The golden age of the conglomerate may be in the rear view mirror, however a few shining examples of how companies can acquire, marge, and integrate firms into their business model, finding ways to produce superior returns over time, still exist today.
Warren Buffett's Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B) is one of the most well-known conglomerates out there, having produced stellar returns in all but a few years of the company's existence.
Another company North of the border which acts as a "Canadian Berkshire" of sorts is Fairfax Financial Holdings Ltd. (TSX:FFH). Fairfax invests in a range of companies, spread across a few key industries such as real estate, renewable energy, and infrastructure.
The firm is currently attractively valued, trading at multiples which are much lower than those seen at comparable firms (such as Berkshire Hathaway), and has a very strong balance sheet which will allow Fairfax to continue growing in the future via strategic acquisitions as they arise.
Despite having a market capitalization of more than $18 billion, Fairfax boasts a price to book ratio of just 1.45, meaning investors are still able to pick up shares of Fairfax at slightly more than the book value of these assets. Fairfax has strong margins (net margin of nearly 12%), and return on equity (ROE) of approximately 11%, making this company an earnings machine, supporting a dividend yield of approximately 2%.
For investors looking at a way to diversify at a relatively cheap price, Fairfax is an excellent way to go.
Invest wisely, my friends.
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