ORLY - Tracking Akre Capital Management Portfolio: Q3 2023 Update

2023-11-24 04:39:36 ET

Summary

• Akre Capital Management's 13F portfolio value decreased by 4% to $11.52B in Q3 2023.
• The largest five stakes in the portfolio are MasterCard, Moody's, American Tower, Visa, and KKR, accounting for 68% of the total portfolio value.
• The Akre Focus Mutual Fund has achieved annualized returns of 13.92% since its inception in 2009, outperforming the S&P 500 Index.

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 11/13/2023. 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 2023.

This quarter, Akre's 13F portfolio value decreased ~4% from ~$12B to ~$11.52B. The number of positions decreased from 18 to 17. The largest five stakes are MasterCard, Moody's, American Tower, Visa, and KKR. They account for ~68% 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 Q3 2023, the mutual fund's annualized returns are at 13.92% compared to 12.92% for the S&P 500 Index. For YTD through Q3 2023, the fund returned 10.10% compared to 13.07% for the S&P 500 Index. Their cash allocation is currently at ~6.1% near the bottom end of their historical range. 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 ), Lumine Group ( OTCPK:LMGIF ), and Topicus.com ( OTCPK:TOITF ). Topicus.com and Lumine Group are spinoffs from Constellation Software.

Stake Disposals:

Adobe Inc. ( ADBE ) : ADBE was a fairly large 4.33% 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. There was a ~25% reduction during Q4 2022 at prices between ~$275 and ~$346. That was followed by a ~15% selling in the last two quarters at prices between ~$321 and ~$495. The stake was disposed of this quarter at prices between ~$481 and ~$565. The stock currently trades at ~$620.

Stake Increases:

American Tower ( AMT ) : AMT has been in the portfolio for over two decades. It is the third-largest stake at ~10% of the portfolio. Recent activity follows: the six 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. Since then, there have only been minor adjustments. The stock is now at ~$199. There was a ~4% trimming last quarter and a marginal increase this quarter.

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

KKR & Co. ( KKR ) : KKR is a ~9% 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 also saw a ~15% increase. That was followed by a ~10% increase this quarter in prices between ~$54 and ~$65. The stock currently trades at $68.45.

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

CoStar Group ( CSGP ) : The ~5% 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 in Q2 2022 at prices between ~$54 and ~$68. The stock currently trades at $83.85. This quarter saw a minor ~2% increase.

Note: The prices quoted above are adjusted for the 10-for-1 stock split in June 2022.

Stake Decreases:

MasterCard ( MA ): MA is currently the largest 13F stake at ~26% of the portfolio. It was first purchased in 2010 and has consistently increased since. Their overall cost-basis is ~$22 compared to the current price of ~$410 per share. Q1 2020 saw a ~9% stake increase while Q2 2022 saw a ~14% selling at prices between ~$309 and ~$379. There was marginal trimming this quarter.

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 has doubled at higher prices. Recent activity follows: Q4 2016 saw a ~15% increase at prices between $94 and $109 and that was followed by a ~22% increase the following quarter at prices between $95 and $114. Since then, the activity has been minor. It currently trades at ~$365 and is now the second-largest stake at ~14% of the portfolio. There was a ~4% trimming this quarter.

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

Visa Inc. ( V ) : Visa is a large (top five) 9.59% 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 by 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 ~$254. There was a ~6% trimming during Q4 2022 and a ~3% trimming this quarter.

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

O'Reilly Automotive ( ORLY ): ORLY is a large 8.33% 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. There was a ~20% selling during Q4 2022 at prices between ~$703 and ~$865. The stock is now at ~$992. The last two quarters also saw a ~12% trimming.

Roper Technologies ( ROP ) : ROP is 6.62% 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 saw a ~22% stake increase at prices between $254 and $453. The stock is now at ~$529. H1 2021 saw a ~12% trimming and that was followed by a ~5% trimming this quarter.

Brookfield Corp ( BN ): BN is a ~5% 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 saw another ~45% increase at prices between $10 and $33.50. That was followed by another ~30% stake increase during Q4 2022 at prices between ~$31 and ~$35. The stock currently trades at $34.32. There were minor further increases in the last two quarters while this quarter there was marginal trimming.

Note: the prices quoted above are adjusted for the Asset Management Business spinoff completed last December. Shares of the spinoff, which assumed the name Brookfield Asset Management, were 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.

Danaher Corporation ( DHR ) : DHR is a 3.83% 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. Since then the activity has been minor. The stock is now at ~$221. This quarter saw marginal trimming.

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

Berkshire Hathaway ( BRK.B ), Brookfield Asset Management ( BAM ), CarMax Inc. ( KMX ), DigitalBridge ( DBRG ), Dollar Tree ( DLTR ), and Verisk Analytics (VRSK) : These small (less than ~2% of the portfolio each) stakes were reduced this quarter.

Kept Steady:

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. Q3 2022 saw a ~30% selling at prices between ~$36 and ~$71. It currently trades at $72.25. The position is very small at 0.16% of the portfolio.

Below is a spreadsheet that highlights the changes to Akre Capital Management's 13F stock portfolio as of Q3 2023:

Source: John Vincent. Data constructed from Akre Capital Management's 13F filings for Q2 2023 and Q3 2023.

For further details see: