Markel Is a Great Choice for Long-Term Investors: Opinion

NEW YORK ( TheStreet) -- Insurers are having a great year, and Markel ( MKL) is doing great.

Although its main business is insurance and that segment is doing well, some of the investments it has been making with its excess cash are performing even better.

The economy is in recovery, and while the market as measured by the Value Line Index was up 12% in the past year, Markel is up more than 24% for the same period:

Source: Barchart.com

Markel Corporation markets and underwrites specialty insurance products in the United States and internationally. It operates in three segments: Excess and Surplus Lines, Specialty Admitted, and London Insurance Market.

The Excess and Surplus Lines segment writes property and casualty insurance outside of the standard market for hard-to-place risks, including catastrophe-exposed property, professional liability, products liability, general liability, and commercial umbrella, as well as provides environmental, transportation, inland marine, ocean marine, casualty facultative, railroad, and public entity insurance products.

The Specialty Admitted segment writes risks that remain with an admitted insurance company for marketing and regulatory reasons. This segment writes specialty program, personal and commercial property, and liability and workers' compensation insurance products.

The London Insurance Market segment writes specialty property, casualty, professional liability, equine, marine, energy, and trade credit insurance and reinsurance products. The company was founded in 1930 and is headquartered in Glen Allen, Virginia. (The preceding company profile is from Yahoo! Finance.)

Factors to Consider

Technical factors provided by Barchart.com

The stock rates a 96% Barchart technical buy signal as well as a Trend Spotter buy signal. It is trading above its 20-, 50- and 100-day moving average and hit 15 new highs in the last quarter as well as 31 new highs in the past year.

The price increased 14% for the quarter and 24% in the past year. The Relative Strength Index is 64.67%, and Barchart computes a technical support level at 470.41. The price recently was 476.50, which is above its 50-day moving average of 448.14.

Fundamental Factors

Wall Street is following this stock, and seven brokerage firms assigned 11 analysts to predict the company's numbers. They project revenue will increase by 8.8% this year and another 6.6% next year. Earnings are estimated to increase by 37.1% this year and an additional 8.2% next year. They're expected and continue to increase by an annual rate of 11.75% for five years out. The price-to-earnings ratio is a reasonable 21.24 when compared to the market P/E of 15-plus. The company has a single-A financial strength rating.

Investor Interest

The analysts released two strong buy, three buy, four hold and two underperform reports on the company, and the consensus is that investors could see a 14% to 18% annual return over the next five years. TheStreet rates this an "A" stock. The individual investor as measured by the readers of Motley Fool are bullish on this stock, and 2,801 readers gave the stock a 98% vote of confidence to beat the market. The really smart boys -- the short-sellers -- have been covering their positions. Short interest has gone from a high of 185,000 shares a year ago to a low of 38,000 shares recently.

Peer Comparisons

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The market is a pretty good judge, and while Markel was up 24% over the past year, The Traveler's Companies ( TRV) was up 29%, Chubb ( CB) up 19% and Allstate ( ALL) up a whopping 57%.

Traveler's has an "A" financial-strength rating and is rated "A" by TheStreet. Revenue is expected to be up 2% this year, and earnings are estimated to increase by 12.65% annually for the next five years.

Chubb has an "A+" financial-strength rating and is rated "A" by TheStreet. Revenue is projected to be up 3.40% this year and earnings to compound by 8.90% annually for the next five years

AllState has an "A" financial strength rating and is rated "B" by TheStreet. It may have already had its price gain and is expected to increase revenue by 1.80% nest year and have earnings increase of 16.28% annually for the next five years.

Conclusion: Markel is having solid growth projections in both revenue and earnings and an investment portfolio that seems to be performing well. Good financial strength and a reasonable P/E is a plus. The stock is outperforming the market, and the price compared to the 20-, 50- and 100-day moving averages and the increasing 14-day turtle channels deserve your attention if you are a long-term, conservative investor.

At the time of publication, Van Meerten held no shares in stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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