Markel Hits 52-Week High on Possibility of Strong Q3 Earnings - Analyst Blog

Shares of Markel Corp. (MKL) scaled a new 52-week high of $669.68 on Oct 21. The stock price appreciation was likely led by expectations of improved financials as the company is slated to release third-quarter 2014 earnings on Nov 6.

Notably, this property-casualty insurer's shares have risen 16.4% since the beginning of 2014. The improving momentum of this Zacks Rank #3 (Hold) stock also stems from enhanced capital position and modest leverage.

Yesterday's closing price represented a robust one-year return of about 28.9% against a return of 11.3% clocked by the S&P 500 index. Average volume of shares traded over the last three months stands at approximately 31.7K.

Rationale

Markel has been diversifying its business portfolio and capitalizing on inorganic growth opportunities through strategic acquisitions. The recent acquisitions of Cottrell Inc. as well as Tromp-Pol Baking Equipment B.V. (Vanderpol) and Den Boer Baking Systems BV (Den Boer) in the third quarter are expected to boost financials and expand the company's footprint in the U.S. and European markets, respectively. While acquisitions entail an initial cost of integration, these are likely to be accretive to earnings in the long run.

Meanwhile, Markel's modest capital and adequate liquidity positions it to tactically enhance operating leverage amid higher expenses from acquisitions and restructuring. A steady growth outlook should continue to score well with ratings agencies and maintain positive sentiment among shareholders.

Moreover, the long-term growth rate for Markel is pegged at 12.5%, quite above the peer group average of 9.5%.

Promising Picks in the Sector

Investors interested in the insurance stocks could consider Endurance Specialty Holdings Ltd. (ENH), AmTrust Financial Services Inc. (AFSI) and HCI Group Inc. (HCI), all of which sport a Zacks Rank #1 (Strong Buy). Of these, AmTrust Financial has been riding on a strong growth momentum and hit a new 52-week high on Tuesday.

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