Industry-Insurance

Some Thoughts on Markel’s Intrinsic Value

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I thought I’d write a post with some quick thoughts on Markel’s value. I recently had a few conversations with a friend regarding how to think about the return on equity that Markel produces relative to the investment return that you will receive as a shareholder. For example, I’ve had a couple questions from clients similar to this: “It’s great that Markel can produce 15% ROE over time, but will we receive 15% if we’re paying above book value?” The current price […]

Investment Philosophy

Some Thoughts on Investment Strategies and Buffett’s 1966 Disney Investment

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There seems to be a strange dichotomy in the value investing universe: those who buy so-called compounders, and those who buy so-called cheap stocks. I want to own businesses that are building value, but that doesn’t mean I don’t care about valuation. I pass on probably 99% of the ideas I look at, many of which are great businesses, simply because the current price won’t allow my investment in the stock to compound at the rate of return that I’m […]

Case Studies

Importance of ROIC Part 5: A Glance at the Last 42 Years of Wells Fargo

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“Experience, however, indicates that the best business returns are usually achieved by companies that are doing something quite similar today to what they were doing five or ten years ago… a business that constantly encounters major change also encounters many chances for major error. Furthermore, economic terrain that is forever shifting violently is ground on which it is difficult to build a fortress-like business franchise. Such a franchise is usually the key to sustained high returns.”   –Warren Buffett, 1992 Shareholder […]

Investment Philosophy

Importance of ROIC Part 4: The Math of Compounding

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I thought I’d circle back to discuss the topic of compounders and return on capital. I wrote a few posts about earlier this year, and there have been numerous comments and questions. In this post, I want to discuss the actual math behind the compounders, to try and show why return on capital is so important to long term business owners (which is what we are as stockholders). To recap what I mentioned earlier, I usually put investments in two broad […]

Education

Importance of ROIC Part 3: Compounding and Reinvestment

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“We prefer businesses that drown in cash. An example of a different business is construction equipment. You work hard all year and there is your profit sitting in the yard. We avoid businesses like that. We prefer those that can write us a check at the end of the year.” -Charlie Munger, 2008 Berkshire Hathaway Annual Meeting I’m patiently looking for bargains everywhere. That’s the name of this game: “figuring out what something is worth and paying a lot less […]

Ben Graham

Net-Nets: A Riddle Wrapped in Mystery Inside a Cigar Butt

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I received a couple questions/comments from readers lately regarding Buffett and some previous comments I made on strategy before and after the Berkshire annual meeting. I always enjoy interacting with readers. The vast majority of my days are spent researching new investment ideas, so I can’t always respond to everything, but please feel free to email me questions/comments to john@sabercapitalmgt.com. I read all my emails even if I don’t always have time to respond. When possible, I’ll respond individually, or […]

Case Studies

Importance of ROIC Part 2: Compounders and Cheap Stocks

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This is part 2 of my follow up thoughts on compounders, cheap stocks, and the importance of returns on capital. Part 1 is here. Also, some previous posts before that are relevant to this post as well: Thoughts on Return on Capital and Greenblatt’s Magic Formula Part 1 Thoughts on Return on Capital and Greenblatt’s Magic Formula Part 2 Buffett Shareholder Letter High ROE Wells Fargo vs. Small Community Banks A Few Thoughts on Buffett and Great Banks To recap last […]

Investment Philosophy

Importance of ROIC Part 1: Compounders and Cheap Stocks

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A while back, I posted a couple articles on return on invested capital (ROIC) along with some comments on Joel Greenblatt’s Magic Formula. These posts attracted a lot of comments and email questions, and so I wanted to post some more thoughts on the topic of compounding generally, and maybe ROIC more specifically. Here are some links to posts that are somewhat related to this topic: Thoughts on Return on Capital and Greenblatt’s Magic Formula Part 1 Thoughts on Return […]

Investment Philosophy

Summary Thoughts on Investment Approach

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One of the most common questions I get from readers as well as clients involves my overall investment philosophy. I talk about this often with clients, but I thought I’d write some comments specifically pertaining to my own investment philosophy and a few aspects of my approach that I think are of central importance. Below are some points that help describe my investment philosophy. Strategy My firm has a simple investment objective: to compound our capital at high rates over […]

Industry-Insurance

Markel (MKL): A Compounding Machine

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“Our financial goals are to earn consistent underwriting profits and superior investment returns to build shareholder value” – Markel 2013 Annual Report Markel is an outstanding business currently in its 85th year of operations. It is an excellent insurance company with a history of underwriting profits. It is also a superb investment company with a history of above average investment returns. Markel had an outstanding year in 2013, basically doubling the size of its insurance business and investment portfolio in […]