6) Markel Group Inc. (NYSE:MKL)
Average Upside Potential: 11.12%
Markel Group Inc. (NYSE:MKL)’s primary business is property and casualty insurance. It focuses on specialty lines, ranging from areas like executive liability to commercial equine insurance.
The company has released its 2Q 2024 financial results, and posted net operating earnings per share of $25.95, crushing the analysts’ estimates by 25%. It saw improvement in earned premiums and higher net investment income, which supported its bottom line. Total operating revenues came in at $3.8 billion, slightly missing the analysts’ expectations by 0.6%. Markel Group Inc. (NYSE:MKL) saw YoY revenue growth of 4.7%.
For those who are unaware, the company is known as an early-stage Berkshire Hathaway. This is because Markel Group Inc. (NYSE:MKL)’s core business remains insurance, but it has a publicly-traded stock portfolio. It also has a venture investing division. Therefore, Markel Group Inc. (NYSE:MKL) is a unique company. It invests its excess capital in common stocks and earlier-stage businesses.
The recent acquisition of Valor Environmental by Markel Group Inc. (NYSE:MKL) implies the company’s strategic approach to growth and expansion. Not only it has enhanced its service offerings, but it has positioned the company to capitalize on the growing environmental services market.
Royal Bank of Canada assumed the coverage on the company’s shares and upped their price target from $1,475.00 to $1,625.00. They gave a “Sector perform” rating on 3rd May. According to Insider Monkey’s database of Q1 2024, 26 hedge funds held stakes in Markel Group Inc. (NYSE:MKL).
Giverny Capital Asset Management, LLC, an investment management company, recently published its 4Q 2023 investor letter. Here is what the fund said:
“In the fourth quarter, we sold Markel Group Inc. (NYSE:MKL), the Richmond-based insurer. For some years now, Markel has tried to mimic Berkshire Hathaway by using profit generated in its core insurance business to buy whole companies. While this has been a compelling model for Berkshire, Markel has not been able to convince high-quality companies to sell for attractive prices to the same degree as Berkshire.
Meanwhile, in its insurance operations, Markel has an elevated expense structure – it spends about 33 cents of every dollar collected in premiums on its own overhead. Its leanest competitor spends 21 cents of every premium dollar on overhead. Markel’s cost structure stems from an unwieldy technology stack that would be very expensive to upgrade. I have great respect for Markel, but the combination of middling investments and a challenging expense structure caused me to believe I could find better value elsewhere.
Selling SS&C and Markel, which were each about 4% of the portfolio, was not easy for me. Both businesses trade for reasonable prices and have good competitive positions. They have strong CEOs who have been in the job for many years. CEO Bill Stone founded SS&C and is a billionaire thanks to his own decisions. Tom Gayner at Markel is a well-regarded stock market investor and a much-admired leader.”
