This company models itself after Warren Buffett's Berkshire Hathaway. Analysts say it can beat the market too

Published Sun, May 21 20238:33 AM EDT

A folksy investor who modeled his entire company after Warren Buffett's conglomerate just came back from a trip to Omaha, Nebraska that may have partly been an attempt at also luring loyal Berkshire Hathaway shareholders. Thomas Gayner , CEO of Markel Corp. , held a brunch Q & A one day after Berkshire's annual meeting, the so-called Woodstock for Capitalists that attracted nearly 40,000 attendees from around the world. Even though Markel is based in a Richmond, Virginia, suburb, it's been a tradition for years to hold the event in the hometown of Buffett, from whom Gayner mimicked his business model — running a growing insurance operation by acquisitions, while managing an equity portfolio partly by capturing the float. The float , a valuable source of funds, consists of monies collected as insurance premiums before it's paid out for claims. Gayner answered questions from both investors and shareholders-to-be, all of whom lined up at the microphones after enjoying delicate pastries and breakfast sandwiches. Exuding a down-to-earth, cheery charm similar to Buffett's, a quick-witted Gayner regularly ignited rounds of applause and laughter. The 61-year-old CEO even filmed a get-well video with the audience for one of his employees who was sick and was unable to attend. When asked about his succession plan, Gayner said he plans to work forever, jokingly promising investors that he's not going to work for 20 years and run for president. Founded in 1930 and with a market value today of $18 billion, Markel is first and foremost a specialty insurance company focused on niche markets like livestock and dude ranches. It tapped into the reinsurance business, insuring other insurers, in 1997. But Markel is also a mini-conglomerate that owns whole businesses outside of insurance, via Markel Ventures. Some of the deals it has done in recent years include buying automobile transport equipment maker Cottrell, luxury handbag company Brahmin and plants retailer Costa Farms. Beyond insurance and subsidiary businesses owned outright, Markel also runs a big equity portfolio, with a market value of nearly $8 billion at the end of the first quarter. Its two biggest holdings at the end of March were Berkshire's Class A and B shares, with a combined value of nearly $1 billion. Markel also counts tech names such as Amazon and Alphabet , as well as retailer Home Depot among its top holdings. Some Wall Street analysts have praised Markel's recent performance against both peers and the broader market. Markel has returned 16.1% annually over the past three years while the S & P 500 has returned 12.4%, according to FactSet. (Berkshire has returned 24.5% a year.) "Underwriting results remain solid, investment income is surging and Ventures continues to deliver very strong results (both top & bottom line)," RBC analyst Mark Dwelle said in a recent note. "We remain at Outperform and see valuation as attractive versus peers." Janney reiterated a buy rating on Markel after its stronger-than-expected first-quarter earnings. "We believe Markel's shares will outperform the S & P 500 over the long term," Janney Montgomery Scott analyst Robert Farnam said in a note. "Given the favorable insurance market conditions in many of MKL's product lines, we believe the company's P/B multiple may expand if it can maintain solid profitability." Markel also has its appeal to Berkshire, which took a $600 million stake in Markel in early 2022. It's unclear if it was Buffett who purchased the stock or one of his investing lieutenants, Todd Combs or Ted Weschler, who oversee about $15 billion each for Berkshire. Shares of Markel are up about 3% so far this year, after rising 7% in 2022.