Saber Capital's analysis of Merkel has valid points here:
Think often, act on few
There are a few answers to that question, but one major factor is the willingness to walk away
from business that will not result in profits. This is harder than it sounds, because it involves
willingly lowering current revenue—something that most executives and almost all Wall Street
analysts don’t like.
Culture
However, a select few businesses have created incentive structures and an owners’ minded culture
that allows them to be able to operate in such a profitable manner.
Berkshire obviously is one example of this—compounding shareholder value at 20% annually for
half a century. Markel is another example.
Main ingredients
Consistent underwriting profits
Superior investment results
Excellent long-term owner/managers
Risk vs. Volatility
Markel invests a much larger portion of its equity into stocks relative to most P/C insurance companies. This means higher returns for the investment portfolio over time, and it means above average book value compounding, which correlates over time with the intrinsic growth in value of the enterprise.
It also means slightly more volatility—which is probably why most insurance companies prefer not
to own equities. But Markel’s logic is the same as Buffett’s and most value investors—volatility is
not risk. Risk is the uncertainty of losing permanent capital—not the temporary fluctuation in the
quoted value of that capital.
Not just bonds & stocks but businesses
In addition to stocks and bonds, Markel also allocates capital to privately owned businesses. The
company recently established an entity called Markel Ventures, which is the vehicle that holds
wholly-owned and partially-owned operating businesses.
AmitKumarDas
commented
6 years ago
Moats in a No-Moat Industry
Saber Capital's analysis of Merkel has valid points here:
Think often, act on few
Culture
Main ingredients
Risk vs. Volatility
Not just bonds & stocks but businesses