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Reasons Why Giverny Capital Exited its Position in Markel Group (MKL)

Giverny Capital Asset Management, LLC, an investment management company, recently published its fourth-quarter 2023 investor letter. A copy of the same can be downloaded here. The firm’s model portfolio returned 16.26% (net) in the fourth quarter compared to an 11.69% return for the S&P 500 Total Return Index. The fund had an annual return of 29.07% compared to the 26.29% return for the Index during the same period. In addition, please check the fund’s top five holdings to know its best picks in 2023.

Giverny Capital Asset Management featured stocks such as Markel Group Inc. (NYSE:MKL) in the fourth quarter 2023 investor letter. Based in Glen Allen, Virginia, Markel Group Inc. (NYSE:MKL) is a financial holding company that underwrites insurance products. On February 5, 2024, Markel Group Inc. (NYSE:MKL) stock closed at $1,418.46 per share. One-month return of Markel Group Inc. (NYSE:MKL) was 0.34%, and its shares gained 1.27% of their value over the last 52 weeks. Markel Group Inc. (NYSE:MKL) has a market capitalization of $18.627 billion.

Giverny Capital Asset Management stated the following regarding Markel Group Inc. (NYSE:MKL) in its fourth quarter 2023 investor letter:

"In the fourth quarter, we sold Markel Group Inc. (NYSE:MKL), the Richmond-based insurer. For some years now, Markel has tried to mimic Berkshire Hathaway by using profit generated in its core insurance business to buy whole companies. While this has been a compelling model for Berkshire, Markel has not been able to convince high-quality companies to sell for attractive prices to the same degree as Berkshire.

Meanwhile, in its insurance operations, Markel has an elevated expense structure – it spends about 33 cents of every dollar collected in premiums on its own overhead. Its leanest competitor spends 21 cents of every premium dollar on overhead. Markel’s cost structure stems from an unwieldy technology stack that would be very expensive to upgrade. I have great respect for Markel, but the combination of middling investments and a challenging expense structure caused me to believe I could find better value elsewhere.

Selling SS&C and Markel, which were each about 4% of the portfolio, was not easy for me. Both businesses trade for reasonable prices and have good competitive positions. They have strong CEOs who have been in the job for many years. CEO Bill Stone founded SS&C and is a billionaire thanks to his own decisions. Tom Gayner at Markel is a well-regarded stock market investor and a much-admired leader."

An experienced underwriter discussing complex insurance cases with a client in a modern office setting.

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Markel Group Inc. (NYSE:MKL) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 32 hedge fund portfolios held Markel Group Inc. (NYSE:MKL) at the end of third quarter which was 29 in the previous quarter.

We discussed Markel Group Inc. (NYSE:MKL) in another article and shared Madison Mid Cap Fund’s views on the company. In addition, please check out our hedge fund investor letters Q4 2023 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.