Tuesday, August 4, 2009

A Smaller Version of Berkshire Hathaway: Markel Corporation

Markel Corporation markets and underwrites specialty insurance and have been doing business since 1930. They are not a big well known company except in the value investing community. This might be due to them being in a rather boring industry- insurance. Wall Street seems to push everything in vogue and the retail investor seems to follow along. Berkshire Hathaway was not well known either 25-30 years ago, and Warren Buffett had already been involved with Berkshire for nearly 20 years. I must admit when I first heard of Berkshire back in the mid 1980's it was trading around 1500 a share. The only reason I noticed it, was that it had a high price tag or so I thought at the time. Hear it is almost twenty-five years later and another high priced insurance stock has got my attention. Well actually I've known about this one for a few years now. Did I say high priced at $342.00 dollars a share. Well for some of you new folks the stock price does not have anything to do with true value of the company. The reason why you see Berkshire Hathaway(BRKA,BRKB)and Markel(MKL)trading so high is because they don't split the stock, like most companies often do.

As stated in the title Markel Corporation is a smaller version of a Berkshire Hathaway. It operates in the same fashion as well. That is it's primary busi
ness is insurance. Most insurance companies have whats called float. Float is the money taken in (insurance premium) less the claims paid out. The difference or "float" is reinvested in fixed income and equities. Of course we all know that Buffett has been a master of this...taking the float and buying well known financially strong companies such as Coca Cola(KO), Johnson & Johnson(JNJ), Proctor & Gamble(PG), Wells Fargo(WFC) and Kraft Foods(KFT). Markel has also done quite well over the last twenty years by doing the same thing. Since August of 1990 Markel has risen over 2100% while Berkshire has risen over 1500%. Currently Markel is trading at $MKL a share. They have over 132 million per share in cash and a debt/equity ratio .34. Markel has over 70 companies in its portfolio with Berkshire Hathaway(BRKA, BRKB), United Parcel Service(UPS), Diageo(DEO), and Carmax(KMX) being some of the larger holdings.

What others are saying about Markel: 5 Star Stocks Begging To Be Bought

Author currently long as of this writing BRKB,WFC,JNJ,MKL,KFT,KMX

1 comment:

  1. Hi thank you for an perceptive post, I actually found your blog by searching on Goole for something else nearly related, in any case before i ramble on too much i would just like to state how much I enjoyed your post, I have bookmarked your site and also taken your RSS feed, Once Again thank you very much for the blog post keep up the good work.


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