DBRG - Tracking Akre Capital Management Portfolio - Q3 2022 Update

Summary

• Akre Capital Management’s 13F portfolio value decreased from $12.49B to $11.34B this quarter.
• They increased DigitalBridge Group while decreasing Goosehead Insurance during the quarter.
• The top three positions are Mastercard, American Tower, and Moody’s, and they add up to ~40% 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 11/14/2022. Please visit our Tracking Akre Capital Management Portfolio series to get an idea of their investment philosophy and our last update for their moves in Q2 2022.

This quarter, Akre's 13F portfolio value decreased ~9% from $12.49B to $11.34B. The number of positions decreased from 22 to 21. The largest five stakes are Mastercard, American Tower, Moody's, O'Reilly Auto, and Visa. They account for ~58% of the total portfolio value.

AUM is distributed among private funds, separately managed accounts, and the Akre Focus Mutual Fund ( AKREX ) ( AKRIX ). Since the 2009 inception through 9/30/2022, the mutual fund's annualized returns are at 13.45% compared to 12.28% for the S&P 500 Index. For the year through 9/30/2022, the fund returned negative 29.46% compared to negative 23.87% for the S&P 500 Index. Their cash allocation has increased from ~2% to ~4% during YTD through Q3 2022. 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 .

Note: positions in the mutual fund not reported through the 13F filings include Constellation Software ( OTCPK:CNSWF ), and Topicus.com ( OTCPK:TOITF ). Topicus.com is a spinoff from Constellation Software that started trading in February 2021.

Stake Disposals:

ThredUp Inc. ( TDUP ) : The minutely small TDUP stake was disposed this quarter.

New Stakes:

None.

Stake Increases:

Mastercard ( MA ): MA is currently the largest 13F stake at ~15% 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 ~$346 per share. Q1 2020 saw a ~9% stake increase while last quarter saw a ~14% selling at prices between ~$309 and ~$379. There was a marginal increase this quarter.

Note: In a WealthTrack interview in November 2019, 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.

KKR & Company ( KKR ): KKR is a ~6% 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 first three quarters of 2020 had also seen a ~15% increase. Since then, there have only been minor adjustments. The stock currently trades at $47.65.

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

Brookfield Corp ( BN ), previously Brookfield Asset Management ( BAM ): BN is a 4.82% of the portfolio stake established in Q3 2019 at prices between $20 and $24 and increased by ~18% next quarter at prices between $22 and $27. The first three quarters of 2020 had seen another ~45% increase at prices between $10 and $33.50. The stock currently trades at $28.20. Last several quarters have seen only minor adjustments.

Note 1: the prices quoted above are adjusted for the Asset Management Business spinoff completed earlier this month. Shares of the spinoff which assumed the name Brookfield Asset Management was distributed at a ratio of 1 share of the separated business for every 4 Class A shares held. The parent company was then renamed Brookfield Corp. The spinoff was valued at ~$12 per share.

Note 2: the prices quoted are adjusted for the 3-for-2 stock-split last year.

CarMax, Inc. ( KMX ): The 4.28% KMX stake is a very long-term position first purchased in 2002. The bulk of the current stake was built over the four quarters thru Q2 2016 at prices between $42 and $68. There was a ~10% stake increase in Q4 2018 at prices between $57 and $74. 2019 had also seen a ~17% stake increase at prices between $58 and $98 and that was followed with a ~20% further increase in Q1 2020 at prices between $44 and $102. The two quarters through Q1 2021 had seen a ~12% selling. The stock is now at $59.37. There were minor adjustments in the last six quarters.

Adobe Inc. ( ADBE ): ADBE is a ~4% of the portfolio position purchased in Q1 2020 at prices between $285 and $383 and increased by roughly one-third in Q1 2021 at prices between ~$421 and ~$502. The stock currently trades at ~$341. Last six quarters have seen only minor adjustments.

Salesforce, Inc. ( CRM ): CRM is a 3.93% of the portfolio position established in Q2 2021 at prices between ~$211 and ~$246 and the stock currently trades well below that range at ~$130. There was a ~8% increase last quarter and a marginal further increase this quarter.

DigitalBridge ( DBRG ), previously Colony Capital: The DBRG stake saw a ~6x increase in Q3 2020 at prices between ~$7.20 and ~$11.60. Last quarter saw a ~55% stake increase at prices between ~$18.20 and ~$30.20. That was followed with a ~15% increase this quarter. The stock currently trades at $11.24. The stake is still very small at 0.51% of the portfolio.

Note: The prices quoted above are adjusted for the one-for-four reverse stock-split in August.

Stake Decreases:

O'Reilly Automotive ( ORLY ): ORLY is a large (top five) ~9% 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 twelve-year period - the stock returned ~10x during that time. 2017 saw a ~130% stake increase at an average cost of ~$195. Q1 2021 saw a ~14% selling at prices between ~$425 and ~$509. The stock is now at ~$834. Last six quarters have seen only minor activity.

Goosehead Insurance ( GSHD ): GSHD is a minutely small position established in Q4 2018 and increased over the next two quarters. There has been periodic buying since. Goosehead had an IPO in April 2018 priced at $10. This quarter saw a ~30% selling at prices between ~$36 and ~$71. It currently trades at $39.77. The position is very small at 0.08% of the portfolio.

Kept Steady:

American Tower ( AMT ): AMT has been in the portfolio for over two decades. It is the second-largest stake at ~13% of the portfolio. Recent activity follows: the six years thru 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. Since then, there have only been minor adjustments. The stock is now at ~$211.

Note: Akre is very bullish on AMT as incremental margins are at over 90% and growth in wireless communication is a significant tailwind.

Moody's Corporation ( MCO ): 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. Since then, the activity has been minor. It currently trades at ~$282 and is now the third-largest stake at 12.23% of the portfolio.

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

Visa Inc. ( V ): Visa is a large (top five) 8.22% 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. Since then, the activity has been minor. The stock is now at ~$207.

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

Roper Technologies ( ROP ): ROP is a 5.25% 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 first three quarters of 2020 had seen a ~22% stake increase at prices between $254 and $453. The stock is now at ~$431. H1 2021 had seen a ~12% trimming.

CoStar Group ( CSGP ): The 4.37% CSGP stake was purchased in Q4 2019 at prices between ~$54 and ~$62 and increased by ~75% next quarter at prices between ~$52 and ~$74. Q2 2020 saw another ~120% stake increase at prices between ~$53 and ~$73. There was a ~25% reduction last quarter at prices between ~$54 and ~$68. The stock currently trades at $77.94.

Note: The prices quoted above are adjusted for the 10-for-1 stock split last June.

Danaher Corporation ( DHR ): DHR is a 3.77% 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 ~$261.

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

Verisk Analytics ( VRSK ): VRSK is a 3.68% 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 ~$176.

Snowflake Inc. ( SNOW ) and Alphabet ( GOOG ) Calls: The 1.50% SNOW stake was purchased last quarter at prices between ~$113 and ~$241 and the stock currently trades at ~$147. The leveraged long stake in GOOGL through Calls is a very small 0.08% of the portfolio position established last quarter.

Alarm.com Holdings ( ALRM ) : ALRM is a very small 0.15% position first purchased in Q2 2015. Q3 2019 saw a ~130% stake increase at prices between $46 and $53. The four quarters through Q3 2020 had seen a ~43% further increase at prices between ~$37 and ~$71. There was a ~50% reduction in Q1 2022 while in the last quarter there was a ~73% increase. The stock currently trades at ~$50.

Dollar Tree ( DLTR ): DLTR position was first purchased in 2010 at a cost-basis in the low-20s. Recent activity follows. There was a ~15% stake increase in Q2 2017 at prices between $66.50 and $83. Q1 2020 saw a ~10% selling and that was followed with marginal trimming in the next three quarters. Q1 2021 saw a ~20% reduction at prices between ~$98 and ~$116. That was followed with a ~25% selling in Q4 2021 at prices between ~$96 and ~$147. The position was almost sold out next quarter at prices between ~$126 and ~$160. The stock currently trades at ~$140.

Berkshire Hathaway ( BRK.B ) : The minutely small 0.04% BRK.B stake saw a ~4% stake increase last quarter.

Below is a spreadsheet that highlights the changes to Akre Capital Management's 13F stock portfolio as of Q3 2022:

For further details see: