Investment Case for Two Top Holdings

David Rainey:
Markel has been an important holding in the fund since early 1997 or for over 22 years. Markel is a U.S. based global property and casualty insurance company with important underwriting operations in the U.S., the London market, Continental Europe, and through the Lloyd's Syndicate, where they seek to underwrite special risk where they can add unique value and underwrite profitably. Examples would be bars and taverns versus white tablecloth restaurants, or it might be a summer camp for children or equestrian insurance, where they will insure horses that are basically treated as personal pets, but not, let's say, Arabians, which are traded in an international market.

Markel has always impressed us with its high return business model and its unique culture. Three of the founders of the firm still involved with it today and management has always taken a long-term perspective on its investment decisions. We believe that the same forces that propel this growth in the past are present today. If Markel can continue to produce superior underwriting results, strong investment returns, and make opportunistic acquisitions, we believe that it should be able to grow its book value per share at a low teens rate for the next decade.

Brian Macauley:
We've held CarMax in the portfolio for about 15 years now, so a long-time holding. CarMax is this country's largest used car auto retailer. They have about 200 locations nationwide today. We believe their space for about 300 or more than 300 locations in time. And CarMax obviously sells vehicles, but they do it with a very consumer-friendly approach. They have a broad selection, they have high quality vehicles that go through rigorous testing process, and they have a fixed-price, no-haggle policy. And the attributes that attracted us 15 years ago are more or less the attributes that are appealing to us today, a very differentiated customer proposition and a very difficult to replicate business model.

We believe that CarMax is going to be able to continue to grow the number of stores they have across the country at about a 10% annual rate. In addition, we believe that they are undergoing a very important transition now, where they're going to be able to offer their vehicles not only through their stores, but they'll be able to sell a vehicle to you at your home through the internet. For delivery to your home, if that's your preference or for delivery to your place of work, or you could come in and execute a very quick, relatively paper-free process at the store, vastly expediting the purchase process. We think that's going to be a big uplift to the company and going to further differentiate what the company has to offer.