I deeply respect Warren Buffett's approach to investing and Berkshire Hathaway (NYSE:BRK.B) is a top ten core holding in my portfolio. I'm still building my position and expect over time to have Berkshire become my largest holding. While Buffett and Charlie Munger have clearly done an amazing job -- there is a reason I'm buying into their business -- I do worry that the current size of Berkshire means future returns will be muted. I've been studying options to offset this risk and took my first small step towards real commitment today.
I've been studying Markel Corporation (NYSE:MKL) for a few years; in the last six months more deeply. In short, they are of the same mindset and approach as Berkshire yet vastly smaller and younger. Based on the stock's price chart I clearly should have done less studying and more buying in the last three months. Oh well, that 20/20 hindsight problem...
One of the very best Seeking Alpha articles I've read about any stock was written by contributor John Huber. Rather than try and tell you about Markel and the investment thesis, I strongly urge you to go read his excellent article, "Markel: A Compounding Machine At A Cheap Price." John does an excellent job laying out the case for Markel's success and approach to business.
While I'm not ready to outright purchase Markel at the current price, today I took a first step and wrote the $650 October 18 put. I was paid a premium of $18.50 and this will provide a return of 9.2% annualized over 113 days. If I am "put" the shares, I'll happily buy as I'm getting a 3% discount compared to outright purchase today. My break even price is $631.59.
I look forward to being a shareholder yet wonder how long I will need to be "paid to wait."
Disclosure: The author is long BRK.B, MKL.