Markel Stock: Is This Berkshire Hathaway Alternative Undervalued?

During their recent episode, Taylor, Carlisle, and Jonathan Boyar discussed Markel Stock: Is This Berkshire Hathaway Alternative Undervalued?. Here’s an excerpt from the episode:

[Jonathon] Yes. Markel is a name we know well. Is it the next Berkshire Hathaway?

No. I mean, I think it’s an attractive investment. I think there’s only one Berkshire Hathaway.

I think Markel has great days ahead of it. But I don’t want to be disingenuous and say, I know it’s good for headlines and et cetera. But it’s not.

You have a company that’s selling for 1.2 times book that over the last couple of years missed the hard insurance market. They were not good at writing insurance, which is a problem for an insurance company. But it seems like they’re turning it around.

They have a new person who’s doing this. And so far, the early results are quite promising. Combined ratios going down.

There’s an activist involved, Channa Partners, who are putting suggestions in place that I think some of them make sense, some less so. But he’s been run by Tom Gaynor. He’s been a little skimpy on the buybacks.

I think going forward, he’s going to be a little bit more aggressive. If not, I think Markel will, Channa will make life very unpleasant for them. So I think there’s a lot of things to like.

I think it could be, you know, a company you can hold for a long period of time and do quite well. Is it going to be Berkshire Hathaway? No, but it could be a good stock.

[Tobias] How did they miss the hard insurance market? What happened there?

[Jonathon] I mean, they just didn’t do a good job growing, you know, writing policies. They didn’t do a good job of growing the amount of policies that they were going to write. They got into reinsurance, which was a disaster.

You know, they just, the one division that did do well was international, which is where the new guy is coming from. So they just, they missed the boat and it is what it is. But going forward, if they’re able to lower that combined ratio, which is essentially basically their profit margin, which would increase their profit margin, they could do quite well over time, especially if they buy back shares at 1.2 times book. Plus, they own these like industrial type businesses and financial assets. They have a stock portfolio that’s done reasonably well, ironically, or maybe not ironically, Berkshire is their largest position. So there’s things that they, there’s a lot to like about the name.

I just think, I think it’s an unfair comparison to almost any company to say it’s going to be the next Berkshire Hathaway. But it’s, I think investors should take a further look.