There are heaps of investors who can boast of success over the past year, but consistent performance is far less common. Not many investors can say they've beaten the market over the past decade, and nobody has as many decades of market-beating success under their belts as Warren Buffett.
Buffett took the helm at Berkshire Hathaway way back in 1965, and since then, shares of the holding company have risen, on average, 19.8% annually. The benchmark S&P 500 index has risen at an annual rate of just 9.9% over the same time frame.
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If you'd like a comfortable retirement that lasts more than a year or two, it makes sense to follow investors like Buffett as opposed to whomever had a good run over the last year or two. Luckily, some of the stocks in Berkshire Hathaway's equity portfolio are trading at very reasonable prices right now.
Markel Group
Markel Group (MKL -0.67%) is often called a "baby" Berkshire because it's following a business plan that worked out well for Buffett's holding company. At its heart, Markel is a specialty insurance company and a well-run one at that.
It isn't unusual for claims and expenses to consume 100% of the premiums insurance companies collect. Markel Group's insurance operation achieved a combined ratio of 93% in the second quarter, which means it was able to hold on to 7% of the premiums it collected.
Like Berkshire Hathaway, Markel Group uses its insurance float as a free source of capital for investing in a combination of businesses it can control and shares of companies it doesn't. Markel's equity portfolio dipped in 2022, but it delivered an $857 million gain in the first half of 2023.
Equities aren't the only bright spot on Markel's income statements this year. In the first half, operating income from Markel Ventures, the segment containing privately held businesses, surged 42% year over year to $223 million. That works out to a healthy 9% operating-profit margin for the average business in the Markel Ventures portfolio.
Despite successfully running a business plan that made Berkshire one of the world's largest companies, Markel shares are trading for the low price of just 7.9 times trailing free cash flow. From this low valuation, patient investors can realize market-beating gains even if profits never grow again from their present level. With a successful insurance operation to support its growing portfolio of income-generating investments, investors can reasonably expect steadily growing profits for many years to come.
StoneCo
If you don't find the insurance industry as exciting as Buffett does, consider StoneCo (STNE -0.85%). This company is rapidly bringing software solutions and financial services to Brazil's booming e-commerce sector.
In the Western Hemisphere, Brazil's population of more than 214 million is second only to the United States. It's also the second-largest e-commerce market on its side of the planet. According to Americas Market Intelligence, Brazilian e-commerce sales are expected to grow 27% in 2023 to reach $274.5 billion.
StoneCo's growing slightly faster than its industry. In Q2, revenue soared 28% year over year, and progress on the bottom line was even more impressive. Net income improved from a loss of $98.1 million in the previous-year period to a gain of $61.6 million in Q2.
StoneCo stock slid slightly after reporting Q2 earnings partly because it lost some of its largest clients. Payment volume from key accounts fell by 33% year over year. Luckily, key accounts are responsible for less than 15% of the company's tota-payment volume at the moment.
At recent prices, you can buy StoneCo stock for just 16.9 times forward-looking earnings estimates. With a strong trend toward increasing overall e-commerce sales, growing fast enough to justify this relatively modest earnings multiple should be a breeze.
