Back in 2003, Warren Buffett said that derivatives posed a "mega-catastrophic risk" to the economy. In a shareholder letter, he compared derivatives to "hell... easy to enter and almost impossible to exit." Buffett has also called derivatives a fool's game and, most famously, likened the contracts to "weapons of mass destruction."

All of this makes it all the more fascinating that Berkshire Hathaway's (NYSE: BRK.A) first-quarter profits plummeted due to $1.7 billion in losses on, you guessed it, derivatives. Peter Cohan wrote that "This proves that George W. Bush was right and so was Warren Buffett."

It would be like anti-prostitution zealot Elliot Spitzer getting caught with a call-girl. Oh wait ...

So what happened? Here's one possibility: Even after an $9 billion plunge in the company's cash position, Berkshire still had $35.57 billion in cash on its balance sheet. Warren Buffett is the greatest investor of all-time, but it's difficult to find enough undervalued stocks in sleepy industries to put that much money to use.

Given that Buffett may not be at the helm for too many more decades, even value investing disciples -- I consider myself one -- may want to look elsewhere for investors employing a similar style with more manageable assets to deploy. One possibility is Leucadia National (NYSE: LUK), which Aaron Katsman recently compared favorably to Berkshire Hathaway. A year ago, Jim Cramer named Brookfield Asset Management Inc. (NYSE: BAM) as the next Berkshire Hathaway.

Leucadia National (NYSE: LUK) is a holding company that has been compared favorably to a young Berkshire Hathaway (NYSE: BRK.A), and BloggingStocks' Aaron Katsman has suggested that company as a good alternative to Berkshire for investors.

Apparently Leucadia has also taken Buffett mentor Benjamin Graham's mantra to heart: "Be fearful when others are greedy and greedy when other are fearful."

Leucadia has boosted its stake in AmeriCredit (NYSE: ACF) all the way up to 22.4%. It's hard to think of a more contrarian investment in light of the consumer credit crunch: AmeriCredit buys auto loans from dealerships and makes its own loans through its dealership network -- 80% of the loans are for used cars.

Fears of a continuing rise in defaults have sent shares of the company down big over the past year. The stock is currently trading at a low P/E and a discount to book value. The big question is whether all the bad news is priced -- it's possible that the company will have to take additional losses on bad loans, just as many subprime housing lenders have.

To see what else Leucadia has in its portfolio, check out this page from StockPickr.

With this weekend's Barron's postulating that Berkshire Hathaway Inc. (NYSE: BRK.A) is overvalued (for a good analysis check out Peter Cohan's review), investors that are looking for a great holding/investment company should look at Leucadia National (NYSE: LUK). This undiscovered company with a hodgepodge of investments ranging from timber to real estate to a winery, has been a stellar performer for investors. Over the last two years, Leucadia has outperformed Berkshire by about 50% and over the last five years, it's no comparison. The little-known Leucadia has eaten Berkshire's lunch, outperforming it by more than 170%!

It's no secret that many investors are worried that Mr. Buffett will step down in the near future, and that when he does investors will flee the stock. For those wanting to continue investing in an investment company, take a long hard look at Leucadia.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. Disclosure: Writer has no position in any stock mentioned as of 12/16/07.