According to Berkshire Hathaway's (BRK.A 0.46%) (BRK.B 0.40%) recent regulatory filings, the conglomerate owns nearly 50 different stocks in its closely watched portfolio. They are in several different industries, ranging from banking to software and everything in between. And many (especially the larger positions) were hand-picked by legendary investor Warren Buffett himself.

However, while I own several of the stocks in Berkshire's portfolio, the one I'm most excited about happens to be the one whose business model is closest to Berkshire's -- Markel (MKL -1.40%).

What does Markel do?

At its core, Markel is an insurance company. It primarily writes specialty insurance policies, which is known as excess and surplus (E&S) insurance in industry terms. In short, Markel's insurance policies cover unusual situations, high-risk businesses, and difficult-to-gauge risks.

For example, Markel commonly insures businesses in high-risk industries like construction. It offers wedding insurance, insures high-value horses, and writes motorcycle policies. It offers home and dwelling insurance for high-risk properties, like those in flood-prone coastal areas.

The key takeaway for investors is that specialty insurance is hard to do, but can be very profitable for companies that are good at it. In the first quarter of 2023, Markel had $1.97 billion in earned premiums, 12% more year over year, and operated with a 94% combined ratio. Without getting too deep into how the insurance business works, a combined ratio is all of the premiums paid out as claims plus the company's operating expenses. So a 94% combined ratio means Markel had a 6% profit margin on underwriting. Most insurers are happy to roughly break even on insurance and make their money from investing the premiums collected but not yet paid out for claims.

An early-stage Berkshire?

The reason Markel often draws comparisons to an early-stage Berkshire Hathaway is because of how it invests its premiums not yet paid out (known as the "float").

Markel has two different investment arms. Markel Ventures is the company's venture capital division, which owns or invests in early-stage companies including heavy machinery manufacturers, luxury fashion companies, a homebuilder, and much more.

In addition, Markel invests in a portfolio of public stocks just like Berkshire does (although it's a significantly smaller portfolio). In fact, Berkshire is the No. 1 holding. Other top Markel investments include Deere, Alphabet, Brookfield Corporation, and Home Depot.

One of the most important things to keep in mind is that smaller investments can become serious needle-movers for Markel since it's about 3% of Berkshire's size. For example, a successful venture investment could be a big windfall for Markel but would barely register on Berkshire's balance sheet. This investment flexibility gives Markel a significant advantage.

Not a cheap stock

Markel trades for about 18 times forward earnings, so while this isn't an excessive earnings multiple, it isn't cheap, either. And the stock is significantly closer to its 52-week high than it is to the low.

I've been slowly building a position in Markel (very slowly, given that the stock is about $1,350 per share), but plan to continue adding to it over time. Conditions in the specialty insurance space are quite favorable right now, and there are also plenty of attractive investment opportunities available to companies that have capital to put to work.

Berkshire Hathaway has been building its position as well. The company added shares of Markel in the first quarter and now owns 3.5% of the business. While it remains to be seen if Markel will become "the next Berkshire Hathaway," this is a unique business model that is set up for success in the current market environment.