Is Markel Corporation (MKL) Going to Burn These Hedge Funds?

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Markel Corporation (NYSE:MKL).

Is Markel Corporation (NYSE:MKL) undervalued? Money managers were reducing their bets on the stock. The number of bullish hedge fund positions shrunk by 8 in recent months. Markel Corporation (NYSE:MKL) was in 25 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 37. Our calculations also showed that MKL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to take a glance at the key hedge fund action surrounding Markel Corporation (NYSE:MKL).

Alex Litowitz Magnetar Capital

Alex Litowitz of Magnetar Capital

Do Hedge Funds Think MKL Is A Good Stock To Buy Now?

At Q3’s end, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -24% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MKL over the last 25 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Polar Capital held the most valuable stake in Markel Corporation (NYSE:MKL), which was worth $130.4 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $99.6 million worth of shares. Giverny Capital, Wallace R. Weitz & Co., and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Giverny Capital allocated the biggest weight to Markel Corporation (NYSE:MKL), around 5.29% of its 13F portfolio. Wallace R. Weitz & Co. is also relatively very bullish on the stock, setting aside 2.81 percent of its 13F equity portfolio to MKL.

Seeing as Markel Corporation (NYSE:MKL) has faced falling interest from hedge fund managers, logic holds that there exists a select few funds who sold off their positions entirely last quarter. Intriguingly, Charles Akre’s Akre Capital Management said goodbye to the biggest position of the “upper crust” of funds watched by Insider Monkey, comprising close to $16.2 million in stock. Robert Joseph Caruso’s fund, Select Equity Group, also sold off its stock, about $14.6 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 8 funds last quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Markel Corporation (NYSE:MKL) but similarly valued. We will take a look at Viatris Inc. (NASDAQ:VTRS), Westinghouse Air Brake Technologies Corporation (NYSE:WAB), Conagra Brands, Inc. (NYSE:CAG), Coupa Software Incorporated (NASDAQ:COUP), GoodRx Holdings, Inc. (NASDAQ:GDRX), 10x Genomics, Inc. (NASDAQ:TXG), and MarketAxess Holdings Inc. (NASDAQ:MKTX). This group of stocks’ market valuations are similar to MKL’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VTRS 55 1466403 2
WAB 38 2982164 -8
CAG 20 625323 -9
COUP 52 4542300 -2
GDRX 26 1063016 -2
TXG 28 963031 0
MKTX 29 730008 -2
Average 35.4 1767464 -3

View table here if you experience formatting issues.

As you can see these stocks had an average of 35.4 hedge funds with bullish positions and the average amount invested in these stocks was $1767 million. That figure was $690 million in MKL’s case. Viatris Inc. (NASDAQ:VTRS) is the most popular stock in this table. On the other hand Conagra Brands, Inc. (NYSE:CAG) is the least popular one with only 20 bullish hedge fund positions. Markel Corporation (NYSE:MKL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MKL is 24.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and surpassed the market again by 5.1 percentage points. Unfortunately MKL wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); MKL investors were disappointed as the stock returned 2.7% since the end of September (through 12/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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Disclosure: None. This article was originally published at Insider Monkey.