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Markel Puts Its Money Where Its Mouth Is

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If you've read some of my musings here at the Fool, you're probably aware I have no qualms extolling the virtues of Markel Corporation (NYSE: MKL  ) . In fact, in late April, I even went so far as explain why I favor holding Markel for its future upside potential over the company's much larger, world-dominating counterpart in Berkshire Hathaway (NYSE: BRK-B  ) (NYSE: BRK-A  ) .

Of course, by owning shares of Markel, investors indirectly own a piece of Berkshire Hathaway, too. Remember, Warren Buffett's company so happens to be the single largest holding in Markel's own equity portfolio, which is managed by the company's president, CIO, and renowned value investor, Tom Gayner.

In any case, it turns out I'm certainly not alone in my fondness for Markel from an investment perspective, anyway.

To be sure, in a recent SEC filing in which Markel released the latest details of its employee retirement savings plan, one investment option stands out from the rest:

 Investment Type Fair Value (as of 12/31/2012) % of Total
 Markel common stock  $72,513,051  27.90%
 Blended mutual funds  $69,120,113  26.59%
 Large cap mutual funds  $64,312,459  24.74%
 Short-term investment funds  $17,194,918  6.62%
 Bond mutual fund  $17,132,868  6.59%
 Mid/small cap mutual funds  $11,231,055  4.32%
 International mutual funds  $8,412,721  3.24%
 Total investments:  $259,917,185  100%

Markel Employee Retirement Account Plan investments, Source: Markel SEC Form 11-K filing, page 8

Though blended mutual funds put up quite a fight last year, Markel common stock once again walked away unscathed as Markel employees' retirement vehicle of choice, representing nearly 28% of the value of all investments in the plan.

What's more, it's also worth noting the 167,303 shares collectively held by Markel's roughly 6,400 employees equates to more than 1.73% of Markel's 9.63 million total shares outstanding.

So what does this tell us?

The downside
First, while it's fairly obvious a significant number of Markel employees believe strongly in the longevity of their company, most of us would be wise to remember it's generally not a great idea to over-saturate our own retirement portfolios with a single investment. This is especially apparent when that investment happens to be the stock of our own employer, where our "insider" perspectives may tend to provide a false sense of confidence in the businesses that enable us to pay our bills.

On a more encouraging note, though -- depending on how you look at it, anyway -- while Markel's employee stock ownership levels were still impressive at the end of 2012, the numbers were even more disparate in 2011, at the end of which Markel employees owned 171,766 common shares, or more than 4,000 more shares than at conclusion of last fiscal year. When all was said and done in 2011, Markel stock represented more than 31% of the total value of Markel's retirement account plan.

It would appear, then, at least some aspiring Markel retirees took the opportunity to rebalance their accounts in 2012.

The silver lining
That said, as a shareholder myself, I certainly can't blame Markel employees for their continued spate of long-term optimism.

After all, with Gayner at the helm of both Markel's investment operations and its Markel Ventures subsidiary, the stock not only bears striking similarities to a high-quality mutual fund in and of itself, but also, like Berkshire Hathaway, is supplemented by significant insurance operations.

In addition, the company still enjoys the leadership of Chairman and longtime CEO Alan Kirshner, who himself is famously supported by the ever-effective vice chairmen and third-generation Markel family members, Steve and Anthony Markel. In short, and as I wrote in February, Markel's management team both has a vested interest in the business and knows it inside and out.

Foolish takeaway
Of course, these are just a few reasons why Markel has been able to return more than 6,200% since its IPO in 1986 and why I'm convinced it should continue to outperform the broader markets going forward.

When we zoon out a bit from Markel, though, it's safe to say the best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.


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  • Report this Comment On July 05, 2013, at 1:35 PM, crpapa wrote:

    Have you made any changes in your recommendation about LUK as far as strike price?

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