Tom Gayner is co-CEO and chief investment officer at Markel Corporation, a holding company for insurance, reinsurance, and investment operations around the world. The company has often been compared to Berkshire Hathaway in the way it operates. Gayner is an excellent investor and one of the best in the modern era. Just go and look at his performance at Markel for proof of this.
Gayner gave a talk at google a couple of year’s back which was a masterclass. That talk had a number of golden nuggets. Here are 14 of them which every investor can learn from. Enjoy!
- Invest in profitable businesses. Focus on those that have good returns on capital and operate with low leverage.
- Reasons why businesses may not be profitable include them not having a good product and product not being necessary to customers.
- During the investment process, ask yourself how big the company can be. How scalable is the business model. What are the reinvestment opportunities?
- Some business earn great returns on capital but cannot reinvest in itself.
- Price/Valuation should be the last thing you should focus on. Focus on business quality first.
- Some people pay too much for an asset, this is a ‘lesser’ mistake. A huge mistake is not buying compounders as they keep rising due to them having “too high valuation”.
- Reinvestment is most important = Qualitative business aspects
- Finding management teams is akin to dating, need to spend time with them either through interactions or reading about them (annual reports, proxy statements, news articles)
- The secret to success in investing is lasting the first 30 years. Everything from over to under valuation you will see gain. Pattern recognition is important.
- Growth is important but hard to value. Benjamin Graham (Warren Buffets mentor) made more money in Geico than all other investments combined. The reason was growth and reinvestment opportunities. Not one of his classic investments i.e. not a deep value play.
- Live less than you make. Compound your return through positive investments. Live a long time (have a long time horizon).
- Gayner started out in the business looking at new lows list i.e. what is on sale. Now looks at new highs list – probably a reason it’s there, what does the market know that I don’t know.
- Time is a friend of a wonderful business. Let compounding do the hard work for you.
- Bought a library card – referring to buying Google in infancy, gives you lock-in to read report and figure out what company does.