This month I actually did a lot of pondering about which idea rattling around in my head would be most useful to share with my favorite folks, the Stock Gumshoe Irregulars (yes, that’s you!). For a while I was considering an obscure closed end fund that owns a big chunk of a private insurer, but the value didn’t seem to be there.
Then I thought I might recommend a combo play on “what works in America” beginning to work in China and Brazil, specifically Brazil Fast Food (BOBS) for fast food franchising exposure in Brazil and Nepstar (NPD) for chain drug stores in China … but those are both quite speculative. I don’t like to make macro bets, but I feel cautious enough about the investing environment that I hesitate to profile a firm like China Nepstar right now — I may still do so in the future, and they’re not as expensive as they were when they went public, but it’s still hard to focus on a firm with very tight margins that trades at a 30+ PE ratio right now. I’ll take my chances and assume that there will be a hiccup sometime soon that makes those shares look cheaper.
Then I looked over which solid companies were trading at good valuations, and I found that Markel, my favorite insurance company, just trickled down to a price/book value of under 1.2 (it’s 1.19 right now, actually). That’s a rare value, and has always been a great time to buy these shares in the past (though I’ve rarely been patient enough to buy them that cheap — my position in this company is longstanding and currently underwater), so I thought we should focus on this fairly big, relatively safe insurer that has a steady growth strategy, an incredible commitment to being fair to stockholders, and a nice big portfolio of large cap stocks that I think will continue to serve them well.
Now, to be clear, I have owned Markel for a long time, and overall I’m still carrying a paper loss on those shares. The most recent purchase I made, however, was just about a year ago, at almost the same share price that it’s trading at now (right around $328). At the time, Markel had a price/book value of about 1.4 or so, as low as I’d seen it in a long time, and the ...