Markel Corp (NYSE:MKL)

CAPS Rating: 5 out of 5

The Company markets and underwrites specialty insurance products and programs to a variety of niche markets and operates in three segments of the specialty insurance marketplace: the Excess and Surplus Lines, the Specialty Admitted and the London markets.

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Member Avatar AlexeiVronsky (90.87) Submitted: 5/28/2014 9:51:02 AM : Outperform Start Price: $558.52 MKL Score: +6.54

Cheap mini-brk

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Member Avatar kbelboe2 (38.93) Submitted: 5/27/2014 12:45:31 PM : Outperform Start Price: $632.13 MKL Score: -0.96

Simply put, a recent buy of Arnold Van Den Berg.

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Member Avatar Charlotte49er (80.21) Submitted: 5/22/2014 12:07:47 PM : Outperform Start Price: $621.97 MKL Score: -0.16

"The Next Berkshire Hathaway"

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Member Avatar kevday (99.07) Submitted: 5/20/2014 1:39:14 PM : Outperform Start Price: $616.05 MKL Score: -0.53

ht M* (one of the ultimate stockpickers)

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Member Avatar famiglia112 (58.73) Submitted: 5/15/2014 2:32:53 AM : Outperform Start Price: $636.00 MKL Score: -3.04

Compounding machine/mini-Berkshire

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Member Avatar flynthewest (< 20) Submitted: 5/5/2014 1:22:45 PM : Outperform Start Price: $637.82 MKL Score: -3.59

Layered on Markel's 2013 superior underwriting performance and cache of quality wholly owned companies will be the performance benefits that will accrue from Markel's year ago purchase of Alterra. These have not been fully integrated into its value. Calendar year 2014 will give this key integration an opportunity to be recognized in underwriting results and float generation. In addition, it will permit Tom Gayner, President and Chief Investment Officer, the opportunity to find additional ways to constructively allocate some if not all of the remaining capital made available to him from the Alterra acquisition. Considering his superior record of investment placement, he will undoubtedly be able to identify intrinsic value producers with much greater success than Alterra's multiple investment managers have done in the past.

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Member Avatar Irishmate (28.85) Submitted: 4/30/2014 2:30:55 PM : Outperform Start Price: $620.16 MKL Score: -0.69

Started investing at $420 and have added as its risen.

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Member Avatar MTGrizzly (< 20) Submitted: 4/28/2014 10:23:33 PM : Outperform Start Price: $616.60 MKL Score: -0.37

Strong portfolio, excellent long term valuation

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Member Avatar OKwarrior (30.12) Submitted: 4/6/2014 5:44:52 PM : Outperform Start Price: $607.40 MKL Score: +0.20

This is another Berkshire-Hathaway. An insurance company holding corp, that is particularly good at investing the "float" and compounding returns for years.

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Member Avatar evdoninger (57.61) Submitted: 3/31/2014 12:37:58 PM : Outperform Start Price: $593.20 MKL Score: +3.37

Strong underwriting, the Alterra acquisition, Tom Gayner.

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Member Avatar malcolmcochran (52.62) Submitted: 3/20/2014 11:39:20 AM : Outperform Start Price: $589.49 MKL Score: +4.00

It will not dramatically outperform. Just steadily.
It is a complex company but it is carefully run. hat is an essential point in picking it. It is in Insurance but it underwrites selected sectors avoiding what look like short-term gains. It makes money by investing cash. It reduces its tax rate because income from these companies have already paid the tax. Companies pay it a premium to have it "on hand" (underwriting). Its P/E is falsely high because its earnings are invisible. Why bother with it? Ans: it is a pile of money being carefully handled and that is reflected in its value and hence stock price. So it will increase and you sell when you want.

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Member Avatar luremaster (33.72) Submitted: 3/13/2014 3:17:40 AM : Outperform Start Price: $581.10 MKL Score: +5.98

GREAT TRACK RECORD

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Member Avatar SlothropsMonkey (84.90) Submitted: 3/10/2014 11:51:33 PM : Outperform Start Price: $222.69 MKL Score: -1.15

Monkey's second highest conviction idea right now for several reasons: big and steady like the Titanic, so I reckon all that needs to not happen is a clandestine iceberg. But the business culture is second to none, inspired by incentives to perform. The moniker "Baby Berkshire––the business is niche insurance + investment of profits–– helps Monkey sleep peacefully at night and for decades to come. One of the best values and easiest decisions out in the jungle right now.

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Member Avatar gartheee (33.32) Submitted: 2/18/2014 10:34:36 PM : Outperform Start Price: $572.65 MKL Score: +5.31

solid company that's currently on a roll, I'm only picking for the next few months for now because it's already jumped quite a bit recently, but I still plan to hold my position long term

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Member Avatar tsunamied (84.71) Submitted: 2/11/2014 8:38:41 AM : Outperform Start Price: $554.99 MKL Score: +6.72

great management

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Member Avatar PatientJC (31.41) Submitted: 2/10/2014 11:40:55 AM : Outperform Start Price: $539.59 MKL Score: +9.68

Superior fundamentals

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Member Avatar EJE38 (22.50) Submitted: 1/28/2014 5:32:28 PM : Outperform Start Price: $541.75 MKL Score: +7.93

Leading position in insurance underwriting.

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Member Avatar Davyjr01 (48.63) Submitted: 1/24/2014 7:20:39 PM : Outperform Start Price: $546.62 MKL Score: +7.27

Markel is currently selling at 1.2x book, and it usually sells for 1.0x to 2.2x. Also Thomas Gayner will continue to grow the companies invested assets.

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Member Avatar asdfk123 (68.49) Submitted: 1/21/2014 6:16:02 AM : Outperform Start Price: $562.08 MKL Score: +7.92

I’ve been watching Markel since August, 2013. I learned of Markel as one of the MF Inside Value top picks. After taking some time to review a few years of historical annual reports, I strongly believe management is committed to the firm.

I like the 10 year trend for Markel. From 2003 to 2012 the firm has grown net income at a higher rate than top line revenue. In my opinion, this is a demonstration of excellent operational performance.

I’m hopeful the 2012 acquisition of Alterra will provide substantial top line revenue growth in future years. So far the 2013 financials for Markel look promising. I’m guessing total revenue will come in somewhere around 3.8 billion with earnings per share around $19.11. I’m anticipating 28% top line growth for 2013 with roughly 12.93% through 2022. I’m a little unsure what the future holds, so 12.93% seems reasonable. Using a discounted cash flow model, I imagine the firm is probably worth 8.2 billion. With 13.97 shares outstanding, this provides an intrinsic valuation of $588.69 per share, or a 3.9% discount.

Even though the discount on Markel is low, I think the price is reasonable given my expectations for the future. Another thing I particularly like about Markel is its low beta. Given its beta, the risk free return of a 5 year certificate of deposit, and the historical return of the S&P 500, I give Markel a minimum annual compound return hurdle rate of 5.93%. I strongly believe the firms management will outperform this in book value per share growth. Also, I’m confident Markel will outperform the S&P 500.

My only concern is the initially low return on invested capital and high price to earnings ratio. If the firm performs as I anticipate, this will not be a problem.

Markel will be an exciting company to watch over the next 5-10 years!

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Member Avatar JohnCLeven (81.63) Submitted: 1/6/2014 12:54:16 PM : Outperform Start Price: $516.13 MKL Score: +5.93

Similar to Leucadia (LUK), Markel (MKL) is often referred to as a “Mini Berkshire Hathaway (BRK.B). Like BRK.B and LUK, MKL is simply a long-term compounding machine. Markel has a disciplined insurance business that invests the float in solid equities. They also have a ton of bonds, which I’m not thrilled about.

Tom Gayner seems to be a very competent investor, who has outperformed the market over the long-term. Top 10 largest positions in the equity portfolio are: CarMax, Berkshire Hathaway, Diageo, Brookfield Asset Management, Walgreen’s, Fairfax, Disney, Wal-Mart, Exxon Mobil, Home Depot, and UPS.

Book value per share (BVPS) has increased from $3.42 in 1986 to $462.27 in the trailing twelve months (per Morningstar). This would be a rate of 19.33% compounded annually over the past 27 years. Additionally, BVPS growth has been 11.89% annualized since 2004, and 15.77% annualized since 2008.

If my memory serves, the annualized growth of the S&P 500 over the past century or so was something like 6%, 8% with dividends. So MKL’s growth rate is significantly better than the general market. I don’t expect that trend to reverse anytime soon. (BRK.B is approx 34 times larger than MKL and still growing faster than the S&P 500.)

Additionally, the market is not so cheap right now. However, MKL seems cheap at its current 1.2x book value. (Historically runs between 1.1x BV and 2.2xBV) It’s hard to determine what BV MKL “should” trade at, but the average since 1990 is 1.7x. If we conservatively assume lower than average BV growth over the next 5 years of 9%, we get a per-share BV of 711.26. If we put a 1.7x multiple on that, we get a $1209.14 share price in 5 years. That would be a 16% annualized return from today’s $575.88 price. That not necessarily a forecast, but just one of many plausible estimates based on the future BV and the multiple applied to it. If you take a rational range of likely BV growth rates, and a range of multiples, and calculate the results, you can see that even under quite conservative assumptions, MKL should match or beat the S&P.

I consider MKL another one of those “heads I win big, tails I still do ok” type of bets. Given MKL’s history and valuation vs the S&P 500’s history and valuation, I think MKL has a very high probability of beating the S&P 500 over the long-term. In fact, I’d be fairly surprised if MKL doesn’t crush the S&P over the long term.

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