Markel Stock Analysis & Deep Dive

What's the current status of the mini Berkshire Hathaway?

Intro

Markel is a company that has fascinated me for a long time and is often referred to as the mini-Berkshire Hathaway. After seeing Markel’s CEO Tom Gayner live in Omaha in early May, I can fully understand this reasoning. Tom Gayner is a very fascinating person and an amazing speaker.

Watch this video to better understand the man behind Markel’s success.

History

It all started with a small insurance company for jitney buses.

Markel went public in 1986 at a price of 8,33$ per share and a market cap of 15m. I guess you would now love to make a call into the past and tell your parents to invest in this company. These 8,33$ compounded at an annual rate of 15% and turned this initial small amount to a share price of 1300$ and 17.4bn in market cap.

2005 marked a major milestone for Markel when Markel bought the first non-insurance company in AMF Bakery Systems.

An overview of the businesses that Markel invested in can be found here:

https://www.mklgroup.com/what-we-do/markel-ventures

You will find everything from a luxury handbag producer to a crane company and even a home builder.

Today Markel employs about 21000 people of which 5000 are working in the insurance business and 16000 within Markel Ventures.

Writing a deep dive takes me 40+ hours to get a proper understanding of the company and the attributes of the industry it is working in. You will support me a great deal if you a) subscribe to this substack and b) recommend this blog to your friends and family. To all existing subscribers: Thank you for your support! :)

Business Overview

Similar to Berkshire Hathaway, the backbone of Markel is the insurance business. The float from this insurance business is then used to fund other investments. The float is the money being paid upfront by the customers. Markel has a wide portfolio of holdings in stock-listed companies as well as fully owned subsidiaries. This approach is modeled after the great Berkshire Hathaway (not the worst role model).

To understand Markel, it is important to separate it into 3 pillars:

1. Insurance business

2. Operating businesses

3. Security investments

Tom Gayner said the following on the release of the Q1/23 earnings:

"Markel Ventures achieved impressive organic revenue and profitability growth. In insurance, we continue to grow while maintaining our decades long approach to disciplined underwriting. Our investment income continues to benefit from higher interest rates, and we experienced favorable returns in our equity portfolio. As always, we encourage investors to focus on our operating performance over the long term, where our three-engine system continues to demonstrate strength, durability and profitable growth,"

“We believe our financial performance is most meaningfully measured over longer periods of time, which tends to mitigate the effects of short-term volatility and also aligns with the long-term perspective we apply to operating our businesses. We generally use five-year periods to measure our performance.”

This long-term thinking is exactly what I also apply in choosing my investments.

If you want to read the full article and learn about the management, the composition of the segments, takeovers, risks, fundamental analysis, and a conclusion please subscribe and support my work. To all existing subscribers: Thank you for your support and enjoy the rest of the article!