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James Li
James Li
Articles (1445)  | Author's Website |

Tom Gayner's Top 5 Buys in the 4th Quarter

Markel co-CEO releases portfolio

Tom Gayner (Trades, Portfolio), co-CEO of Markel Corp. (NYSE:MKL), disclosed this week that his top five buys for fourth-quarter 2019 included a new holding in O-I Glass Inc. (NYSE:OI) and position boosts in Mohawk Industries Inc. (NYSE:MHK), Illinois Tool Works Inc. (NYSE:ITW), Healthcare Services Group Inc. (NASDAQ:HCSG) and NVR Inc. (NYSE:NVR).

Gayner believes that the stock is part of a business, which in turn is worth the present value of cash flows. The chief investment officer of the Richmond, Virginia-based company said that Markel “operates with a margin of safety in the investment portfolio” and that the portfolio can earn good returns by focusing on areas where Gayner has high understanding and knowledge, a model that Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B) co-managers Warren Buffett (Trades, Portfolio) and Charlie Munger (Trades, Portfolio) define as the “circle of competence.”


As of quarter-end, Markel’s $7.20 billion equity portfolio contains 134 stocks, of which two represent new holdings. The top three sectors in terms of weight are financial services, consumer cyclical and industrials.


New buy: O-I Glass

Gayner purchased 350,000 shares of O-I Glass, giving the position 0.06% weight in the equity portfolio.


The Perrysburg, Ohio-based company manufactures glass bottles for a wide range of beverages, including beer, wine, soda and spirits. According to GuruFocus, O-I Glass’ operating margin has increased approximately 3.9% per year on average over the past five years and is outperforming 75.37% of global competitors, suggesting good profitability.


Despite good profitability, O-I Glass’ financial strength ranks 3 out of 10 on warning signs like low interest coverage and a weak Altman Z-score of 0.91.


Steven Romick (Trades, Portfolio) and First Pacific Advisors (Trades, Portfolio) also have holdings in O-I Glass.


Mohawk Industries

Gayner added 48,000 shares of Mohawk, increasing the holding 22.54%. Shares averaged $136.34 during the quarter.


The Calhoun, Georgia-based company manufactures a wide range of flooring products, including rugs, carpets and laminate tiles. GuruFocus ranks the company’s profitability 7 out of 10 on several positive investing signs, which include an operating margin that has increased approximately 10% per year on average over the past five years and a three-year revenue growth rate that outperforms 62.10% of global competitors.


Gurus with holdings in Mohawk include Ruane Cunniff (Trades, Portfolio) and John Rogers (Trades, Portfolio)’ Ariel Investment.


Illinois Tool Works

Gayner added 33,000 shares of Illinois Tool Works, increasing the position 11.54%. Shares averaged $169.96 during the quarter.


The Glenview, Illinois-based company manufactures a wide range of industrial equipment and products, which include engineered fasteners and seat heaters. GuruFocus ranks the company’s profitability 9 out of 10 on several positive investing signs, which include a three-star business predictability rank, a high Piotroski F-score of 8 and profit margins that are expanding and outperforming over 96% of global competitors.


Healthcare Services

Gayner added 177,000 shares of Healthcare Services, increasing the holding 44.64%. Shares averaged $24.81 during the quarter.


The Bensalem, Pennsylvania-based company provides housekeeping and facility management services to the health care industry. GuruFocus ranks the company’s financial strength and profitability 8 out of 10 on several positive investing signs, which include a high Piotroski F-score of 7, debt ratios that outperform over 81% of global competitors, expanding profit margins and a return on equity that outperforms 80.35% of global companies operating medical care facilities.


Healthcare Services’ valuation ranks 10 out of 10 on the back of price-earnings, price-book and price-sales ratios close to 10-year lows.



Gayner added 1,100 shares of NVR, increasing the position 15.16%. Shares averaged $3,705.32 during the quarter.


The Reston, Virginia-based company builds single-family detached homes, town homes and condos under four trade names, operating in 28 metro areas in 14 states east of the Mississippi River. GuruFocus ranks NVR’s financial strength 8 out of 10 several positive investing signs, which include robust interest coverage and Altman Z-scores.


Other safe investing signs, which include expanding profit margins and a four-star business predictability rank, contribute to a GuruFocus profitability rank of 9.


See also

Gayner and co-CEO Richard Whitt said in Markel’s fourth-quarter earnings release that gross written premiums exceeded $6 million, driven by the synergies the company achieved “between [Markel’s] underwriting and other insurance platforms.” For the year, Markel reported revenues of $9.5 billion, up from revenues of $6.8 billion in 2018. Net earnings of $129.07 per share in 2019 increased from a net loss of $9.55 per share in 2018.


Disclosure: No positions.

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About the author:

James Li
I am an editorial researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

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