Meet the Money Manager

Meet the Money Manager Who Is Beating Berkshire Hathaway and Owns It Too

By Matt Nesto

Much has been made of "the lost decade" for stocks, a 10-year span in which investors in the S&P 500 index saw no gains. And yet, noted value investor Thomas Gayner, president and CIO of Markel (MKL), saw his portfolio gain more than 100%. Understandably, when we caught up with him on the sidelines of the Berkshire Hathaway annual meeting, his commitment to the Benjamin Graham/Warren Buffett—style of investing was concise and unbending.

"It works," Gayner says of this style. "There are certainly times when value goes out of favor—that has always been the case, there's nothing different or new about that—but that's sort of why it works," he says in the attached video.

What's also interesting is that his top stock, which accounts for about 12% of a $2.5 billion portfolio, is badly lagging the market—not just for a few quarters, but for the past three years. And yet, he's not nervous nor is he reducing his stake in Berkshire Hathaway (BRK.A).

"While the price of the stock [Berkshire] has lagged in the last few years, the value, by contrast, I would argue has actually been increasing," Gayner says, adding that the price always catches up with value over time. "Part of being a value investor is just being willing to lean against the wind and do some things that are unpopular... that get you outside the comfort zone," he says, reminding us that if it were easy, everybody would be doing it.

His style, which emulates that of Warren Buffett and Charlie Munger, is to buy "steady-Eddies," which he characterizes as being marathoners rather than sprinters. That doesn't mean this self-described "slow-seller" never sells anything. It does mean, as he says, that in 20+ years he's "never owned a hot stock."

So while growth investors are busy getting their heads around things like Facebook (FB), Gayner isn't worried. He isn't trying to bring his 3% exposure to the Technology Sector (XLK) up to a level in the mid-teens that more closely matches the market.

"It's really nothing new to not have the hot stock, and we've done pretty well over the years," Gayner says, adding that current worries about Europe, China, or even slowing domestic job growth don't effect him.

"Things are always getting better or worse, and it's no different this time."