Markel: Smart Money's Baby Berkshire?


Nicholas Vardy Image Nicholas Vardy Editor, Bull Market Alert, The Alpha Investor Letter, and The Global Guru

Markel Corporation (MKL) bears such a close resemblance to Warren Buffett’s Berkshire Hathaway (BRK.B) that analysts have dubbed it the “Baby Berkshire", observes Nicholas Vardy, editor of Smart Money Masters.

The nickname is apt. With a market cap of just $13.74 billion, Markel is just 2% the size of Berkshire Hathaway’s $432 billion.

Warren Buffett often has said the biggest enemy of Berkshire Hathaway’s future market-beating returns is its size.

He conceded that Berkshire’s unwieldy size is also likely to impair its investment returns in the years ahead. Markel offers the best of both worlds.

On the one hand, Markel has a Buffett-inspired investment strategy, with time-tested results. On the other, Markel has a relatively small, $4.15 billion investment portfolio, which increases its chances of generating market-beating investment returns.

Tom Gayner, Markel’s Co-Chief Executive Officer, has run its investment portfolio since he joined the company in 1990. Gayner is a very public disciple of Warren Buffett and operates with a Benjamin Graham–like margin of safety.

Founded in 1930, Markel is a specialty insurance holding company. Both Markel’s underwriting and investment strategy are modeled explicitly on Berkshire Hathaway.

Markel even holds a shareholder brunch in a conference room at the Omaha, Nebraska, Hilton hotel each year — on the day after Berkshire Hathaway’s annual meeting.

Over the years, Markel has established a reputation as one of the leading players in specialty insurance markets.