While we can't categorize conglomerate Markel Group (MKL 0.22%) as a beaten-down stock, it certainly hasn't been an outperformer of late. While some peers in the finance and insurance sectors soared well higher over the past few years, it's risen modestly by comparison.
Yet management is working to streamline it back into the high performer that once earned it the tag of a "baby Berkshire" (referring to Warren Buffett's Berkshire Hathaway). I think that regeneration project is already yielding results.
Buffett junior?
Like Berkshire, Markel is anchored by insurance operations while holding stakes in fixed-income securities and publicly traded companies. It also, through Markel Ventures, manages a portfolio of privately held businesses.
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When the company's business model works, it works beautifully -- the insurance side of it is large, relatively steady, and potentially quite profitable. At times when the more up-and-down investments and Ventures are doing well, Markel's overall fundamentals can really jump. In leaner periods, the relatively steady insurance operations may serve to compensate.
The problem is, compared to its typical performance in years past, the insurance business has been relatively sluggish recently, and those investments weren't all that hot either.
Yet the transformation project seems to be having an impact. In the company's most recently reported quarter, the operating income from investments leaped more than eight times higher on a year-over-year basis to more than $822 million.
This, combined with a 17% improvement in that metric for Markel Ventures (to nearly $208 million), more than compensated for the 27% dive in the insurance segment to $128 million. All told, Markel's overall operating income for the quarter nearly tripled, to $1.1 billion from the year-ago tally of under $410 million.
NYSE: MKL
Key Data Points
That's one big ship
A sprawling insurance business can be tough to turn around, which is why it might take a bit of time to right the foundational Markel operating unit. Still, the company's reorganization and restructuring seems to be sprucing up operations, and I think insurance will soon follow. To me, that's plenty of reason to buy Markel stock now.
