Co-CEO of Berkshire Hathaway-style insurer Markel Corp. (MRKL, Financial) and noted investor Tom Gayner (Trades, Portfolio) followed up a record-breaking year selecting six new names to add to the portfolio in the first quarter.
As disclosed Friday, Gayner purchased: Progressive Corp. (PGR, Financial), Capital One Financial Corp. (COF, Financial), Chipotle Mexican Grill Inc. (CMG, Financial), Mattel Inc. (MAT, Financial), Scotts Miracle Gro Co. (SMG, Financial) and Shake Shack Inc. (SHAK, Financial). With the additions, Gayner brought the number of positions in his portfolio to 137, with 29.7% of companies in financial services and 23% in consumer cyclicals as the most overweight positions. The value of all the stocks totaled $5.26 billion at first quarter-end.
Gayner’s portfolio assets come from Markel’s “float,” or insurance premiums policyholders pay before the funds are paid out for claims. Many insurers use this model made famous by the legendary Warren Buffett (Trades, Portfolio) at Berkshire Hathaway.
In 2017, Gayner boasted a 26% return on his publicly traded equity portfolio. With more than $1 billion in unrealized gains, realized gains and dividends from its public equity holdings, Markel celebrated a fresh record.
Markel, a holding company with $33 billion in assets, has grown book value by 20.1% annually since its 1986 initial public offering through 2013. The company’s stock price has also soared 11,662% from its $8.33 IPO price to around $1,144 per share Monday afternoon. Gayner has managed its portfolio since 1990.
Gayner runs a portfolio dedicated to a strategy governed by four simple principles. As he wrote in his recent letter:
- We look for profitable businesses with excellent long term returns on capital and modest leverage.
- We look for management teams with equal measures of talent and integrity .
- We look for companies that can reinvest their earnings at high rates of return and/or demonstrate skill in acquisitions or other capital management activities.
- We look for these investments at reasonable prices which should produce acceptable returns over time.
Using these principles, Gayner chose Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial) and CarMax (KMX, Financial) to dominate the top three positions in the portfolio for the past five years on record.
The new buys
Progressive Corp. (PGR, Financial)
Gayner purchased 210,000 shares of Progressive, giving it a 0.24% portfolio weight. The average share price of the stock for the quarter was $57 a share.
Progressive Corp. has a market cap of $35.29 billion; its shares were traded around $60.60 Monday with a P/E ratio of 18.84 and P/S ratio of 1.32. Progressive Corp. had an annual average earnings growth of 19.0% over the past 10 years. GuruFocus rated Progressive Corp the business predictability rank of 2.5-star.
Capital One Financial Corp. (COF, Financial)
Gayner purchased 75,000 shares of Capital One Financial Group, giving it 0.14% portfolio space. The stock’s price averaged $100 a share in the first quarter.
Capital One Financial Corp. has a market cap of $44.54 billion; its shares were traded around $91.61 Monday with a P/E ratio of 20.17 and P/S ratio of 1.69. The trailing 12-month dividend yield of Capital One Financial Corp. stocks is 1.73%. The forward dividend yield of Capital One Financial Corp. stocks is 1.74%. Capital One Financial Corp. had an annual average earnings growth of 11.70% over the past 10 years.
Chipotle Mexican Grill Inc. (CMG, Financial)
Gayner purchased 17,500 shares of Chipotle Mexican Grill, giving it 0.11% portfolio space. The stock’s price averaged $315 per share in the first quarter.
Chipotle Mexican Grill Inc. has a market cap of $11.86 billion; its shares were traded around $425.93 with a P/E ratio of 63.66 and P/S ratio of 2.65. Chipotle Mexican Grill Inc. had an annual average earnings growth of 12.2% over the past 10 years.
Gayner purchased 99,000 shares of Mattel, giving it 0.02% portfolio space. The stock’s price averaged $16 per share in the first quarter.
Mattel Inc. has a market cap of $5.11 billion; its shares were traded around $14.86 with and P/S ratio of 1.05. The trailing 12-month dividend yield of Mattel Inc. stocks is 3.57%.
Scotts Miracle Gro Co. (SMG, Financial)
Gayner purchased 13,000 shares of Scotts Miracle Gro, giving it 0.02% portfolio space. The stock’s price averaged $95 in the first quarter.
The Scotts Miracle Gro Co. has a market cap of $4.75 billion; its shares were traded around $83.52 with a P/E ratio of 19.19 and P/S ratio of 1.90. The trailing 12-month dividend yield of The Scotts Miracle Gro Co. stocks is 2.51%. The forward dividend yield of The Scotts Miracle Gro Co. stocks is 2.52%. The Scotts Miracle Gro Co. had an annual average earnings growth of 6.10% over the past 10 years.
Shake Shack Inc. (SHAK, Financial)
Gayner purchased 11,000 shares of Shake Shack, giving it 0.01% portfolio space. The stock’s price averaged $42 in the first quarter.
Shake Shack Inc. has a market cap of $1.75 billion; its shares were traded around $47.60 with and P/S ratio of 3.5.
See more of Tom Gayner (Trades, Portfolio)’s stocks in his portfolio here.
