Warren Buffett's Berkshire Hathaway Inc (BRKa.N) trades at a lower premium and has more earnings power than Carl Icahn's Icahn Enterprises Inc (IEP.O), and investors wishing to invest alongside either billionaire may want to side with the so-called Oracle of Omaha, Barron's said in its March 10 edition.
Both conglomerates posted record profit in 2013, with Berkshire recording $19.5 billion of net income and $15.14 billion of operating income while Icahn Enterprises, a so-called master limited partnership, posted a $1.03 billion profit.
Berkshire owns more than 80 businesses including the BNSF Railway and Geico car insurance, and shares such as Wells Fargo & Co (WFC.N) and Coca-Cola Co (KO.N). Icahn Enterprises owns stakes in companies like auto parts maker Federal Mogul Corp (FDML.O), and through investment in an Icahn hedge fund stocks such as Apple Inc (AAPL.O) and Herbalife Ltd (HLF.N).
The two companies' shares have performed much differently so far this year. Berkshire's Class A shares closed on Friday at $183,772, after touching a record high earlier in the day. Meanwhile, Icahn Enterprises shares closed Friday at $116.69, which was 22 percent below its record set in December.
According to Barron's, Berkshire looks like a better buy.
Berkshire trades at 1.36 times its year-end book value of $134,973 per share, and the newspaper said it may trade at a discount to intrinsic value, citing Buffett's repeating in his annual shareholder letter this month that Berkshire's intrinsic value "far exceeds" its book value.
Assuming some profit improvement, Berkshire's book value could approach $145,000 per share by year end, Barron's said, or 1.27 times the current share price.
That would be close to the 1.2 multiple at which Buffett, 83, said in the letter he would be "aggressive" in buying back stock, after buying back none in 2013.
In contrast, Barron's said Icahn Enterprises' share price is nearly 50 percent above what the company calls its "indicative asset value."
The newspaper said that price "looks excessive" because the company wholly owns only a small group of businesses, and its performance hinges on Icahn's continued investing success.
"Icahn, at 78, continues to deliver," Barron's said. "But the current price of Icahn Enterprises discounts a lot more success by the billionaire. Berkshire looks like a better bet."
(Reporting by Jonathan Stempel in New York; Editing by Meredith Mazzilli)