Subject: Re: MKL Omaha Brunch notes
We can only speculate. 2023 was a challenging year for MKL. It was surprising to me BRK sold so quickly.

It's become much more difficult to speculate about Berkshire buys and sells of relatively small positions since Todd and Ted joined the crew. We don't know who bought and sold Markel and we don't know why in either case. No one has said anything publicly, other than Mr. Gayner acknowledging he was disappointed in the sale.

Nevertheless, here are a few baseless speculations:

1. 2023 was a disheartening year for observers of Markel's insurance operations. In the midst of a "hard" insurance market that benefited most of the other big players, Markel stumbled badly following the departure of longtime insurance chief Richie Whitt. The horrendous Q4 combined ratio would not have been public knowledge when Berkshire sold in late '23, but the disappointing Q3 numbers suggested the negative trend. This seems like the simplest explanation.

2. Markel's normally sleepy stock was fairly volatile in 2022-23, providing opportunities for short-term profit-taking. For example, I bought a small lot in February of '22 at a price of $1,235 per share. Less than two months later, in mid-April, I sold it at a price of $1,478 per share. I hadn't intended for it to be a short-term trade, but a 20% gain in two months is unusual for MKL shares. It just seemed likely not to last. Four months later, in August, I bought them back for $1,185 apiece. Berkshire is not known for taking trading profits, but the combination of worrisome insurance performance trends and an opportunistic price might have been enough to create an incentive in this case.

3. This is by far the most speculative, but I can't help wondering about Todd and Ted's incentives these days. There has long been speculation that when Mr. Buffett left the stage, Berkshire leadership would be bifurcated between operations (Greg Abel and Ajit Jain) and public market investments (Todd and Ted). This speculation never made clear how resources would be allocated between those two buckets. The news out of the AGM was that Mr. Buffett's thinking has evolved and he now believes it will behoove the board to put Mr. Abel in charge of all capital allocation.

Not only were Todd and Ted not included in the leadership group on the dais, I don't recall their names being mentioned, except possibly for Mr. Combs' role running Geico. I may be reading too much into that particular tea leaf, but their general exclusion from the conversation about succession doesn't seem like a terribly promising sign for their roles in a post-Buffett Berkshire. Neither needs the paycheck and both joined Berkshire to work with Mr. Buffett. Markel's business plan is that of a long-term compounder. If your own time horizon as a portfolio manager is in flux, perhaps that's not the best fit.

It is tempting to think that top managers at Berkshire are above jockeying for position, but it does not seem to me beyond the realm of possibility that Todd and Ted were incentivized to improve their short-term performance as decisions around succession were crystalizing. If so, an opportunistic short-term exit from Markel might have made more sense than in times when future division of responsibilities was not on the table.

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Again, this is all rank speculation, but given the state of flux in Berkshire leadership and the number of cooks in the stock-picking kitchen, I don't consider either of the Markel transactions a big deal. Markel is a mini-Berkshire with a few obvious warts. It's unlikely to win any short-term stock-picking contests unless you get lucky with the start and end dates. But it does have a long-term record of steady if unspectacular compounding.

Mr. Market seemed happy about the Q1 report. Most of the gains were in the investment portfolio, which bounces around with market sentiment, but the combined ratio came back down into double figures, which was reassuring. My position, which consists mostly of that August 2022 buy supplemented by a small add on the drop following the Q4 report, is up 30% in less than two years. I have found over the years that returns from Markel are all about entry points. This is true of all investments, of course, but my experience has been that Markel offers wider pricing variance than other similar firms. If they can keep the insurance train on track, they should be OK, but that's worth monitoring closely given the recent stumbles.