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Value Investor Gayner’s Top Stock Picks For Q4

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Markel Corporation (NYSE:MKL) is a Virginia-based financial holding and insurance company. It invests its ‘float’ in the equity markets through its subsidiary Markel Gayner Asset Management just like Warren Buffett‘s Berkshire Hathaway Inc. (NYSE:BRK.A). Thomas Gayner has been heading Markel Gayner Asset Management since 1990 and since 2004 has also served as the Chief Investment Officer (CIO) of Markel Corporation (NYSE:MKL). The company recently submitted its 13F filing with the Securities and Exchange Commission (SEC) for the reporting quarter ending September 30. According to the filing Markel Corporation (NYSE:MKL)’s US equity portfolio at the end of September was worth nearly $3.8 billion, 5% less than the $4 billion that it was worth at the end of June. The filing also revealed that Markel Corporation had a fairly low quarter over quarter turnover in its equity portfolio of just 9.09% and its top 10 holdings accounted for 42.48% value of its equity portfolio at the end of September. In this article we are going to take a closer look and analyze the fund’s top six equity holdings at the end of the third quarter.

Tom Gayner

We track hedge funds and prominent investors because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 50 most popular large-cap stocks among hedge funds had a monthly alpha of about 6 basis points per month between 1999 and 2012; however the 15 most popular small-cap stocks delivered a monthly alpha of 80 basis points during the same period. This means investors would have generated 10 percentage points of alpha per year simply by imitating hedge funds’ top 15 small-cap ideas. We have been tracking the performance of these stocks since the end of August 2012 in real time and these stocks beat the market by 53 percentage points (102% return vs. S&P 500’s 48% gain) over the last 37 months (see more details here).

Tom Gayner
Tom Gayner
Markel Gayner Asset Management

#6 Brookfield Asset Management Inc (NYSE:BAM)

Shares Owned by Markel Corporation (as of September 30): 5.018 million shares

Value of Holding (as of September 30): $157.792 Million

Markel Corporation added an additional 18,000 shares of Toronto-based alternative asset management firm Brookfield Asset Management Inc (NYSE:BAM) during the third quarter. Although shares of Brookfield Asset Management Inc (NYSE:BAM) recovered from the decline, they suffered due to the volatility of the third quarter in October, they still trade flat for the year. On November 6, the company reported better than expected fiscal 2015 third quarter results. While the Street had expected the company to report EPS of $0.45 on revenue of $4.70 billion, Brookfield Asset Management reported EPS of $0.48 on revenue of $5.06 billion. Glenn Greenberg‘s Brave Warrior Capital was one of the hedge funds that initiated a stake in the company during the second quarter; it held 5.44 million shares of Brookfield Asset Management, as of June 30.

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#5 Walt Disney Co (NYSE:DIS)

Shares Owned by Markel Corporation (as of September 30): 1.57 million shares

Value of Holding (as of September 30): $161.016 Million

The stock of Walt Disney Co (NYSE:DIS) had a fantastic bull run during the first 7 months of the year and then suffered an over 20% decline during August. However, it has recouped most of the losses since then and currently trades with year-to-date gains of 23.71%. During the third quarter, Markel Corporation increased its stake in the company by 23,000 shares. For the third quarter of fiscal 2015, Walt Disney Co (NYSE:DIS) reported EPS of $1.14 on revenue of $13.51 billion on November 5. Analysts had expected the company to report EPS of $1.14 on revenue of $13.50 billion. On November 10, analysts at Credit Suisse reiterated their ‘Outperform’ rating on the stock, while upping their price target on it to $130 from $120. Ken Fisher‘s Fisher Asset Management is another shareholder of the company, with ownership of nearly 8.51 million shares as of September 30.

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