Markel is a “buy”!
Markel’s stock (NYSE: MKL) is already rebouncing after its negative reaction to the announced Markel-Alterra merger!
When Markel announced its merger plans late December (see post below including a link to the press release) the market reaction was surprisingly negative and the 17% year-to-date performance of Markel’s stock has been erased in a few days down to a mere 2012 performance of 4.5%
But have a look at the stock in January 2013: It is already gaining lost ground and finished at $463.03 last Friday, already up 6.8% this year.
Certainly the merger plan is not without risks, but Markel pays only a slight premium to Alterra’s book value and in addition they pay the purchase price with their own cheap stock.
We think there is reason for optimism:
Both insurance companies are working with consistent underwriting profits, synergies of the merger should be meaningful and CIO Thomas Gayner will invest Alterra’s cash with better returns then they did until now.
Markel’s stock is selling for a p/book value of 1.2 – no question, this is a „buy”!