Chuck Akre of Akre Capital Management

http://www.valuepodcast.com/135#t=1:01.801

Chuck Akre focuses on companies with the following characteristics:

  1. Excellent management with a strong track record
  2. Durable competitive advantage
  3. Long term growth and reinvestment opportunities
  4. Attractive purchase prices

 

Compounding Machines:

  1. The compounded return rate of your portfolio represents the long range ROE of your invested capital across all the portfolio businesses.
  2. The goal is to achieve a high or above average compounded rate of return with a below average level of risk.
  3. Focus on a smaller group of business where the returns on owners capital are historically higher than average.
    1. nature of the enterprise
      1. how long is the runway
    2. management
      1. should treat all shareholders as partners
    3. reinvestment opportunity
      1. how does the business allocate free cash flow
  4. These are compounding machines according to Akre
  5. The goal is to find unique businesses that can generate exceptional returns over a long period.
  6. They constantly review all these tenets with each portfolio business
  7. Using excess cash to pay dividends is not the most efficient way for CEOs to increase business value; however, the portfolio manager can allocate that cash

 

Portfolio Management:

  1. There is a dilemma when businesses reach full value in the market:
    1. Do you close all the positions? or close some?
  2. They try not be a speculator in the price movement of shares, but rather an investor in the business

 

General Principles:

  1. In every industry there are businesses that stand out
  2. Identify and partner with these management teams
  3. Look closely at the way management reinvests in the business:
    1.  nothing can create or destroy value more effectively
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