Looking for the Next Berkshire Hathaway Inc. (BRK.A)

The company has made successful investments in the energy sector with names like Diamond Offshore Drilling Inc (NYSE:DO) and Boardwalk Pipeline Partners, LP (NYSE:BWP), and management – Loews Corporation (NYSE:L) has been managed by members of the Tisch family since 1961- has a solid track record when it comes to allocating capital.

On the other hand, Cna Financial Corp (NYSE:CNA)´s underwriting business has historically produced subpar returns. That´s a big difference in comparison with Berkshire and its top notch insurance operations.

Markel Corporation (NYSE:MKL) is usually referred to as “baby-Berkshire,” and for good reasons. The company´s president and CIO, Tom Gayner, working together with Chairman and CEO Alan Kirshner, has produced outstanding returns for investors over the long term: Markel Corporation (NYSE:MKL) has multiplied its price more than 20 times since 1990.

Markel is focused on specialized insurance, and this allows the company to differentiate itself from the competition and obtain solid results from its underwriting operations. Like Berkshire, Markel capitalizes its financial strength by investing a relatively high proportion of its assets in high quality stocks with strong competitive advantages to maximize returns.

Markel has recently acquired  reinsurance company Alterra Capital Holdings Ltd (NASDAQ:ALTE) for $3.1 billion. Alterra Capital Holdings Ltd (NASDAQ:ALTE) could play for Markel a similar role to the one General Reinsurance plays for Berkshire, diversifying risks and allowing for more flexibility in the investment portfolio.

Bottom Line

Due to its profitability in both underwriting and investments, its amazing track record of long term returns, and business model similarities , Markel Corporation (NYSE:MKL) looks like the strongest candidate to become the next Berkshire Hathaway.

The article Looking for the Next Berkshire Hathaway originally appeared on Fool.com and is written by Andrés Cardenal.

Andrés Cardenal owns shares of Berkshire Hathaway. The Motley Fool recommends Berkshire Hathaway, Loews, and Markel. The Motley Fool owns shares of Berkshire Hathaway, Loews, and Markel. Andrés is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.