Can't Get Enough of Berkshire Hathaway? Add These 2 Similar … – The Motley Fool

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If you follow Warren Buffett and his firm Berkshire Hathaway (BRK.A -0.38%) (BRK.B -0.40%), then I don’t need to tell you just how strong Berkshire’s stock has been since Buffett took over the company in 1965. The large conglomerate routinely beats the market year in and year out.
Part of the beauty of Berkshire is that it runs several businesses that free up cash it can then invest into stocks and bonds, a strategy that has served it well long term. Just imagine if you could find more stocks like Berkshire for your portfolio.
Well, as it happens, you can. There are several stocks that run business models like Berkshire’s. If you can’t get enough of Berkshire Hathaway, here are two other similar stocks to add to your portfolio.
Similar to Berkshire Hathaway, Boston Omaha (BOC 0.18%) runs a wide variety of businesses. These include insurance, billboards, and broadband. 
The billboard business generates revenue by leasing outdoor advertising space to businesses. At the end of the third quarter of 2022, Boston Omaha operated roughly 3,900 billboards with about 7,400 advertising faces. The goal for the company is to keep buying up billboards across the U.S. to grow the unit.
Boston Omaha’s insurance business mainly targets lower-policy property and casualty insurance, as well as surety insurance. The insurance division is licensed in all 50 states, and Boston Omaha hasn’t ruled out expanding into other insurance lines that are similar to surety. In 2020, Boston Omaha launched its broadband internet business by acquiring the rural provider FibAire. Since then, it has made other acquisitions and hopes to keep growing in Arizona, Florida, Nevada, and Utah, among other locations.
These core business lines, particularly insurance, generate cash that Boston Omaha can use to expand its core businesses through acquisitions, and invest in other assets such as stocks, bonds, and real estate. Boston Omaha has also launched an asset management business. Cash and cash equivalents at the company have fallen from about $72.5 million at the end of 2021 to about $38.5 million at the end of Q3.
Things may be volatile for the company because assets it owns such as stocks can see their fair value change abruptly along with the market. But ultimately, the success of its long-term basis will come down to how well Boston Omaha develops its core businesses and deploys cash. If the company can have even a fraction of the success Berkshire Hathaway has, this could be a home run for shareholders.
The property and casualty insurer Cincinnati Financial (CINF 0.76%) is not nearly as complex as Berkshire Hathaway or Boston Omaha — its only core business is in insurance. But unlike a lot of insurers and more similar to Berkshire, Cincinnati Financial invests a large portion of the cash float it derives from insurance premiums into stocks.
At the end of Q3, nearly 42% of its invested assets were in individual stocks, while the remainder were in bonds. As mentioned above, doing this can create volatile earnings because these invested assets are tied to the market and stocks have swung wildly over the last two years. But over time, if done carefully and correctly as Berkshire has done it, the model can generate superior returns.
This year, Cincinnati Financial saw its combined ratio, which looks at the percentage of claims and expenses being paid out as a percentage of written premiums, rise to close to 104% at the end of Q3, mainly due to losses from Hurricane Ian. That means losses and expenses are outpacing premiums. However, management has a strong track record and believes its combined ratio will fall back in line with where it’s been historically, at under 100%.
Unlike Berkshire, which doesn’t pay a dividend, Cincinnati Financial is what investors call a Dividend King. This means the company paid out and grew its dividend annually for at least 50 straight years. Cincinnati Financial has accomplished this feat for 61 years, so if you are looking for a Berkshire Hathaway-like company with a strong dividend, then look no further.
Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Boston Omaha. The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway, short January 2023 $200 puts on Berkshire Hathaway, and short January 2023 $265 calls on Berkshire Hathaway. The Motley Fool has a disclosure policy.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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