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Local firm’s stock hits $1,000 mark

Michael Schwartz August 1, 2017 1

markel hq

The Markel Corp. headquarters at Innsbrook. (Michael Schwartz)

While internet giants Amazon and Google parent Alphabet were earning headlines earlier this summer as their stocks reached $1,000 per share, a local company was climbing toward that milestone to much less fanfare.

And on July 20, shares of Henrico-based insurance firm Markel Corp. (NYSE: MKL) closed at above $1,000 per share, earning it a spot in the so-called “$1,000 club.” It has since continued to climb, closing Monday at $1,071.

It’s the first time in Markel’s three decades as a public company it has reached the threshold, and is the first time shares of a Richmond-based publicly traded company have ascended to such a level, according to several local investment professionals who scanned their memories on the subject last week.

Bruce Kay, head of investor relations at Markel, wasn’t too impressed with what he called a “relative” milestone.

“It took 30 years as a public company to do it, but it’s also a function of us not splitting the stock,” Kay said. “There are other Richmond companies that could have maybe achieved it if they had grown the value of the company and not split it.”

Markel has never split its stock, meaning it never issued additional shares to cause the share price to adjust downward based on the corresponding share-for-share split ratio.

“We’re more Berkshire Hathaway-like, so our view is we’re interested in growing the pizza instead of cutting into pieces,” Kay said. “The rest is just math.”

While Markel plays down the significance, Kay’s reference to Warren Buffett’s Berkshire Hathaway is appropriate.

The $1,000 mark positions Markel as one of only five companies on the three major American stock exchanges whose common shares trade at $1,000 or higher. That group includes Berkshire Hathaway, which has a share price of nearly $263,000.

Others include agribusiness and shipping giant Seaboard Corp. ($4,275/share), homebuilder and mortgage company NVR ($2,610/share) and travel website firm Priceline Group ($2,028/share).

Amazon’s and Google’s stay in the $1,000 club didn’t last long, as each has since dipped back down into the $900s.

Markel’s nearest Richmond-based rival based on share price is NewMarket Corp., a petroleum additives company whose stock closed Monday at $460 per share.

Kay said share price isn’t the indicator that anyone should focus on.

“It sticks out because it’s four digits,” he said. “People don’t think in fractions. It’s a relative measure, not an absolute measure.”

He said other locally based public companies have overall market capitalization – the market value of a company’s outstanding shares – equal to or greater than Markel’s, despite a far-lower share price.

“If you look at Altria, Dominion, CarMax – all those market caps are equal or higher than ours,” Kay said. “They have many more shares outstanding at a lower price.”

Markel’s market cap is $14.9 billion. By comparison, Dominion, CarMax and Altria’s market caps are $48.55 billion, $12.14 billion and $124.65 billion, respectively.

Those three firms’ respective share prices at Monday’s closing bell were $77.18, $64.97 and $66.25.

The difference is the number of shares outstanding. Markel has around 14 million shares outstanding because of its aversion to splits.

“These other companies will have hundreds of millions,” Kay said. “It’s just an entirely different approach to ownership.”

Altria has 1.91 billion shares outstanding, Dominion has 628 million and CarMax has 183 million.

Kay said Markel, which was founded 86 years ago and went public in 1986, prefers to place value on measurements like return on investment, and return on capital.

“That’s the measure of how well a company is doing,” he said.

Clarification: July 20 was the day that Markel first closed at or above $1,000 a share. It first traded for more than $1,000 on July 3, but closed that day below the threshold and didn’t rise above it again until July 20. 

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One Comment »

  1. Matt Richardson August 1, 2017 at 7:19 am - Reply

    Technically, Markel hit $1,000 on July 3 (intraday) not July 20 as the article states. The latter date was when the stock first closed above $1,000.

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