High Growth Tom Gayner Stocks: Berkshire Hathaway Inc., Pool Corp., Brown & Brown Inc., Patterson Companies Inc., The Home Depot Inc.

Tom Gayner is the Executive Vice President and Chief Investment Officer Of Markel Corp and President of Markel Gayner Asset Management, Inc. since December of 1990. The asset under management is about $2 billion. Markel Corp. has a market cap of $3.21 billion; its shares were traded at around $327.41 with a P/E ratio of 13.16 and P/S ratio of 1.69. (See Guruek’s article on 3Q performance of Markel Corp.) Over the last 10 years, Mr. Gayner has averaged an investment return of 14.3% a year, compared with S&P500s 7.6% over the same period. He is also the director of Colfax Company (industrial) and The Washington Post Company (news media).

Established in 1930, Markel Corporation underwrites specialty insurance at a profit. Like a miniature Berkshire Hathaway, Markel Corp takes “float” or generated earnings from insurance premiums, and reinvests it in equities and businesses to give fixed incomes. Two of Markel’s main sources for funds come from loss reserves and shareholder equities. Markel Corp (MKL) does not split their shares, which is currently priced at $328 a share. Gayner is considered to play the same role in Markel Corp as Buffet does for Berkshire Hathaway.


As a value investor, Mr. Gayner believes that stocks are valuated at company’s present worth and future cash flow. He invests in companies with high returns on invested capital (which means profit), and with fair or better purchase price. Additionally, companies with good reinvestment track record, like Berkshire Hathaway, attract Gayner.


In the 2Q conference call, Mr. Gayner said his advice to investing in a finicky economy is to invest in the “silver medallist”. In his analogy, the players in team-A are “bunch of gold, commodities, natural resources, things that had pricing power”, the players in team-B are government bonds. Team-A can be the gold medallist in inflation scenario, and Team-B can be the gold medallist in deflation scenario. He said to stick with companies like Wal-Mart (WMT) because “Wal-Mart sells what people need… nobody goes to Wal-Mart because they dream of going there…Connecting theme is to look for the silver medallist that’s not going to win the gold in either one of those environments, but sure is going to be there close at the finish line and not running risks of life out.”


In an article, Gurufocus has posted Markel Corp’s most recent buys and sells. Markel’s top holdings have been weighed in financials 45.8%, consumer Services 24.4%, industrials 13.8%, and consumer goods 8.5%. Also, see the performance of MKL compared to S&P since 1990.



NYT, Berkshire Hathaway plans to sell off its holdings in two railroad companies Union Pacific and Norfolk Southern before finishes takeover of Burlington Northern Santa Fe. Since June 2009, Berkshire held 9.5 million shares (worth $592.6 million) of Union Pacific and 1.9 million shares (worth $98.7 million) of Norfolk Southern. In a press release, Berkshire plans to be prudent in its reinsurance risks and complete their $26 billion Burlington Northern Santa Fe purchase. The company plans to borrow $8 billion to pay for the acquisition. It will pay 40% in Berkshire stock and 60% in cash. Berkshire Hathaway recovers from last year and triples its 3Q profit to $3.24 billion or $2,087 per Class A share, from $1.06 billion, or $682, a year earlier. In 3Q 2008, the company covered $350 million in losses from hurricanes. This year 3Q, revenue increased 7% to $29.9 billion on insurance underwriting premiums.

Tom Gayner likes Berkshire Hathaway because as a business it has good reinvestment dynamics. In the long term, it will build value, better rate of return, and wealth for the life of the company. In the quarter ended on September, Gayner has purchased 2,694 shares of BRK-A stock with a total value of $249 million.

Pool Corp. (POOL) 0.06%

SCP Pool Corporation retails swimming pool maintenance supplies. Pool Corp. has a market cap of $981.79 million; its shares were traded at around $20.15 with a P/E ratio of 22.39 and P/S ratio of 0.55. The dividend yield of Pool Corp. stocks is 2.58%. Pool Corp. had an annual average earning growth of 26.3% over the past 10 years.


In 3Q 2009, POOL reported loss of $9.3 million, or $0.19 per share, compared with profit of $22.1 million, $0.45 per share, last year. Revenue declined 13% to $430.1 million, on weak construction and bad weather. The company expects new pool construction to drop 50% U.S.


Tom Gayner bought 35,000 shares at $22.23 a share, with a value of $778,000.

Brown & Brown Inc. (BRO) 0.52%

Mid-market insurer Brown & Brown Inc. has a market cap of $2.61 billion; its shares were traded at around $18.43 with a P/E ratio of 15.89 and P/S ratio of 2.67. The dividend yield of Brown & Brown Inc. stocks is 1.68%. Brown & Brown Inc. had an annual average earning growth of 25% over the past 10 years.


Quarter ended on September 2009, the company made a flat profit of $41 million compared to $40.6 million. Revenue for the same period was $243.8 million compared to $247 million during the quarter last year. BRO reported 3Q earnings of 29 cents per diluted share. The company extended a $200 million unsecured debt agreement with Prudential Insurance Company for three more years. BRO paid fee of $50,000 to Prudential for the renewal.

Tom Gayner owns 365,628 shares of BRO, with a value of $7 million.

Patterson Companies Inc. (PDCO) 0.1%

Dental and veterinary equipment supplier, Patterson Companies Inc. has a market cap of $3.16 billion; its shares were traded at around $25.87 with a P/E ratio of 15.31 and P/S ratio of 1.02. Patterson Companies Inc. had an annual average earning growth of 20.3% over the past 10 years.

The company released that its CEO James Wiltz will retire April 2010. The quarter ended in July 2009, Patterson reported income of $45 million, or $0.38 per share compared to $46 million or $0.39 per share in prior year. Revenue increased 6% to $790 million comparing those periods.

Tom Gayner bought 50,400 shares at $27.62 per share, with a value of $1.39 million.

The Home Depot Inc. (HD) 1.95%

Retailer Home Depot has a market cap of $44.45 billion; its shares were traded at around $26.08 with a P/E ratio of 15.71 and P/S ratio of 0.62. The dividend yield of The Home Depot Inc. stocks is 3.45%. The Home Depot Inc. had an annual average earning growth of 19.5% over the past 10 years.


To boost sales, the Home Depot Inc. will offer 10% discount this Veteran’s Day Weekend to all military personnel (Nov 11-15). The company bought 72 acres of land in Massachusetts for $5.76 million. The company plans to build a Northeastern commercial distribution center.


Tom Gayner kept Home Depot holdings at 983,736 shares, with a value of $26.2 million.


Sources:

Thomas Gayner Forbes Bio
Markel Corp Top Holdings and 3Q Performance (Guruek)

Buffetteer

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