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Are your return assumptions for Berkshire (~8%-10%) and for Markel (~15%) nominal figures or are they real (inflation-adjusted) figures?


To be clear on Markel, I believe that 15% annualized is possible over the next five years based on my valuation model. I believe that book value could grow to around $750 and if P/B is at 1.5 at the end, we could have a stock price in the neighborhood of $1,100 - roughly a double from here.

I am not counting on Markel growing book or intrinsic value at 15% annualized over the next five years since I also assume some multiple expansion. Markel should have an easier time compounding BV/IV at 10-12% than Berkshire which is probably going to be in the 8-10% range. But there is a possibility that Markel could surprise on the upside significantly while I think this is less likely for Berkshire.

Berkshire is much more diversified, much safer, and much less likely to produce a poor result than Markel so in a sense investors will be getting paid for taking on a somewhat higher level of business risk if Markel works out as I expect it will.
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