probable expansion of the book value multiple, it's extremely improbable that you'll get less than 8% annualized return by buying Berkshire today and holding for 10 years. 10-12% annualized returns are probably more realistic. Not earth shattering returns...but extremely safe. Capital preservation always comes first.

    3) My turn to sling the mud. *disclaimer: i'm usually very nice to people I disagree with* However, you made a comment about my "attitude" that I didn't like very much.

    So, here's your challenge: If your current TempoAllegro account EVER has a higher average pick score, among the OUTPERFORM picks, both active and closed, than my JohnCLeven acct does, i'll will send you $20.

    And if you can't keep up, and never surpass me...it costs you nothing. That's how confident I am that my strategy will beat yours.

    How does that sound?

  • Report this Comment On May 04, 2013, at 6:32 AM, TempoAllegro wrote:

    It sounds like you like to gamble. I am not into it, nor your 20 bucks, thanks.

    You make a lot of assumptions about me and my investing based on what I wrote. Lighten up, guy, what I am trying to say is that whether you choose Apple or Berkshire - both good companies in their own way, depends on your own investing goals and style. And the articles here, which we take for granted, often point out useful things but get trashed. Then people like to trash each other. How about being peaceful?

    And who has time to keep up with CAPS picks anyway? I have a life, and prefer to put any time I got into monitoring my own investments, as you rightly point out is the way to go.

    Right now I choose Apple over Berkshire, and not because I do not doubt the things you say. I just want something more focused on tech, and believe Apple is a great company for which opinions swing all too wildly one way or the other- and I believe their CEO when he says they will be coming out not just with new products, but new product categories soon. They have reinvented mobile phones into smart phones, made PCs a thing of the past with tablets - I believe they will do it again because they got the talent, bucks, and plenty of good reasons to do so.

    Good luck with Berkshire - I will keep watching it - I like the Heinz acquisition, but that is not quite the kind of innovation I am looking for.

  • Report this Comment On May 09, 2013, at 4:01 PM, JohnCLeven wrote:

    I have no problem being peaceful. I want to be very clear on that.

    I also would like it to be clear that you we're the one who started it, not me. You asked what "plant or era" I was from. I just replied to your insult.

    Also, I don't like gambling at all. I kind of hate going to Las Vegas.

    Lastly, it's not hard to keep up with an average pick score once every 6 months or year. If you don't want to take a shot at free money w/ zero risk of loss, that's fine. I'll keep my $20. I'll leave the offer open though, just in case you change your mind.

    Good luck with your investments.

  • Report this Comment On May 09, 2013, at 4:02 PM, JohnCLeven wrote:

    planet* not plant

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