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Why Markel Stock Popped on Friday

Motley Fool - Fri Feb 3, 4:39PM CST

What happened

Markel Corp.(NYSE: MKL) stock ended the trading week in style by closing 2.5% higher in Friday's session. That was in contrast to the bellwether S&P 500 index, which slumped by 1% on the day. One researcher cranked its price target on the stock higher, and investors took the added bullishness to heart.

So what

Markel, which is often compared to superstar investor Warren Buffett's company Berkshire Hathaway(NYSE: BRK.A)(NYSE: BRK.B), received that increase from Truist Securities. The firm now believes Markel is fairly valued at $1,400 per share, up from its previous estimation of $1,300. Despite the bump, Truist maintained its hold recommendation on the stock.

The reasoning behind Truist's move wasn't immediately apparent.

Like Berkshire Hathaway, Markel rests on a foundation of insurance operations and holds an equity portfolio. It also plows capital into private investments. With that kind of structure, its fortunes can vary widely.

This was apparent in the full-year 2022 results it published on Wednesday. While the company's insurance arm recorded a 17% increase in earned premiums over the 2021 tally, there was a night-and-day difference on the bottom line. Due to investment losses, the company flipped to a net loss of $1.3 billion from the year-ago profit of over $2 billion.

Now what

But, as Markel cautioned in that earnings release, "We believe our financial performance is most meaningfully measured over longer periods of time, which tends to mitigate the effects of short-term volatility and also aligns with the longer-term perspective we apply to operating our businesses."

In that spirit, the company added that across the five-year period concluding at the end of 2022, its compound annual growth in book value per share was 6%.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Markel. The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway, short January 2023 $200 puts on Berkshire Hathaway, and short January 2023 $265 calls on Berkshire Hathaway. The Motley Fool has a disclosure policy.

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