Markel Corporation (MKL): Three Reasons Warren Buffett Should Buy It

Like Berkshire with Buffett, Markel relies on Gayner’s investing prowess to make the most of its shareholder equity. The big difference, however, is that Berkshire’s massive balance sheet allows Buffett to also invest its insurance float, which gave him more than $73 billion in free money to work with in 2012.

While the added capital from the Alterra Capital Holdings Ltd (NASDAQ:ALTE) deal could very well give Markel the flexibility to eventually do the same on its own going forward, to be able to invest Markel’s shareholder equity and insurance float would be icing on the cake for Buffett and Berkshire.

Investing in the little guy
Sure, Buffett has spent a ton of money buying massive businesses in the past decade, but last year alone, he also forked out $2.3 billion on smaller bolt-on acquisitions. Given Markel’s current market capitalization of just $5 billion, it should come as no surprise that Gayner, who is also president of Markel Ventures, is well versed in pursuing exactly the types of small acquisitions for which Buffett is so fond.

In fact, according to the Markel Ventures’ website, they look for:

1. Profitable businesses with good returns on capital.

2. Talented management teams and a culture of integrity.

3. Reinvestment opportunities and capital discipline.

4. Fair prices.

What’s more, Gayner prefers to use little or no debt with Markel’s acquisitions, maintaining a stated long-term goal of building “a great company comprised of solid businesses.”

Foolish final thoughts
All things considered, it’s no wonder Markel is often touted as a miniature version of Berkshire Hathaway. In any case, given Markel’s superior management team, insurance operations, and demonstrated knack for growing the business through small acquisitions, don’t be surprised if Buffett makes a play to absorb the company to the long-term benefit of Berkshire shareholders.

The article 3 Reasons Buffett Should Buy Markel originally appeared on Fool.com.

Fool contributor Steve Symington owns shares of Markel. The Motley Fool recommends Berkshire Hathaway, H.J. Heinz Company, and Markel. The Motley Fool owns shares of Berkshire Hathaway and Markel.

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