Markel Corporation (NYSE:MKL) is an insurance company which invests its capital in the financial markets and therefore reports many of its long equity in positions in 13F filings as hedge funds and other major investors do. We track 13F filings partly for their role in developing investment strategies; for example, the most popular small cap stocks among hedge funds (as listed in our August 2012 newsletter) outperformed the S&P 500 by 18 percentage points between September and January (read more about our hedge fund strategies). We also use 13F filings as recommendations from fund managers- not necessarily to follow blindly, but to research further. Incidentally, we spoke with Tom Gayner, chief investment officer at Markel, in January to learn more about his investing process. Read our exclusive interview with Tom Gayner. Here are our thoughts on five of Markel’s top picks as of the beginning of 2013:
The largest position in Markel’s portfolio was what in theory should be many value investors’ favorite stock: Berkshire Hathaway Inc. (NYSE:BRK.B). Warren Buffett’s holding company (see Buffett's stock picks) does trade at a premium to book value with a P/B ratio of 1.3, as investors believe that Buffett will manage Berkshire’s financial assets very effectively. While we of course admire Buffett’s investing ability, prospective long-term Berkshire shareholders should make sure that they are comfortable with the future investment team.
Markel owned 5.1 million shares of CarMax, Inc (NYSE:KMX), a $9 billion market cap used car dealer. We reported on an insider purchase at CarMax earlier this month (learn more about the insider purchase). When we had looked at the company compared to its peers, we had not been particularly impressed; in particular, AutoNation, Inc. (NYSE:AN) and Group 1 Automotive, Inc. (NYSE:GPI) had seemed that they might be better values though we imagine that buying any of these companies is more of an industry or macro play than anything else. Carmax’s trailing P/E is 22, so at least some earnings growth is already priced into the stock.
See three more stocks Gayner liked: