Tracking Charles Akre's Akre Capital Management Portfolio - Q2 2018 Update

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Includes: AKREX, AKRIX, AKRSX, ALRM, AMT, AMTD, BOMN, BRK.A, BRK.B, DHIL, DHR, DLTR, ESGR, KKR, KMX, LAMR, LKQ, MA, MCO, MKL, ORLY, PRMW, ROP, SBAC, UBNT, V, VRSK
by: John Vincent
Summary

Chuck Akre’s portfolio value increased from $7.62B to $7.92B this quarter.

Akre Capital Management doubled KKR while dropping LKQ during the quarter.

The top three positions are Mastercard, American Tower, and Moody’s, and they add up to ~38% of the entire portfolio.

This article is part of a series that provides an ongoing analysis of the changes made to Akre Capital Management’s 13F portfolio on a quarterly basis. It is based on Akre’s regulatory 13F Form filed on 08/14/2018. Please visit our Tracking Charles Akre’s Akre Capital Management Portfolio series to get an idea of their investment philosophy and our last update for their moves in Q1 2018.

This quarter, Akre’s portfolio value increased ~4% from $7.62B to $7.92B. The number of positions decreased from 24 to 23. The largest five stakes are Mastercard, American Tower, Moody’s Corporation, Visa, and Markel Corporation. They account for ~54% of the total portfolio value.

AUM is distributed among private funds, separately managed accounts, and the Akre Focus Mutual Fund (AKREX) (AKRIX) (AKRSX). Akre coined the term "compounding machines" to describe the type of businesses he invests in. To learn more about that investing style, check out 100 to 1 in the Stock Market.

New Stakes:

None.

Stake Disposals:

LKQ Corporation (LKQ): LKQ was a 1.57% position established in 2015 at prices between $24 and $31. The five quarters through Q2 2017 had seen a ~12% combined increase at prices between $25 and $36. Q4 2017 saw an ~11% trimming at prices between $31 and $36 and the disposal this quarter was at prices between $29.50 and $39.50. The stock currently trades at $34.27.

Stake Increases:

Mastercard (MA): MA is currently the largest 13F stake at 13.23% of the portfolio. It was first purchased in 2010 in the low-$20s price-range and it currently trades at ~$217. The stake saw increases every year since but was kept steady in 2016. Q1 2017 saw a ~13% increase at prices between $105 and $113. There was a marginal increase this quarter.

Note: Akre’s cost-basis on MA is ~$22 per share.

American Tower (AMT): AMT has been in the portfolio for well over sixteen years. It is the second-largest stake at 12.88% of the portfolio. Recent activity follow: the last five years saw consistent buying every year. The share count has increased over four times from 1.7M shares to 7.1M shares during that period. The buying happened at prices between $65 and $118 and the stock is now at $148. There was a marginal increase this quarter.

Markel Corporation (MKL): MKL is another top five ~7% portfolio stake that has been in the portfolio for over twenty years. Recent activity follow: H2 2013 and H1 2014 saw a stake doubling at prices between $510 and $655 and since then the position has remained relatively steady. The stock is now at ~$1,200. There was marginal increase this quarter.

Note: Akre saw 20-times compounding over 20 years on his first purchases of MKL. However, they also increased their original stake substantially a decade ago at a cost-basis of $444 (2.5 times book value) and that portion has only increased ~150%.

Roper Technologies (ROP): ROP is a large 5.44% of the portfolio position first purchased in Q2 and Q3 2014 at prices between $129 and $150. The stake saw incremental buying in the following quarters. In Q2 2016, there was a ~20% increase at prices between $165 and $185. The stock is now at ~$298. There were marginal increases in the last three quarters.

Dollar Tree (DLTR): DLTR is a 5.40% of the portfolio position first purchased in 2010 at a cost-basis in the low-20s. The stock currently trades at ~$80. The position was kept relatively steady in 2016, although previous years had seen significant buying. There was a ~15% increase in Q2 2017 at prices between $66.50 and $83. This quarter saw a ~4% increase.

CarMax Inc. (KMX): The 4.84% KMX stake is a very long-term position first purchased in 2002. The bulk of the current stake was built over the four quarters through Q2 2016 at prices between $42 and $68. The stock is now at $78.85. There were marginal increases in the last two quarters.

KKR & Company (KKR): KKR is a 3.14% of the portfolio position established last quarter at prices between $20 and $24.50 and doubled this quarter at prices between $19.50 and $25.50. The stock currently trades at $25.96.

Note: In May, KKR opted to convert from a partnership to a corporation (effective July 1).

Alarm.com Holding (ALRM) and Primo Water (PRMW): These two very small (less than ~0.6% of the portfolio each) stakes saw increases this quarter.

Note: Akre Capital Management has a ~9% ownership stake in Primo Water.

Stake Decreases:

Moody’s Corporation (MCO): The initial purchase of MCO happened in Q1 and Q2 2012 in the high-$30s price-range. Since then, the position size was doubled at higher prices. Recent activity follow: Q4 2016 saw a ~15% increase at prices between $94 and $109 and that was followed with a ~22% increase the following quarter at prices between $95 and $114. It currently trades at $178 and is now the third-largest stake at ~12% of the portfolio. There was a marginal reduction this quarter.

Note: Akre’s cost-basis on MCO is ~$39.

O’Reilly Automotive (ORLY): ORLY is a 6.53% portfolio stake first purchased in 2005. Over 800K shares were purchased at the time. The position was at 825K shares as of Q1 2017 - every year had seen adjustments but overall the stake had remained remarkably steady over the twelve-year holding period – the stock returned ~10x during that time. Last year saw a ~130% stake increase at prices between $173 and $270. The stock is now at $344. Last two quarters saw marginal trimming.

Note: In A WSJ interview earlier this year, Akre disclosed that the large increases last year in O’Reilly happened at an overall cost-basis of ~$195 per share.

Verisk Analytics (VRSK): VRSK is a 3.46% portfolio position first purchased in H2 2012 at prices between $46.50 and $51. 2015 saw a huge 3x stake increase at prices between $63 and $81. The position has since been kept relatively steady. The stock is currently at ~$121. Last four quarters saw minor selling.

Enstar Group (ESGR): ESGR is a long-term 3.45% portfolio stake that has been in the portfolio for almost a decade. The bulk of the original stake is from Q1 and Q2 2008 at prices between $89 and $119. The position remained largely untouched until 2015. H2 2015 and Q1 2016 saw a roughly 3x increase at prices between $146 and $165 and the stock is now at ~$211. There was a ~3% trimming last quarter and a ~6% reduction this quarter.

Note: Akre Capital Management has an ~8% ownership stake in Enstar Group.

TD Ameritrade (AMTD): AMTD is a ~2% portfolio position first purchased in 2009. The bulk of the current stake was built in 2011 and 2012 at prices between $15 and $22 and the stock is now at $58.55. This quarter saw marginal trimming.

Berkshire Hathaway (BRK.A) (BRK.B): Berkshire Hathaway stake is a 0.83% of the portfolio long-term stake. The last major activity was in Q3 2017 when there was a ~27% selling at prices between $169 and $184. The stock is now at ~$210. This quarter saw marginal trimming.

Diamond Hill Investment Group (DHIL): The minutely small 0.16% stake in DHIL saw a ~55% selling this quarter.

Kept Steady:

Visa Inc. (V): V is a large (top five) ~8% of the portfolio stake. It was established in Q2 2012 at a cost-basis of around $30. Q2 2013 saw a one-third increase in the low-$40s and that was followed with a 60% increase in Q2 2016 in the high $70s. Q1 2017 also saw another roughly one-third increase at prices between $79.50 and $90. The stock is now at ~$148.

Note: Visa stock split 4-for-1 in March 2015. The prices quoted above are adjusted for that split.

SBA Communications (SBAC): SBAC is a 5.14% portfolio stake. The original position is from H1 2014 at prices between $88 and $102. Q4 2015 saw a one-third increase at prices between $100 and $121 and a similar increase occurred in Q4 2016 as well at prices between $96 and $115. The stock currently trades well above those ranges at ~$156.

Ubiquiti Networks (UBNT): UBNT is a 2.87% portfolio stake built up in H2 2014 at prices between $28 and $46.50. Q1 2015 also saw a ~40% stake increase at prices between $26 and $32. Since then, the position has been kept relatively steady. The stock currently goes for ~$90.

Danaher Corporation (DHR): DHR is a 2.06% of the portfolio position established in Q4 2013 at prices between $47 and $55 and increased by roughly five-times in Q2 2014 at prices between $52 and $59. The stock is now at ~$104. Q4 2016 saw a ~10% increase.

Note: The prices quoted above are adjusted for the Fortive spinoff in July last year.

Boston Omaha (BOMN) and Lamar Advertising (LAMR): These two minutely small (less than ~0.1% of the portfolio each) positions were kept steady this quarter.

Below is a spreadsheet that highlights the changes to Chuck Akre’s 13F stock portfolio as of Q2 2018:


Charles Akre - Akre Capital Management - Q2 2018 13F Report

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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