It’s a perfect time to update my thinking and valuation rationale for Markel, in part because they just announced that they’re changing their name to more clearly call attention to their increasingly diversified conglomerate of businesses: Markel Corporation has now become Markel Group (still MKL as the ticker, and Markel Corp. is still the name of the core specialty insurance business that started it all). Plus, of course, they’re holding their annual meeting in Richmond today (with a good turnout, it looks like, though I didn’t make it).

Why rethink valuation? Well, Markel CEO Tom Gayner went on a bit of a tirade about the tyranny of “book value” as a measure of the company’s worth in his letter to shareholders and during his comments at the Markel Brunch last weekend in Omaha, and it’s a fair criticism… even if it’s a little bit of a challenge to come up with a simple replacement. Gayner called book value a “half truth” when it comes to assessing Markel’s worth in any one year, though it gets to be a bit fairer over longer periods of time, and he called out Home Depot (HD), a stock Markel has held for about 10 years, as an example of why book value doesn’t work as well with operating companies as it does with pure insurance companies (HD’s book value per share has declined about 80% while Markel has owned it, and may well go negative at some point, but the stock has also gone up in value by an average of about 17% a year during that time). Markel is no Home Depot, obviously… but most of the Markel Ventures operations are a lot more like Home Depot than they are like an insurance company.

My starting point with Markel is trust, and it did take quite a few years to build that trust… I trust them to be good stewards and good operators, and to continue to build the value of the company over time by making good decisions about risks and investments, in both private and public companies. Whether or not I want to buy the shares on any given day, though, depends on the current valuation — if I’m very likely to be patient and hold these shares for 20 years, not trying to actively trade in and out, then the only way to get better-than-average results ...