Markel Corporation (MKL) invests in companies rather than bonds to obtain higher returns than many of its insurance peers, and the family-owned, Virginia-based insurer also has good owner/operators, making this company a favorite of William H. Mann III, Chief Investment Officer and Portfolio Manager at Motley Fool Asset Management, LLC.
“Most insurance companies view their insurance book as being the risk side of their book, and the money that they hold on to in the float needs to be guaranteed. They put it into zero-coupon bonds and things of that nature, with returns now that are just barely above zero. Well, Tom Gayner goes out and buys companies with it, very similar to the way that Warren Buffett does,” Mann said.
Mann says the Gayner’s constructs MKL‘s portfolio very well, and the company presents great opportunities for investors looking at their investments on a cyclical basis, even as the company move quarterly similar to other insurance companies.
“Every insurance company has extremely lumpy earnings, because you’ve got whatever insurable liabilities that come up each quarter against their guesses, and then on top of that you’ve got their investment portfolio, which wiggles and waggles as investment portfolios want to do,” Mann said. “If you view it from the time frame of a business cycle versus a quarterly or even monthly or daily cycle, you see an extraordinary opportunity.”
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