BAMKF - Tracking Akre Capital Management Portfolio - Q4 2022 Update

Summary

• Akre Capital Management’s 13F portfolio value decreased from $11.34B to $11.06B this quarter.
• They increased Brookfield Corp while decreasing O’Reilly Auto, Adobe, CarMax, and Verisk Analytics. They also dropped Salesforce.com and Snowflake.
• The top three positions are Mastercard, Moody’s, and American Tower and they add up to ~46% 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 2/13/2023. 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 Q3 2022.

This quarter, Akre's 13F portfolio value decreased ~2% from $11.34B to $11.06B. The number of positions decreased from 21 to 20. The largest five stakes are MasterCard, Moody's, American Tower, Visa, and O'Reilly Auto. They account for ~65% 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 2022, the mutual fund's annualized returns are at 13.93% compared to 12.65% for the S&P 500 Index. For 2022, the fund returned negative 22.93% compared to negative 18.1% for the S&P 500 Index. Their cash allocation has increased from ~2% to ~6.7% during 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:

Salesforce ( CRM ): CRM was a 3.93% of the portfolio position established in Q2 2021 at prices between ~$211 and ~$246. The disposal this quarter was at prices between ~$128 and ~$165. The stock currently trades at ~$168. They realized losses.

Snowflake Inc. ( SNOW ): The 1.50% SNOW stake was purchased in Q2 2022 at prices between ~$113 and ~$241. The position was sold this quarter at prices between ~$126 and ~$189. The stock currently trades at ~$164.

New Stakes:

Brookfield Asset Management ( BAM ): BAM is a small ~1% of the portfolio position established as a result of the spinoff from Brookfield Corp. The stock currently trades at $35.38.

Stake Increases:

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 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 ~$212. There was 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.

Brookfield Corp. ( BN ), previously Brookfield Asset Management: BN is a 4.94% 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. That was followed with another ~30% stake increase this quarter at prices between ~$31 and ~$35. The stock currently trades at ~$36.

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 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.

Danaher Corporation ( DHR ): DHR is a 4.29% 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 ~$256. There was a ~8% stake increase this quarter.

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

DigitalBridge ( DBRG ), previously Colony Capital: The DBRG stake saw a ~6x increase in Q3 2020 at prices between ~$7.20 and ~$11.60. Q2 2022 saw a ~55% stake increase at prices between ~$18.20 and ~$30.20. That was followed with a ~22% increase in the last two quarters at prices between ~$11.50 and ~$23.50. The stock currently trades at $14.90. The stake is still very small at 0.49% of the portfolio.

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

Stake Decreases:

Mastercard ( MA ): MA is currently the largest 13F stake at 18.47% 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 ~$368 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.

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.

Visa Inc. ( V ): Visa is a large (top five) 9.24% 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 ~$226. There was a ~6% 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 (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. Last six quarters had seen only minor activity. There was a ~20% selling this quarter at prices between ~$703 and ~$865. The stock is now at ~$862.

Roper Technologies ( ROP ): ROP is a 6.47% 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 ~$423. H1 2021 had seen a ~12% trimming. There was marginal trimming this quarter.

KKR & Co. ( KKR ): KKR is a 6.34% 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 $57.55. This quarter saw a ~2% trimming.

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

Adobe Inc. ( ADBE ): ADBE is a 3.77% 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. Last six quarters had seen only minor adjustments. There was a ~25% reduction this quarter at prices between ~$275 and ~$346. The stock currently trades at ~$365.

CarMax Inc. ( KMX ): The 2.91% 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. 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. That was followed with a ~30% reduction this quarter at prices between ~$56 and ~$75. The stock is now at $74.32.

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 ~$147. There was further selling this quarter.

Verisk Analytics ( VRSK ): The VRSK position was 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 had since been kept relatively steady. This quarter saw the stake almost sold out at prices between ~$166 and ~$186. The stock is currently at ~$176.

Kept Steady:

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 ~$303 and is now the second-largest stake at 14.36% of the portfolio.

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

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 $78.18.

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

Alarm.com Holdings ( ALRM ) : ALRM is a very small 0.12% 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 next quarter there was a ~73% increase. The stock currently trades at $52.15.

Alphabet ( GOOG ) Calls: The leveraged long stake in GOOGL through Calls is a very small 0.08% of the portfolio position established in Q2 2022. GOOG currently goes for $95.78.

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. Last quarter saw a ~30% selling at prices between ~$36 and ~$71. It currently trades at ~$41.50. The position is very small at 0.08% of the portfolio.

Berkshire Hathaway ( BRK.B ) : The minutely small 0.05% BRK.B stake was kept steady this quarter.

Below is a spreadsheet that highlights the changes to Akre Capital Management's 13F stock portfolio as of Q4 2022:

For further details see: