How do Berkshire Hathaway and Markel Differ?
Everyone calls Markel the "Baby Berkshire", but the two companies are quite different as investments today. Both are great companies to own, but for different reasons.
Berkshire Hathaway is a huge conglomerate, where the operating profits from the subsidiary companies (railroad, energy, trucking, chemicals, etc.) are now more important than the income from Berkshire's insurance companies' underwriting and stock investments. Berkshire wields the power to finance and profit from huge deals like they did with Kraft-Heinz.
Markel is in a much earlier stage. They have a few small subsidiary businesses, but Markel is still almost entirely dependent on insurance underwriting profits and portfolio investment profits. One hopes that they can grow to be as Berkshire over the next few decades, but it is not a sure thing. Markel, as a smaller company, has the advantage of the ability to buy meaningful stakes in a diverse assortment of companies without the complications of owning 10% or more of those company.
The Companies vs. the Index
Berkshire Hathaway and Markel are both one-part "active mutual fund". Berkshire's "fund" is managed by Warren Buffett (and to some extent these days, Ted Weschler and Todd Combs); Markel's "fund" is managed by the highly respected (though less well-known) Thomas Gayner. The investment portfolio is a more important part of Markel and a less important part of Berkshire, but because we're also talking about the business results/prospects of the insurance industry (for both) and the industrial and financial economy (for Berkshire), neither one is really comparable to a mutual fund or ETF.
So which one is "better" depends on what "better" means. If you want to try to beat the S&P and will still live a comfortable life if either Markel or Berkshire Hathaway strikes out, then the stocks are better. If you want to play it safer with that part of your portfolio and take risks elsewhere, the S&P 500 index might be better. Nobody but you can really say what's "best" for you.
What did I do?
I own both Berkshire Hathaway and Markel in my standard brokerage account. Neither one is more than 5% of that account. I pay a lot more attention to Berkshire Hathaway (I write a blog about it), so I personally feel comfortable owning a larger position in Berkshire Hathaway. I know less about Markel, but I know a lot of other very smart investors who have larger positions in Markel.
My much larger 401k account is 100% index funds (large cap, small cap, international, bonds). I automatically invest there with every paycheck and never think about it except when I get end-of-year reports. I love investing in stocks and talking about stocks, but in my total financial existence, index funds dwarf any single stock position that I might own. I am never buying any stock instead of index funds, always in addition to.
So Back to the Original Question...
Looking backwards, people have indeed gotten rich by putting huge portions of their fortunes in Buffett's hands. Maybe giving your money to Gayner today will play out the same way, maybe not. Can Weschler and Combs replace Buffett and continue his performance over the next few decades? Luck plays a bigger role than we like to admit in any investor's fortunes, and survivorship bias plays a big role in which investors we lionize.
Will Berkshire Hathaway in the future continue on its positive trajectory after Buffett leaves? Will Markel match or beat that trajectory or follow the path of a more average insurance company?
I don't know. I personally think Markel might have a higher potential upside, but also a higher potential downside. I think both have an above-average chance to do better than the S&P 500, but I can't say which will do better, so I hedge my bets and own them all.
Disclosure: I own positions in BRK.B, MKL, and an S&P 500 index fund. This post is my opinion and an explanation of how I invest. Your financial situation and investing goals may be different, so don't buy or sell any company mentioned here without further research or advice from an investment professional.
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