No. of Recommendations: 8
I don’t understand why people are lacking enthusiasm for this stock. The insiders keep buying. Maybe because Buffett/Ted/Todd sold in the latest 13F?
A fair question. Mr. Gayner clearly thinks the market is missing something. From the Q2 earnings call:
* Five years ago, at June 30, 2019, we had total net investments, that is, our entire investment portfolio plus cash minus debt, of $17.5 billion. As of June 30, 2024, that number stands at $28.2 billion, an increase of 61%.
* Five years ago through June 30, 2019, we earned underwriting and insurance income of $142 million. Five years later, through June 30, 2024, we earned underwriting and insurance income of $313 million, an increase of 120%.
* Five years ago through June 30, 2019, we earned $133 million of operating income in our Markel Ventures operations. Through June 30, 2024, we earned $281 million of operating income, an increase of 112%.
* At June 30, 2019, each share of Markel sold for about $1,100. At June 30, 2024, each share of Markel sold for about $1,575, an increase of about 43%. The share price change is the lowest number on the page.
Despite the best efforts of investors like Mr. Gayner and Prem Watsa to emulate the Berkshire model, the market quite persistently declines to value them in the same way. Fairfax trades below 1.2x book value and Markel recently slipped again below 1.3x while Berkshire remains comfortably above 1.5x.
I think it's fair to say that neither Mr. Gayner nor Mr. Watsa has demonstrated the golden touch that so often characterized Mr. Buffett's moves at a similar stage of his career. Even lately, his prescient decision to invest massively in Apple produced returns that Mr. Gayner's mutual fund-like stock portfolio could not hope to match.
Markel has also made a few highly visible mistakes on the insurance side, including the disastrous CATCo acquisition and last year's losses in a specialty line that caused a surge in the overall combined ratio, that triggered some doubts about its reliability.
The stock is down since Q2 earnings, which were negatively impacted by smaller gains in the equity portfolio than a year ago, a meaningless accounting requirement.
It's also worth noting that they are putting their money where Mr. Gayner's mouth is with regard to valuation, having reduced the share count from 13.8 million to 12.9 million over the same span as the metrics above.
If they can just go a few years in a row with no embarrassing missteps, it seems quite possible they will be rerated to a more robust valuation.
