Should You Consider Investing in Markel Corporation (MKL)?

Vltava Fund, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. In its Q3 investor letter, Vltava Fund mentioned the two companies they recently owned and provided some updates about the fund’s assets as of the end of the recent quarter. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

In the Q3 2021 investor letter of Vltava Fund, the management firm mentioned Markel Corporation (NYSE: MKL) and discussed its stance on the firm. Markel Corporation is a Glen Allen, Virginia-based insurance company with a $16.8 billion market capitalization. MKL delivered an 18.78% return since the beginning of the year, while its 12-month returns are up by 24.99%. The stock closed at $1,227.23 per share on October 5, 2021.

Here is what Vltava Fund has to say about Markel Corporation in its Q3 2021 investor letter:

“It is interesting that although Berkshire Hathaway’s business model is fundamentally very simple, produces excellent results, and has been in the public eye for decades, almost no one has managed to replicate it. The implementation of this idea is seemingly very difficult. In fact, the sole company that has been largely successful in following Berkshire’s footsteps is Markel Corporation. Its foundation is likewise a successful and highly profitable insurance business that produces free capital for further investments into both public and non-public shares in combination with exemplary asset allocation.

Much of the credit for this goes to its co-CEO, Tom Gayner. Markel was originally a family business founded in 1930 by the Markel family. Tom Gayner came onto the scene in 1990, when he took over the investment part of Markel, and since 2016 he has held the position of co-CEO alongside Richard White. Tom Gayner is first and foremost an excellent investor and asset allocator. At Markel, he is currently in charge of a USD 28 billion investment portfolio, as well as the part that invests in private companies and goes by the name Markel Ventures. He has been instrumental in driving the stock price from USD 10 to USD 1,200 during his tenure. That is about the same percentage increase that Berkshire’s shares had over the same period.

Tom Gayner, and indeed Markel as a whole, is a fine example of the fact that you do not need to invent something new, to come up with some innovation, or to try and disrupt something in order to succeed in the world of finance. To succeed, it is enough to apply things and practices that have been proven over the years. But it certainly is not easy. Markel has one undeniable advantage over Berkshire, and that is its much smaller size. The long-term potential of the company in the hands of Tom Gayner and his colleagues remains enormous.”

Pixabay/Public Domain

Based on our calculations, Markel Corporation (NYSE: MKL) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. MKL was in 33 hedge fund portfolios at the end of the first half of 2021, compared to 30 funds in the previous quarter. Markel Corporation (NYSE: MKL) delivered a -1.57% return in the past 3 months.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

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