Tom Gayner (Trades, Portfolio)'s Markel Asset Management (MKL, Financial) published its latest 13F filing earlier this week.
Gayner is considered to be one of the greatest value investors working today. Between 1992 and 2015, the Markel Equity portfolio returned 11.9% per annum compared to 9% for the S&P 500. He has since matched the index.
Buying quality
Gayner employs a similar investing approach to Warren Buffett (Trades, Portfolio). He likes to buy high-quality companies and hold them over the long term. He has also said in the past that he wants to build positions slowly. This suggests that any small positions he holds today might become be substantial core portfolio holdings in the future.
That being said, the value investor doesn't tend to do a tremendous amount of trading. The most significant positions in Markel's portfolio don't turn over very much, and for the past few years, Berkshire Hathaway (BRK.A, Financial) (BRK.B, Financial) and Brookfield Asset Management (BAM, Financial) have dominated the list of top holdings.
This continues to be the case. However, moving further down the most recent 13F filing, we can get some idea of the sort of companies that Gayner could be looking to add to in the future. According to the latest filing, two new positions were added to the Markel Portfolio last quarter.
New positions
The first of these new positions was O-I Glass Inc. (OI, Financial). The investment manager acquired 350,000 shares in the business, giving it a 0.06% portfolio weight.
Formerly known as Owens-Illinois, Inc, O-I manufactures glass container products for the food and beverage industries. Its earnings have been falling for the past few years, but growth is expected to return in the next two.
On top of this, after recent declines, the stock is trading at a deeply discounted valuation of just 5.9 times forward earnings for 2021. There's also a dividend yield of 5.1% on offer for investors.
Gayner also initiated a new position in IAC/InterActive Corp. (IAC, Financial). This holding amounts to 1,150 shares, which makes it one of the smaller holdings in the portfolio.
IAC is a media and internet company which owns, among other assets, the Match Group's online dating portfolio, which includes Tinder, PlentyOfFish and OkCupid.
In some respects, this does fit well into Gayner's traditional value hunting template. While the stock does not look particularly cheap (it is currently trading at a forward earnings multiple of 46), it does own some highly recognizable and valuable brands. The value investor likes to invest in these sorts of assets, which can also be seen with the other new holding, O-I.
This is one of the largest producers of glass containers in the world, and as a result, has some unique competitive advantages as well as economies of scale.
Kraft holding
As well as the new buys, Gayner also nearly doubled his position in Kraft Heinz Co. (KHC, Financial). While this was the most increased holding in the portfolio for the period, it still remains an insignificant position overall.
At the end of the year, Markel owned just 68,000 shares, giving the position a 0.03% portfolio weight.
Still, it is interesting to note that the value investor sees some sort of opportunity here. As mentioned above, Gayner likes to buy companies that have a durable competitive advantage and substantial brand value. He wants to buy these companies at attractive valuations, sometimes when they have fallen on hard times. Kraft certainly fits into this bracket right now.
As the position currently accounts for less than 0.1% of Markel's investment portfolio, it's clear that Gayner is not willing to go all-in on the stock just yet. However, it is also clear that he's keeping an eye on the business. Perhaps he's waiting for the right opportunity to buy more?
Disclosure: The author owns shares in Berkshire Hathaway.
Read more here:
- Berkshire Hathaway: Considering the Stock's Underperformance in 2019
- Charlie Munger's Advice for First Time Investors
- Charlie Munger's Advice on Learning From Mistakes
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