3 Dividend Stocks to Buy and Hold Forever | The Motley Fool Canada

3 Dividend Stocks to Buy and Hold Forever | The Motley Fool Canada: "Is Fairfax Financial Holdings the next Berkshire Hathaway?
Company Snapshot: (data as of May 13, 2015)

Market cap: $13.96 billion
Recent share price: $626.05
Trailing P/E: 11
Price/Book Value: 1.3
Investors are like fisherman; they all have a story of the big one that got away.

Consider Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B), which under the management of legendary investor Warren Buffett, grew from a small textile manufacturer into a massive, business conglomerate. If you had invested $1,000 in Berkshire back in 1964, your stake would be worth around $16 million today.

These days, of course, Berkshire is all grown up. So savvy investors must therefore look for the next Berkshire with similar business traits and a lot more room to grow. I have one possibility for you: Fairfax Financial Holdings (TSX: FFH).

Fairfax looks remarkably similar to what Berkshire Hathaway looked like 40 years ago when it was generating solid double-digit returns. For the better part of the last three decades, this company has been run by Prem Watsa, who has used the same value-oriented strategies Buffett favors:

Focus on wonderful businesses
Buy them below their intrinsic value
Hold for the long haul
It's not hard to see why Mr. Watsa has earned the reputation as 'Canada's Warren Buffett'. In the same way Berkshire Hathaway's insurance businesses provide a platform for Buffett's investing activities, Fairfax's insurance operations exist to generate cash for Watsa to invest. And over the last 28 years, Watsa has grown the company's book value per share at a 21.3% compounded annual clip.

But here's the real reason why I like Fairfax: The company is worth only $14 billion. While that might sound large, keep in mind that Berkshire Hathaway is valued at over $350 billion at current prices.

Why is this relevant? Because as Buffett himself admits, “It’s a huge structural advantage not to have a lot of money.”

In other words, smaller companies have a clear advantage over larger ones. That's because a tiny name like Fairfax can take advantage of deals that Berkshire could never participate in. And this means Fairfax can rapidly compound its earnings and dividends for decades to come."



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