Markel Corporation (MKL): Is This “Forever” Stock The Next Berkshire Hathaway Inc. (BRK.A)?

Merkel’s total operating revenues have increased 30% from last year, to $1.9 billion. This is attributed to a 27% gain in insurance operations as well as a 64% profit from Markel Ventures, the company’s non-insurance businesses. Perhaps the most significant number is the change in cash and cash equivalents, up from $863 million last December to $1.7 billion as of June, which gives it even more flexibility in difficult economic environments.

While Markel is still more of an insurance company than Berkshire, it has been seeing tremendous success with the business investments that make up Markel Ventures. A number of diverse companies are held in this segment such as AMF Bakery Systems, a designer and manufacturer of high-speed bakery equipment, and Diamond Healthcare, a leader in behavioral health services.

And it’s not just private equity that’s driving returns, but investments in Buffett-approved companies like The Coca-Cola Company (NYSE:KO), Costco Wholesale Corporation (NASDAQ:COST), American Express Company (NYSE:AXP) and a large stake in Berkshire Hathaway Inc. (NYSE:BRK.A) itself. All in all, Markel is a triple threat that has staying power and the maneuverability to snag attractive companies that the cumbersome Berkshire can’t.

A telling sign that Wall Street is a believer in the company can be found by looking at institutional transactions. In the last quarter, 592,550 shares were purchased representing 6.7% of shares outstanding. Management has slowly been adding to its holdings as well and currently owns 14% of Markel Corporation (NYSE:MKL)’s total market cap.

Risks to Consider: Markel is a property and casualty insurance company and has the standard risks of higher than expected losses on claims as well as being subject to interest-rate risk and market risk from its investment operations. 

Action to Take –> Markel is a value buy based on its current P/B ratio of 1.17. Expected earnings growth of 11.8% gives us a price target of around $575 within the next 12 months.

P.S. — Buffett has said his preferred investment horizon is “forever” — and after six months and $1.3 million in research expense, we’ve uncovered the absolute best group of Forever Stocks. To learn more about these stocks — including some of their names and ticker symbols — click here.

– Daniel Cross

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