Tracking Charles Akre's Akre Capital Management Portfolio - Q4 2019 Update

Summary

• Chuck Akre’s portfolio value increased from $10.14B to $10.91B this quarter.
• Akre Capital Management added CoStar Group and increased Brookfield Asset Management during the quarter.
• The top three positions are American Tower, Mastercard, and Moody’s, and they add up to ~42% 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 02/14/2020. 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 2019.

This quarter, Akre’s 13F portfolio value increased 7.5% from $10.14B to $10.91B. The number of positions stayed steady at 25. The largest five stakes are American Tower (AMT), Mastercard (MA), Moody’s Corporation (MCO), Visa (V), and O’Reilly Auto (ORLY). They account for ~58% of the total portfolio value.

AUM is distributed among private funds, separately managed accounts, and the Akre Focus Mutual Fund (MUTF:AKREX) (AKRIX) (AKRSX). Since the 2009 inception, the mutual fund’s annualized returns are at 16.72% compared to 14.14% for the S&P 500 Index. For 2019, the fund returned 35.15% compared to 31.50% for the S&P 500 Index. Their cash allocation is ~17% of the portfolio. 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

CoStar Group (CSGP) and Ansys Inc. (ANSS): These are small new positions established this quarter. The 1.37% CSTR stake was purchased at prices between $544 and $617 and the stock currently trades at $707. ANSS is a minutely small 0.39% of the portfolio position established at prices between $214 and $259 and it is now at $238.

Stake Disposals

Enstar Group (ESGR): ESGR stake was almost eliminated last quarter and the remaining position was disposed this quarter. The bulk of the original stake was from Q1 and Q2 2008 at prices between $89 and $119. The position remained largely untouched until 2015. H2 2015 & Q1 2016 saw a roughly 3x increase at prices between $146 and $165. 2018 saw a ~38% selling at prices between $155 and $220 and the position was almost sold out over the last three quarters at prices between $160 and $192. The stock is currently at ~$175.

Boston Omaha (BOMN): The minutely small position in BOMN was eliminated during the quarter.

Stake Increases

CarMax Inc. (KMX): The 5.42% 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 in Q4 2018 at prices between $57 and $74. The stock is now at ~$85. The last four quarters have also seen a ~17% stake increase at prices between $58 and $98.

Brookfield Asset Management (BAM): BAM is a 3.31% of the portfolio stake established last quarter at prices between $48 and $54 and increased by ~18% this quarter at prices between $51 and $58.50. The stock currently trades at $61.67.

Alarm.com Holdings (ALRM): ALRM is a small 0.63% first purchased in Q2 2015. The last quarter saw a ~130% stake increase at prices between $46 and $53. The stock currently trades at $44.89. This quarter also saw an ~18% stake increase. For investors attempting to follow, ALRM is a good option to consider for further research.

Goosehead Insurance (GSHD): GSHD is a minutely small position established in Q4 2018 and increased over the next two quarters. Goosehead Insurance had an IPO in April 2018 priced at $10. Since then, the stock has traded as high as ~$62. It currently goes for $60.63. This quarter saw a ~70% stake increase.

Ollie’s Bargain (OLLI) and Primo Water (PRMW): These two minutely small positions saw minor increases this quarter.

Note: Akre Capital Management has an ~8% ownership stake in Primo Water.

Stake Decreases

Mastercard: MA is currently the second-largest 13F stake at 14.59% of the portfolio. It was first purchased in 2010 and consistently increased since. Their overall cost basis is ~$22 compared to the current price of ~$287 per share. The last few quarters have seen minor trimming.

Note: In a WealthTrack interview last November, Akre commented that something extraordinary is happening at Mastercard – if the rate of return is cut down twice, they would still be earning above average. On the question “one investment every investor should own some of,”, Akre responded with two: MasterCard and Visa.

Moody’s Corporation: The initial purchase of MCO happened in Q1 & Q2 2012 in the high-30s price-range. Since then, the position size was doubled at higher prices. Recent activity follows: 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 ~$238 and is now the third-largest stake at 12.37% of the portfolio. There was marginal trimming in the last three quarters.

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

O’Reilly Automotive: ORLY is a top five 7.58% 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 that 12-year period – the stock returned ~10x during that time. 2017 saw a ~130% stake increase at prices between $173 and $270. There has only been marginal activity since. The stock is now at ~$368.

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 5.38% portfolio stake that has been in the portfolio for over 20 years. Recent activity follows: 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 ~$1217. There was a ~7% trimming 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 12 years ago at a cost-basis of $444 (2.5 times book value) and that portion has only increased ~175%. Markel currently trades at around ~1.5 times book value.

Dollar Tree (DLTR): DLTR is a 4.39% of the portfolio position first purchased in 2010 at a cost-basis in the low-20s. The stock currently trades at ~$80. Recent activity follows: there was a ~15% stake increase in Q2 2017 at prices between $66.50 and $83. Since then, there has only been minor adjustments.

Berkshire Hathaway (BRK.A) (BRK.B): Berkshire Hathaway is a 0.72% 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 ~$206. This quarter saw marginal trimming.

Kept Steady:

American Tower: AMT has been in the portfolio for well over 17 years. It is the largest stake at ~15% of the portfolio. Recent activity follows: the 6 years through Q3 2018 saw consistent buying almost every quarter. The share count 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 ~$246. Since then, there has only been marginal activity.

Note: Akre is very bullish on AMT – growth in wireless communication depends on them and incremental margins are at over 90%. Crown Castle (CCI) is another option in the same mold.

Visa Inc.: V is a large (top five) 8.42% 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 ~$184.

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 5.45% portfolio stake. The original position was 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 ~$286.

Roper Technologies (ROP): ROP is a large 5.09% of the portfolio position first purchased in Q2 & 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 ~$350.

Verisk Analytics (VRSK): VRSK is a 3.48% 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 ~$163. There was a marginal increase last quarter.

KKR & Company (KKR): KKR is a 3.41% 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 in Q4 2018 at prices between $18.50 and $28. The stock currently trades at $26.95.

Note: KKR converted from a partnership to a corporation effective July 1, 2018.

Danaher Corporation (DHR): DHR is a 2.33% 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 ~$148.

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

Colony Capital (CLNY), Descartes Systems (DSGX), and Lamar Advertising (LAMR): These minutely small (less than ~0.05% of the portfolio each) stakes remained steady this quarter.

Below is a spreadsheet that highlights the changes to Chuck Akre’s 13F stock portfolio as of Q4 2019:

Analyst’s Disclosure: I am/we are long MKL, BRK.B, CLNY. 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.

Comments

[RoyalAce]

Many thanks for this great snapshot. As a long term owner of AKREX I think shareholders would be well served if management put out a similar product periodically.