Top Buys of Akre Capital Management

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 |  Includes: AGO, ARO, DHIL, KMX, LAMR, MA, ORLY
by: The Analyst Hub

Founded by Charles T. Akre, Jr. in 1989, Akre Capital Management LLC is a Middleburg, VA-based investment advisory and hedge fund firm. The firm caters to individuals and institutions.

Investment Strategy: Akre Capital Management, LLC employs a value-oriented approach to investing. The firm utilizes a bottom-up analysis in allocating assets and selecting stocks. Akre Capital Management looks for companies with business models that display consistent earnings growth, high ROE or high compound growth rate in book value per share. Investment Criteria: 1) Sound and sustainable business model; 2) Compelling ROE/ROC; 3) High quality management; 4) Certain opportunity to reinvest profits; 5) Reasonable valuation. Decision Making Process: The firm speaks with senior management, as well as with competitors, suppliers, industry specialists, and investment community contacts. Akre Capital Management also attends conferences, participates in earnings call, and conducts literature searches.

The following is a list of top stocks (by market value) that Akre Capital Management bought in the last quarter, as released in its most recent 13F filing with the SEC.

Stock

Symbol

Shares Held - 03/31/2011

Shares Held - 06/30/2011

Carmax Inc.

KMX

493848

799231

Lamar Advertising Co.

LAMR

1257423

1589655

Mastercard Incorporated

MA

159220

185515

O'reilly Automotive Inc.

ORLY

504345

610235

Aeropostale, Inc.

ARO

100000

425000

Assured Guaranty Ltd.

AGO

0

200000

Diamond Hill Investment Group Inc.

DHIL

0

30210

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My favourite among the above stocks is Carmax. CarMax is a retailer of used cars having 105 used car superstores in 51 markets in the U.S (as of July 1, 2011). I believe it is a good long term store growth stories in the retail. After temporarily suspending store growth in December 2008 as a result of the weak economic and sales environment, the company resumed store growth in fiscal 2011 by opening three stores. Carmax plans to open five stores in fiscal 2012 and between eight and ten stores in fiscal 2013. In the long term, Carmax has an opportunity to grow its store count by 3x given its consumer friendly model in auto retailing coupled with the fact that it is still in early stages gaining market share in a very fragmented used car retail market. I believe it can become a “Wal-Mart of the used car market” in the long term. The company is trading at 13.5x forward EPS and I think it’s a good opportunity to buy this secular growth story.

For other stocks in the above list, here are some of the specifics about these companies, including a brief description of their businesses, growth expectations (top line and bottom line):

Lamar Advertising Company is an outdoor advertising company. Lamar Advertising sells advertising on billboards, buses, shelters, benches and logo plates. It operates three outdoor advertising displays: billboards, logo signs and transit advertising displays. Lamar's EPS forecast for the current year is $0.03 and next year is $0.16. According to consensus estimates, its top line is expected to grow 3.00% in the current year and 4.10% next year.

MasterCard Incorporated is a global payments company that provides an economic link among financial institutions, businesses, merchants, cardholders and governments worldwide, enabling them to use electronic forms of payment instead of cash and checks. The company provides a variety of services in support of the credit, debit, prepaid and related payment programs of approximately 22,000 financial institutions and other entities that are its customers. Mastercard's EPS forecast for the current year is $17.72 and next year is $20.87. According to consensus estimates, its top line is expected to grow 18.60% in the current year and 12.20% next year.

O’Reilly Automotive, Inc. and its subsidiaries are specialty retailers of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States, selling its products to both do-it-yourself customers and professional service providers. O’Reilly Automotive's EPS forecast for the current year is $3.61 and next year is $4.09. According to consensus estimates, its top line is expected to grow 7.10% in the current year and 7.00% next year.

Aeropostale, Inc. is a mall-based, specialty retailer of casual apparel and accessories, principally targeting 14 to 17 year-old young women and men through its Aeropostale stores and 7 to 12 year-old kids through its P.S. from Aeropostale stores. The company designs, sources, markets and sells all of its own merchandise. Aeropostale's EPS forecast for the current year is $1.04 and next year is $1.42. According to consensus estimates, its top line is expected to decline 1.20% in the current year and grow 3.90% next year.

Assured Guaranty Ltd. is a Bermuda-based holding company that provides, through its subsidiaries, credit protection products to the United States and international public finance, infrastructure and structured finance markets. The company has two segments: financial guaranty direct and financial guaranty reinsurance. Assured Guaranty's EPS forecast for the current year is $3.74 and next year is $2.93. According to consensus estimates, its top line is expected to decline 1.80% in the current year and 18.40% next year.

Diamond Hill Investment Group, Inc. derives its consolidated revenue and net income from investment advisory and fund administration services provided by its subsidiaries Diamond Hill Capital Management, Inc., Beacon Hill Fund Services, Inc. and BHIL Distributors, Inc. The company has a market cap of $227 mn and it is not covered by any sell side analyst of major brokerage houses.

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