Tom Gayner and Markel’s Top Stock Picks for 2013 Include Carmax

Diageo plc (NYSE:DEO), the alcoholic beverage company who is responsible for (among others) the Johnnie Walker, Crown Royal, and Smirnoff brands, was another of Gayner and his team’s favorite stocks. Diageo trades at 18 times trailing earnings, with revenue up 5% in its most recent quarter compared to the same period in the previous fiscal year; net income did increase at a much higher rate, but we doubt that growth is sustainable without similarly strong improvements on the top line. Renaissance Technologies, founded by billionaire Jim Simons, had initiated a position in Diageo during the third quarter of 2012 (check out more stocks Renaissance was buying).

Markel reported a position of 3.1 million shares in Brookfield Asset Management Inc. (NYSE:BAM), the $24 billion market cap real estate developer. Analyst consensus for 2013 has Brookfield valued at 31 times its current-year earnings. The company has been experiencing growth, but that pricing does give us some pause at least at first glance. Marty Whitman’s Third Avenue Management cut its stake in Brookfield during the third quarter but still closed September with 7.8 million shares in its portfolio (research more stocks Third Avenue owned).

Fairfax Financial Holdings Limited (FRFHF) rounded out Markel’s top five stock picks. Prem Watsa, head of Fairfax, has been called “the Warren Buffett of Canada” for his similar process of managing a holding company and for his investment success over the last 35+ years. While he is not as well known he deserves credit for nearly doubling Fairfax’s stake in BlackBerry (NASDAQ:BBRY) in the third quarter of 2012 when the stock was below $8. Find more of Watsa’s favorite stocks. Fairfax is valued at about the book value of its equity, with investors giving Watsa much less of a premium than Buffett.

Disclosure: I own no shares of any stocks mentioned in this article.