Markel (MKL) - Great Company For Your Retirement Account

Markel Corp, Ticker MKL, had a nice correction today down over 5% as I am writing this. The company is fairly valued selling at 14x the five year average net free cash flow (NFCF). The management here is top notch and has a great track record of creating value for shareholders. With a 10% compound annual growth rate in shareholder equity per share. And premiums have increased 17% in the last two years. With $14.7B in shareholder equity the company has a return on equity of 8.4% using the five year average NFCF.

I don’t know the competitive advantage of their insurance company. I would have to dig deeper to understand it, but I understand the managements philosophy and historical track record. And this gives me enough understanding to take a small position in this company and would be a nice addition to anyone’s retirement portfolio.

This company hits almost all of OWI principles for a great investment. They are very focus on employees, customers, high return on asset businesses, being market leader and operational excellence.

The data below was taken from Markel’s annual letter and is pretty interesting since I look at 5, 10 or 15 year averages when analyzing companies. Looks like Markel does the same.

A big portion of Markel’s income comes from their equity portfolio. They have very similar principles when looking for investments. Here is their 4 tier approach:

• invest in businesses with good returns on capital that don’t use too much debt

• management teams that possess equal measures of talent and integrity

• that can reinvest their earnings at good rates of return or redistribute it

• at fair prices.

These principles have worked out well for them. Their current invesment portfolio is $9B with a cost of $2.9B.

Management has a 20 year track record of outstanding business returns and shareholder returns. This is an easy asset to buy and hold at this valuation.