Tracking Charles Akre's Akre Capital Management Portfolio - Q4 2018 Update

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

Chuck Akre’s portfolio value decreased from $8.56B to $7.90B this quarter.

Akre Capital Management decreased Enstar Group, while increasing CarMax, KKR, and TD Ameritrade during the quarter.

The top three positions are American Tower, Mastercard, and Moody’s, and they add up to ~37% 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 02/14/2019. 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 Q3 2018.

This quarter, Akre’s portfolio value decreased ~8%, from $8.56B to $7.90B. The number of positions increased from 24 to 25. The largest five stakes are American Tower (AMT), Mastercard (MA), Moody’s Corporation (MCO), O’Reilly Auto (ORLY), and Visa (V), and they account for ~53% 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

Goosehead Insurance (GSHD): GSHD is a minutely small position established this quarter. Goosehead Insurance had an IPO in April 2018 priced at $10. Since then, the stock has traded as high as $38. It currently goes for $27.78.

Stake Disposals

None.

Stake Increases

Moody’s Corporation: 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. In recent activity, 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 $172 and is now the third-largest stake at ~10% of the portfolio. There was a marginal increase this quarter.

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

CarMax Inc. (KMX): The 4.59% 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. There was a ~10% stake increase this quarter at prices between $57 and $74. The stock is now at $59.55.

KKR & Company (KKR): KKR is a 3.14% of the portfolio position established in Q1 2018 at prices between $20 and $24.50 and doubled next quarter at prices between $19.50 and $25.50. There was another ~25% increase this quarter at prices between $18.50 and $28. The stock currently trades at $22.96.

Note: In May 2018, KKR opted to convert from a partnership to a corporation (effective July 1).

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 $54.64. This quarter saw a ~13% stake increase.

Focus Financial Partners (FOCS): FOCS is a small ~1% of the portfolio position established last quarter. It had an IPO in July at ~$38 per share, and the stock is currently at $36.50. There was an ~8% stake increase this quarter.

Primo Water (PRMW): The very small 0.50% portfolio stake in PRMW saw a marginal increase this quarter.

Note: Akre Capital Management has a 7.38% ownership stake in Primo Water.

Stake Decreases

American Tower: AMT has been in the portfolio for well over sixteen years. It is the largest stake at ~14% of the portfolio. In recent activity, the last six 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 ~$185. There was a marginal reduction over the last two quarters.

Mastercard: MA is currently the second-largest 13F stake at 12.72% of the portfolio. It was first purchased in 2010 in the low-$20s price range, and it currently trades at ~$226. 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. The last few quarters have seen very minor adjustments.

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

O’Reilly Automotive: ORLY is a top-five 8.22% 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. 2017 saw a ~130% stake increase at prices between $173 and $270. The stock is now at $366. Last year saw marginal trimming.

Note: In a WSJ interview in early 2018, Akre disclosed that the large increases in 2017 happened at an overall cost basis of ~$195 per share.

Markel Corporation (MKL): MKL is another large ~7% portfolio stake that has been in the portfolio for over twenty years. In recent activity, 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 ~$969. The last few quarters have seen only very minor activity.

Note: Akre saw 20 times compounding over 20 years on his first purchases of MKL. However, they also increased their original stake substantially eleven years ago at a cost basis of $444 (2.5 times book value), and that portion has only increased ~150%. Markel currently trades at around 1.45 times book value.

Dollar Tree (DLTR): DLTR is a ~6% of the portfolio position first purchased in 2010 at a cost basis in the low-$20s. The stock currently trades at ~$104. 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. The last few quarters have seen only minor adjustments.

Roper Technologies (ROP): ROP is a large 5.29% 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 ~$323. There was a marginal reduction over the last two quarters.

Enstar Group (ESGR): ESGR is a long-term 1.90% portfolio stake that has been in the portfolio for over 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 ~$167. Last year saw a ~38% selling at prices between $155 and $220.

Note: Akre Capital Management has a 4.96% ownership stake in Enstar Group.

Berkshire Hathaway (BRK.A, BRK.B): Berkshire Hathaway stake is a 0.90% 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 ~$202. This quarter saw marginal trimming.

Boston Omaha (BOMN): The minutely small 0.07% portfolio stake in BOMN saw a ~25% reduction last quarter and marginal trimming this quarter.

Kept Steady

Visa Inc.: 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 ~$151.

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% 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 ~$186.

Verisk Analytics (VRSK): VRSK is a 3.51% 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 ~$127.

Ubiquiti Networks (UBNT): UBNT is a 3.37% portfolio stake built 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 ~$143.

Danaher Corporation (DHR): DHR is a 2.16% 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 ~$126. Q4 2016 saw a ~10% increase.

Note: The prices quoted above are adjusted for the Fortive spinoff in July 2017.

Alarm.Com Holdings (ALRM), Diamond Hill Investment Group (DHIL), and Lamar Advertising (LAMR): These three minutely small (less than ~0.50% 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 Q4 2018:

Charles Akre - Akre Capital Management - Q4 2018 13F Report Q/Q Comparison

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.