I recently read a NY Times Sunday article about Markel (note: This is a Times Select article which requires a membership fee.) I greatly enjoyed this article but it led me to thinking. Markel (MKL) apparently is a great company. There are lots of reasons why but the most compelling for me was that they do business the way Warren Buffet does business. Now, emulating the most successful stock picker in the history of the stock market does not seem like such a terrible business plan, as long as you can pull it off. And Markel does seem to be pulling it off.Let’s take a look at some of the qualities that Markel shares with Berkshire Hathaway.

1. Managers are on the side of shareholders. When Markel has had a bad year, management has been very honest about where the problem is and how it will be fixed rather than gloss over it.
2. It’s in the insurance business. Granted, it’s a different insurance business than Berkshire Hathaway, but, it is a business that produces a large cash flow which is then re-invested.
3. It does not offer earnings guidance to Wall Street avoiding the “beat the numbers” farce every quarter.
4. Markel’s investment portfolio is value based and the man in charge of Markel’s investment portfolio, Thomas Gayner, is a value investor (with stellar results since he took over, averaging 17% since 1990).
5. Mr. Gayner looks for companies with four characteristics that are very similar to the characteristics Warren Buffet uses. They are:

• profitability
• management integrity and smarts
• ability to re-invest return on capital
• a fair price

6. Executive compensation. The top three executives made around $600,000 each. There are no golden parachutes and no contracts or agreements that compensate executives for tax gross-ups.
7. Empower employees to get wealthy not by offering stock options but by offering low-interest loans so employees can buy Markel stock. This helps build an ownership mentality rather than a culture of “cash in my options and get out”.

Markel looks like a mini-Berkshire Hathaway and as long as they continue to do what they have been doing, may be a great long-term investment!

Here are some free articles about Markel:
1. Motley Fool: Markel Sees Opportunities in Stock Market

2. Gurufocus: New Guru Added: Tom Gayner of Markel Corp