We came across a bullish thesis on Markel Group Inc. (MKL) on Substack by Soren Peterson. In this article, we will summarize the bulls’ thesis on MKL. Markel Group Inc. (MKL)’s share was trading at $1835.80 as of March 10th. MKL’s trailing and forward P/E were 9.21 and 16.56 respectively according to Yahoo Finance.
Markel embodies the qualities of a long-term investment that allows investors to rest easy. Its disciplined management approach, focus on continuous improvement without excessive risk, and alignment of interests among customers, colleagues, and shareholders create a resilient business model. The company attracts a stable, high-quality investor base, evidenced by its low shareholder turnover, second only to Berkshire Hathaway. Markel’s philosophy is centered on owning businesses indefinitely, emphasizing long-term value creation through sound day-to-day decision-making. While short-term volatility is inevitable, the company remains steadfast in its pursuit of sustainable growth across its three core segments: insurance, investments, and ventures.
The insurance segment remains Markel’s backbone, with a strong U.S. specialty insurance business that insures high-risk, niche markets at high premiums. The company’s disciplined underwriting led to a significant improvement in its combined ratio, dropping to 95.2% in 2024 from 98.4% the previous year, driven primarily by its international insurance operations, which achieved a sub-80% combined ratio. International insurance, which now accounts for a third of total insurance revenue, rebounded from prior turbulence, reflecting the impact of recent management changes. Meanwhile, Markel continues to refine its specialty insurance focus by exiting certain lines, a strategic shift that has already shown positive results and is expected to improve performance further in 2025.
Markel’s investment portfolio delivered a solid 20.1% return in 2024, slightly underperforming the S&P 500’s 25% gain. However, the company remains focused on long-term capital preservation rather than short-term outperformance. Its investment strategy adheres to four core principles: strong returns on capital with low debt, management teams with both talent and integrity, reinvestment opportunities or disciplined capital allocation, and buying assets at a reasonable price. The long holding periods also enable a tax-efficient compounding effect, as demonstrated by a $7.9 billion unrealized gain in 2024, resulting in a $2 billion deferred tax liability that effectively provides low-cost funding. The fixed-income portion of the portfolio is designed to offset insurance float costs, with 98% of holdings rated AA or better. This approach ensures stability through market cycles, with assets structured to match liabilities in duration and currency.
The ventures segment saw revenues increase from $5 billion in 2023 to $5.1 billion in 2024, though operating income remained flat at $520 million as certain businesses faced normalization following pandemic tailwinds. Markel has been patient with acquisitions, waiting for valuations to become more attractive before deploying capital. This disciplined approach continues, with the notable exception of its 2024 acquisition of Valor Environmental, an erosion control company.
With a fortress balance sheet and a commitment to specialization, Markel remains well-positioned for sustainable long-term growth. Its diversified business model, prudent capital management, and focus on quality investments make it a compelling holding for investors seeking stability and compounding returns over time.
Markel Group Inc. (MKL) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 38 hedge fund portfolios held MKL at the end of the third quarter which was 38 in the previous quarter. While we acknowledge the risk and potential of MKL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MKL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.