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I have been going through the Markel portfolio. During the latest earnings call, they indicated the equity portion of their investments has now been built back up from the acquired Alterra float to Markel's target range.

Hi Carl. I think you may have misinterpreted what Tom Gayner said on the Q2 call. I'm assuming this is the line that jumped out:

I am also happy to report to you that recasting of the investment portfolio we picked up in the Alterra acquisition is largely complete.

This was not a reference to the equity/fixed income mix but to the Alterra bond and alternative investment holdings themselves.

As of June 30th, equities represented 51% of shareholders’ equity up from 48% at year end and we continue to methodically build the equity portfolio.

At 51 percent of shareholders' equity, stocks are still a far cry from the target (and pre-Alterra) percentage of 80. The total increase in the equity portfolio through the first half of 2014 is 3 percent.

As for what he found to buy, he increased positions in another couple of insurers he likes -- Chubb and Travelers -- and added meaningfully to Unilever, making it one of 29 positions which count for at least 1 percent of the equity portfolio. He also added meaningfully to Liberty Media, the John Malone vehicle scheduled to spin off its broadband assets -- mainly its stake in Charter Communications, a recent Berkshire investment -- later this year.

As for the number of positions, I too am intrigued by his approach. It looks to me like the many smaller positions are basically a waiting list as he studies and learns about these companies and determines whether they should grow into more substantial roles in the portfolio. Here's a brief passage from his memo to the board after Q1 which illuminates his mindset:

The great financial writer John Train once said that if you had been on the property committee of the Sistine Chapel and tasked with getting the ceiling painted, you shouldn’t have focused on the training of various painters, what kind of paints they used, where they went to school, how many were on the staff and what kind of process they followed. Instead, you should have gone out into the world and asked the question, “Are you Michelangelo?”

We continue to spend all of our time trying to find the Michelangelos of today. Sometimes they are specific individuals. Sometimes, they are teams and systems that produce incredible results over time. The biggest single, and most important, sector of our portfolio of individual security holdings represents a congealed pudding of our vision of companies and leaders that fit this idea. If we get just one or two ideas right in this area, we will continue to produce outstanding overall investment results. To give you an update, as of the end of the first quarter of 2014, and 24+ years into the process, so far so good.

If you are looking for a pure Ben Graham approach, this is not your guy. Price is only one of Gayner's four investment criteria. The others are profitability without excessive leverage; management expertise and integrity; and capital allocation. He has said that if you put a gun to his head, he would list capital allocation as the most important single criterion.

The relatively large number of names in the portfolio seems to me the way he goes about scouting for "the Michelangelos of today." His historical performance has earned my confidence in this approach.
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