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Middleburg, VA-based Investment Adviser Akre Capital Management, LLC, headed by Guru Charles T. Akre, manages over $500 million in three investment vehicles. These include a no-load mutual fund, a long/short hedge fund and separately managed accounts for institutions and high net worth individuals. Akre was recently profiled by the Wall Street Journal as one of three star managers, and last year he was profiled as one of 25 great investors by CNN Money. Furthermore, he has also been interviewed extensively by financial media, including Morningstar, Businessweek, Bloomberg, and Kiplinger among many others. He was ranked in the top one percent of fund managers in his peer group as portfolio manager of FBR Capital Markets (FBCM) $1 billion FBR Focus Fund (FBRVX) that he resigned from in 2009 after serving 13 years in that capacity.

Akre Capital’s investment philosophy is based on investing over the long-term in companies that the fund perceives to be “compounding machines.” To identify and evaluate these companies, the fund follows a three-step process which includes seeking companies that (a) have delivered high rates of return and appear poised to continue doing so, (b) are run by business managers that act with integrity in the best interests of all shareholders, and (c) offer opportunities for managers to reinvest cash flow internally and drive considerable business growth.

The fund holds concentrated positions, investing over $500 million in only 38 equity positions. Over 50% of its holdings are in mid-caps, 30% in large-caps and the remaining 15%-20% in small-cap equities. The fund's portfolio turnover is between 20%-25%, implying a holding period of four to five years. Based on the most recent 13-F filing for the March 2011 quarter, we determined that Akre's portfolio is overweight in the financial and services sectors that account for 43% and 54% of its holdings respectively. The fund is underweight all other sectors.

Within sectors, on a more disaggregated level, my prior analysis of Akre's SEC 13-F filings for the December 2010 quarter had revealed that it was overweighted in the Insurance Industry, the retail industry, the commercial services industry group, and the telecommunications services industry. Based on a review of the most recent SEC 13-F filing for the March 2011 quarter, we determined that Akre has actually either slightly increased or maintained its holdings in each of the above groups and continues to be overweight in all of them.

Akre Capital Management did not initiate any new positions in the recently reported 13-F filing for the March 2011 quarter. The following summarizes its most significant picks, based on additions to its portfolio in the March 2011 quarter:

  • Dollar Tree Inc. (NASDAQ:DLTR) operates over 4,000 discount variety store in 48 states and Canada, offering merchandise at the fixed price of $1.00. Akre added $5 million to its position and now own $39 million worth of stock in this company. Akre initiated this position at the beginning of last year probably in the low $30s. The fund's willingness to accumulate even more shares at double those levels makes this a high conviction buy.

  • American Tower Corp. CLA (NYSE:AMT) operates cellular towers used by wireless service providers and TV and radio broadcast companies. Akre added $5 million to its position and now owns $72 million worth of stock in this company. The fund initiated this position in 2002 probably near $2 and Akre's willingness to accumulate even more shares at the current $15 price makes this a high conviction buy.

  • Ross Stores Inc. (NASDAQ:ROST) operates over 1,000 Ross Dress for Less and DD’s Discount retail stores in 27 states and Guam. This too represents another high conviction buy. Akre added more Ross stock in the March 2011 quarter to the already significant position that he initiated at the beginning of 2010 at much lower prices.

  • MasterCard Inc. CLA (NYSE:MA) provides global payment solutions in support of the credit and debit payment programs of 23,000 financial institutions. Akre added $5 million, bringing its current position to $40 million. The position was initiated in early 2010 at prices slightly lower than current prices.

  • OptionsXpress Holdings Inc. (NASDAQ:OXPS) provides online brokerage services for options, futures, stock, mutual fund and fixed-income investors. Akre added $5 million bringing its current holding to $12 million. The position was initiated in late 2009 at prices similar to current prices.

The following summarizes Akre's most significant pans, based on decreasing its positions in these equities in the March 2011 quarter:

  • MSCI Inc. CLA (NYSE:MSCI) provides investment decision support tools to institutions investing in equity, fixed income and other instruments. Akre's $6 million close-out of its position from the previous quarter is significant and represents a conviction sell as the position was initiated just at the end of 2009 at close to current prices.

  • Ninety-Nine Cents Only Stores (NYSE:NDN) operates 275 deep-discount stores in four states. The company on March 11, 2011 received a ‘Going Private’ proposal from members of the Schiffer/Gold family, together with Leonard Green & Partners, to acquire it.

The following table summarizes Akre's largest holdings that were mostly unchanged during the March 2011 quarter (including any Schedule 13D filings since the end of the quarter):

  • Markel Corp. (NYSE:MKL) offers specialty insurance products and programs like hard-to-place risks and loss exposures for niche markets.

  • Lamar Advertising Co. (NASDAQ:LAMR) operates over 285,000 billboard, logo signs and transit advertising displays in the U.S., Puerto Rico and Canada.

  • Enstar Group Ltd. (NASDAQ:ESGR) acquires and manages insurance and reinsurance in run-off covering activities such as claims administration.

  • O’Reilly Automotive Inc. (NASDAQ:ORLY) operates 3,570 automotive parts stores in 38 states.

  • Hartford Financial Services Group (NYSE:HIG) offers individual and group life, group disability and property and casualty insurance products, primarily in the U.S.

  • Factset Research Systems Inc. (NYSE:FDS) provides financial data from stock markets, newswires and data suppliers to investment professionals.

  • Carmax Inc. (NYSE:KMX) operates 100 used car dealerships in 26 states.

  • The TJX Companies, Inc. (NYSE:TJX) operates 2,859 off-price apparel and home-goods stores.

  • Penn National Gaming Inc. (NASDAQ:PENN) operates 17 gaming properties with 27,065 gaming machines and 533 table games.

Table

Company

Ticker

New or Increased or Decreased or Unchanged Position

Market Value at end of March 2011 Quarter

Change in Value from Prior Quarter

New Picks and Pans

MSCI Inc.

MSCI

Decreased

$ 0 million

$ 6 million

Dollar Tree Inc.

DLTR

Added

$ 39 million

$ 5 million

American Tower Corp.

AMT

Added

$ 72 million

$ 5 million

Ross Stores Inc.

ROST

Added

$ 45 million

$ 5 million

MasterCard Inc.

MA

Added

$ 40 million

$ 5 million

99 Cents Only Stores

NDN

Decreased

$ 0 million

$ 4 million

OptionsXpress Holdings Inc.

OXPS

Added

$ 12 million

$ 4 million

Largest Holdings

Markel Corp

MKL

Decreased

$ 46 million

$ 1 million

Lamar Advertising Co

LAMR

Added

$ 46 million

$ 1 million

Enstar Group Limited

ESGR

Decreased

$ 46 million

$ 0 million

O Reilly Automotive Inc New

ORLY

Added

$ 29 million

$ 2 million

Hartford Financial Services Group Inc.

HIG

Decreased

$ 20 million

$ 0 million

Factset Research Systems Inc.

FDS

Decreased

$ 16 million

$ 1 million

Carmax Inc.

KMX

Added

$ 16 million

$ 0 million

TJX Companies Inc.

TJX

Added

$ 12 million

$ 0 million

Penn National Gaming Inc.

PENN

Decreased

$ 11 million

$ 0 million

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Credit: Historical fundamentals including operating metrics and stock ownership information were derived using I-Metrix® by Edgar Online®, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.

Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are my ‘opinions’ and I may be wrong. I may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to my thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.

Source: Top Picks by Star Mutual Fund Manager Chuck Akre