August 25, 2013 in Business

If you haven’t heard of Markel, it’s past time for a good look

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You’re probably not familiar with this $5 billion company, but you should be. Markel Corp. (NYSE: MKL) is a specialty insurance company, underwriting risks that many well-known larger insurers don’t. For example, it provides insurance related to dance schools, railroads, snowmobiles, horses, ambulances, historic homes and sustainable farms, among other things.

The company’s book value per share has averaged 16 percent growth per year over the past 20 years, while its investment portfolio has grown by 16 percent.

Those investment results are driven by Tom Gayner, who invests Markel’s excess funds in the stock market. Gayner seeks investments with high returns on capital, ones that are likely to deliver compounding growth, ones led by talented managers with integrity. He also favors undervalued stocks, with a “safety first” mantra. His formula has served the company well.

Markel recently bought fellow insurer Alterra Capital for $3 billion, and it’s also building a Markel Ventures unit, which buys smaller companies in their entirety, giving Gayner another way to redeploy shareholder capital and providing another profit source for investors. Currently, Markel Ventures is a relatively small contributor to Markel’s overall bottom line, but it’s a huge opportunity for the future.

Ask the Fool

Q: After recently graduating from college, I’m employed and contributing to my workplace 401(k) plan. Should I invest additional money in a CD, too? – G.J., Flagstaff, Ariz.

A: For most young people, CDs are not ideal. Even the best CD rates these days (which you can look up at bankrate.com) are puny. If you know you won’t need a sum of money for at least five years (and to be more conservative, 10 years), it’s likely to grow more briskly in stocks.

Five-year CDs, for example, top out around 2 percent in interest these days, and that’s the maximum. On a $10,000 investment, all you can hope for is roughly $200. Two-year CDs offer only about 1 percent, or $100.

But tobacco giant Philip Morris International was recently offering a dividend yield of 3.8 percent, which would give you close to $400. Procter & Gamble’s yield is around 3 percent, while utility company National Grid yields more than 5 percent, and even Apple’s yield has approached 3 percent.

Dividends are never guaranteed, but many companies have been regularly paying – and raising – them for decades. Plus, on top of the dividend, the stock price of healthy and growing companies will increase over time, too, delivering additional wealth. (The Motley Fool owns shares of Apple and its newsletters have recommended Apple and P&G.)

Q: If I want to switch brokerages, can I have my entire portfolio transferred to the new brokerage, or will I have to sell everything, taking a hit on each transaction, and start from scratch with the new account? – H.W., St. Joseph, Mich.

A: Your new brokerage will likely be able to help you switch seamlessly. No selling or taxable gains need be involved.

My smartest investment

Around 1959, while young and working at a research and development lab, some colleagues and I formed an investment club and turned $10 into $5 with our young get-rich-quick mindsets and approaches. We did learn investing techniques, though.

About 10 years later, I joined an investment club with a much wider range of ages. Most members were professionals, but not all. The club had a much better approach and was much better balanced. Both these club experiences provided an excellent training ground for me. I think it’s best to get your training early, when you have only small sums to put at risk while you learn. – M.R., via email

The Fool responds: Investment clubs are indeed excellent for beginning investors, as they provide a venue in which to learn with and from others. They can be terrific for experienced investors, too, permitting a bunch of folks to share ideas and insights and share the stock-research workload. You can even stop short of actually pooling your dollars, just pooling your thoughts (and enjoying refreshments) at meetings. Learn more about clubs at betterinvesting.org and bivio.com.


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