Barron’s had a feature article today on Markel Corp., essentially saying what the Motley Fool teaser emails have been saying for years: that this is a potential successor to Berkshire Hathaway as the next great insurance stock.
We’ve seen dozens of stocks touted as the “next Berkshire Hathaway,” of course, but this one has been teased as such for longer than most. It’s been a tough year for insurance companies, which means that their profits have come down in a tight pricing environment and many of them are near the bottom of their traditional valuation range. You’ll often see insurance companies valued by book value — so Markel, for example, has a price/book ratio of about 1.5 right now, near the bottom of the range that they typically trade in.
The company focuses on building book value and having a solid value investing strategy for the cash they hold in the float (premiums paid that aren’t yet due as insurance claims), and they generally do so by going after business lines that don’t have huge competition — they’ll ensure oil installations, for example, and they have lots of profession-specific niche insurance products. Barron’s says they’ve doubled book value and share price just about every five years … nice indeed. I’ve been considering adding to my Markel shareholdings recently as it has dipped to $400 (I’ve bought a few times in the past, around $220 and around $500, and continue to hold all those shares).
The “Barron’s bounce” will probably bring Markel shares up a few percentage points on Monday, but it might be worth a look when it comes back down — there’s nothing urgent that’s likely to move the share price up in the near future, in my opinion, but for long term holders who like to watch their book value compound over the years, this one still looks good to me.
Here’s what I wrote about them based on the Motley Fool tease (updated in December).
And here’s what I wrote on my other site, last time I bought shares (about a year and a half ago).