Better Buy: Berkshire Hathaway or Fairfax Financial Stock?

think thought consider
Image source: Getty Images

The stock market has run into quite a brick wall this autumn, with volatility surging for September. Undoubtedly, it’s an uneasy time to be a new investor while rates continue to move higher. Though higher rates aren’t great news, I still think Canadian investors should play the long game and pick up bargains as they see fit.

Like it or not, most of the money tends to be made during times of fear and panic. After the recent slide in the TSX Index, it’s arguably a great time to buy stocks of companies that may be unfairly punished, primarily due to overblown fears about a looming recession and the implication of much higher rates.

In this piece, we’ll take a few steps back and look at two proven market outperformers in Berkshire Hathaway (NYSE:BRK.B) and Fairfax Financial Holdings (TSX:FFH). Indeed, Berkshire is run by the legendary Warren Buffett, while Fairfax has Canada’s version of Warren Buffett in Prem Watsa running the show.

Despite recent market volatility, shares of Berkshire and Fairfax are fresh off all-time highs and could have the means to make new highs, even as broader markets slip further into a correction or bear market. It’s never a good idea to buy stocks based on what others believe is in for the economy. Instead, it can pay dividends to pick individual companies that have the means to do relatively decent in good times and recessionary, inflationary environments like the one we find ourselves in currently.

In short, rates and recession worries could paralyze other investors in fear. But that’s exactly when it’s time for contrarian DIY investors to shine. Without further ado, let’s weigh in on whether Berkshire or Fairfax is the better bet for the next two years and beyond.

Berkshire Hathaway

Berkshire Hathaway is one of the stocks you can buy for your TFSA (Tax-Free Savings Account) and forget you own it. Indeed, the stock isn’t immune from choppy moves. It can really make waves, even when the rest of the market is trending higher. During such times, critics are sure to come out, asking if Warren Buffett and his firm still have it.

Over the past year, Berkshire has really performed well, surging around 23% over the timespan. More recently, shares slipped over 7% as a part of a broader market pullback. I view the dip as a buying opportunity for long-term investors who want to do well, not just for the next few years, but for the next few decades.

Berkshire plays the really long game, and with more than enough liquidity to buy a bargain should market valuations continue to contract into year’s end, Berkshire is a unique way to plough through this new era of higher interest rates. All considered, Berkshire is a great buy here.

Fairfax Financial Holdings

Fairfax stock is in the middle of one of its hottest multi-year runs in recent memory. The stock is up a whopping 74.8% over the past year. And after another big up day (shares rose 1.5% on Wednesday), I think Fairfax is a freight train that cannot be stopped.

Like Berkshire, Fairfax is known to make very smart value investments. The acquisition of Recipe Unlimited was, in my opinion, incredibly wise.

Looking ahead, Fairfax seems to have all the tools to conquer a period of sluggish economic growth. Arguably, Prem Watsa will have more opportunities to pursue deals at a discount if stocks continue their descent from here.

Better buy: Berkshire or Fairfax shares?

I like Berkshire Hathaway just a tad more than Fairfax after its latest pullback. Should FFH stock be in for a correction, I’d also consider picking up a few shares. For now, Berkshire stock looks primed to nibble on recent weakness.