I first bought shares of Markel Group (MKL) about 22 years ago… but I sold them on a stop loss trade in 2004, because I didn’t really understand the company very well and it was going down in a rough year (turns out, 2004 was the last year that Markel reported adverse development of its reserves — meaning, they had to put more money into reserves, to backstop risks that were more expensive than expected, rather than the positive reserve development they do almost every year, releasing excess reserves to become “earnings”).  That was the final washout of Markel’s transformational acquisition of Terranova, a company which really built the base of their international business… but which had some bad reserving to work through before it began to contribute to the company.

I bought back into Markel shares in 2006, gradually realizing I had been an idiot to react to the rollercoaster the share price had been riding, and I’ve owned it ever since, buying more shares along the way.   I like to think I’ve earned a good return on the shares and made some good choices, but I’ve also overpaid for some of my shares… including those first few shares, I think (this isn’t a precise science, of course) — MKL has returned about 9% per year since 2006, and my position has an annualized return of about 11%, so it’s OK… but I don’t have much evidence of great timing in my buys over the years. That investment is keeping up with the market, and I find it reassuring, but it’s not providing a ton of “alpha.”

The challenge, going back in time, comes from that fact that Markel was often pretty richly valued in the early 2000s, in part because that’s when the “baby Berkshire” comparisons really started to be floated in the press (it traded around 2X book value at that time).  After being beaten down a bit by that Terranova acquisition, Markel stock largely outperformed its peers and the market going into 2020, albeit with another hiccup following their last really big insurance acquisition, (Alterra in 2013), but it has since trailed the market over the past 4-5 years, and trailed most of the companies we’d think of as peers (Berkshire, W.R. Berkley, etc) — partly because it has had worse underwriting than many peers over the past few years, at least based on the combined ...