How does Markel invest?
They invest obviously in what they know best and so they have a high percentage invested in insurance companies.
As their equity investment criteria are very similar to those of Berkshire it certainly does not come as a surprise that their biggest investment is in Berkshire stock itself.
For more details on their holdings watch their latest SEC 13F Filing (date May 2009).
As Markel’s general goal is „to earn consistent underwriting profits and superior investment returns to build shareholder value” (Markel Annual Report 2008) they aim for an average annual return of at least 15% on their equity portfolio over the long term.
But obviously this all didn’t work well in 2008. As most of us they did not expect a market decline of this magnitude.
Markel’s return on its equity investment portfolio was – 34%. They went heavely down but still managed to outperform the S&P 500 index.
As they put it in their Annual Report: „The best thing we can say about 2008 is that it is over!”
But they believe that the insurance markets will improve beginning in 2009. „Unprofitable companies have to go out of business some day (with government help or without)”.
And they are rather bullish for the equity markets for the next decade seen the performance of the last ten years!
They know that the average historical performance of the S&P 500 index over the last 100 years was 11% (dividends reinvested) and there were always extended periods of flat or negative markets. So simply put stocks will not stay flat forever.
…. continues ….