Tom Gayner: Why Avoiding “Hot Stocks” Leads to Better Long-Term Returns

During his recent interview at the Library of Mistakes, Tom Gayner emphasized that true success stems not from chasing the “cool kids,” but from a steadfast, principled approach. “I have never been a cool kid. I’ve never owned a hot stock. Not once ever,” he stated, underscoring a discipline that has allowed Markel’s equity portfolio to compound at nearly 13% per annum.

Gayner’s strategy is deeply rooted in learning from both successes and failures, a core tenet of the Library of Mistakes itself. He differentiates between errors, noting that “mistakes of commission are things that you do that you shouldn’t have done… mistakes of omission are way worse.”

His biggest financial regret was not buying Berkshire Hathaway in 1984 after reading about Warren Buffett. “I thought no stock could possibly be worth that much. So I didn’t buy it”. Today it’s $740,000. This omission taught him the profound cost of inaction born from disbelief in quality.

Central to his philosophy is the importance of people and partnerships. He seeks colleagues who can offer constructive criticism, asking, “who do you have in your life that can tell you you’re wrong and that you continue to respect?”

This extends to management, where his bias is clear: “you can’t do a good deal with a bad person.” He believes liking someone is a good signal, but “not liking somebody is an incredibly powerful signal, and you should just trust your gut level instinct.”

For Gayner, a long-term, buy-and-hold approach is paramount, a lesson partly inherited from his grandmother, who held a concentrated portfolio for decades. This patience defers tax liabilities and allows compounding to work its magic.

When asked how he would start over, he affirmed that “the insurance business is the thing to do first… that’s really where the permanent capital comes from.”

His editorial, grounded in the Markel annual letters, champions the traits of patience, discipline, and continuous learning—a simple but profoundly effective formula in a complex financial landscape.

You can watch the entire interview here: