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A Brutal Beating for Baby Berkshire

Shares of Markel (NYSE: MKL  ) fell hard after announcing that it would be buying Alterra Capital (UNKNOWN: ALTE.DL2  ) . Why did the market take this acquisition so badly? In this video, Motley Fool analyst Matt Koppenheffer discusses how this deal is going to cause share dilution for shareholders, and why the market may feel that this "Baby Berkshire" (NYSE: BRK-A  ) may not have the best track record of growing through acquisitions. He also gives his final thumbs-up or thumbs-down on the deal and tells us why.

Warren Buffett's long track record of success has made him one of the best investors of all time. With Buffett at the helm, Berkshire Hathaway has grown book value per share at a compounded annual rate of 19.8% for nearly 50 years! Despite an incredible historical track record, investors have to understand the key issues to watch moving forward. To help investors, the Fool's resident Berkshire Hathaway expert, Joe Magyer, has created this premium research report on the company. Inside you'll receive ongoing updates as key news hits, as well as reasons to both buy and sell the stock. Claim a copy by clicking here now.

Read/Post Comments (3) | Recommend This Article (11)

Comments from our Foolish Readers

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  • Report this Comment On December 20, 2012, at 7:16 AM, CentreCat wrote:

    Just remember how successful Berkshire's acquisition of General Re was. Buffett would love a do-over on that transaction. The general track-record for PC acquisitions is not good. IMO, Markel is clearly overpaying for Alterra. The real winner from this deal is CHUBB, Alterra's largest shareholder.

  • Report this Comment On December 20, 2012, at 4:12 PM, weblywwebly wrote:

    To say this story has anything to do with BRK.B

    is a real stretch. Stick to the relevant .

  • Report this Comment On January 06, 2013, at 8:19 AM, TMFPennyWise wrote:

    I understand why Matt makes the comparison to BRK since like BRK, MKL has several subsidiaries that are in no way related to insurance--for example a dredging operation and a liquid waste company. Perhaps, Matt, you could explain how this unfocussed business model is OK for MKL but any other company (other than BRK which some people say real value would be realized if it split up) would be considered too diverse and better broken up into separate entities?

    Also, I think the stock went down because Moody's and other rating companies question how well this merger will work in terms of blending insurance operations. MKL is not especially known for its brilliant ins. operations and it looks like ALTE has some rocky history and long tail claims that make it a rather speculative play in itself.

    I guess rather than MKL I would prefer to invest in a 'pure play' insurance company--I do have some $$ in Cincinnati Financial CINF as well as American Financial Group AFG and have done quite well with those . And then there are TRAV and AIG. I get very nice dividends from CINF and AFG. That's not happening at all with MKL.

    MKL will be on my watchlist for the next several months--I would like to see how this plays out.

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Related Tickers

4/30/2013 4:00 PM
ALTE.DL2 $32.55 Down +0.00 +0.00%
Alterra Capital Ho… CAPS Rating: *****
BRK-A $215249.96 Down -250.04 -0.12%
Berkshire Hathaway… CAPS Rating: *****
MKL $888.05 Up +0.82 +0.09%
Markel CAPS Rating: *****
BRK-B $143.42 Down -0.41 -0.29%
Berkshire Hathaway… CAPS Rating: *****