Charles T. Akre

Last updated

Charles T. "Chuck" Akre is an American investor, financier and businessman. He is on the board of directors of Enstar Group, Ltd., a Bermuda run-off reinsurance company. He is also the founder, chairman and chief investment officer of Akre Capital Management, FBR Focus, and other funds. Akre Capital Management is based in Middleburg, Virginia.

Contents

Early life

Akre grew up in Washington D.C., graduated from Blair Academy and matriculated to American University, where he started out as a premed student but later switched to BA in English literature. [1] After deciding against going to medical school, Akre started in the securities business in 1968. [2]

Career

Akre held positions as shareholder, director, CEO of the Asset Management Division and director of Research at Johnston, Lemon & Co. (a NYSE member firm). Akre established his own firm, Akre Capital Management, in 1989 and operated it as part of Friedman, Billings, Ramsey & Co. until 1999. In 2000, ACM became independent again.[ citation needed ]

Akre established its current location in Middleburg, Virginia in early 2002 while running the FBR Focus Fund, a small- and mid-cap value mutual fund. While Akre was managing the FBR Focus, it performed in the top 1% of small/mid-cap growth funds in 2002, 2004, and 2006, as well as the 2nd percentile in 2001 and the 6th percentile in 2008. In 2008, Akre's FBR Small Cap Value fund consisted of $55 million; in total in 2003 Akre managed about $135 million. [3] After breaking from FBR, Akre started the Akre Focus Fund in 2009. As of 2009 the fund had about $800 million in assets, while Akre had a seven figure stake in the fund. [4]

Akre Capital Management is a long-term, concentrated value investment firm. Akre's and his team of analysts do intense research, and are known for their contrarian investments, most notably in the cell phone tower space during 2001–2003.[ citation needed ]

"I've managed the portfolio the whole time and I've never changed the investment approach," Akre said to CNN Money. "We've been all of them. I don't box myself in."[ citation needed ]

Investment approach

Charles Akre uses an investment philosophy that he calls the "three-legged stool" approach, which calls for examining business models, rates of return, and reinvestment opportunities. [4] The stool is a reference to a three-legged milking stool he keeps in his office – because it is low to the ground, a farmer sitting on it would not fall far if it flipped over. The implication for investing is that if the economy is rattled, fund investors won't be hit with serious damage. [3]

Good investments are businesses that possess four characteristics:

  1. Good managers with demonstrated track records
  2. Significant and durable competitive advantages
  3. Long-term growth/reinvestment opportunities
  4. Attractive purchase prices relative to the cash flows generated by the company

Heavily influenced by Thomas Williams Phelps book "100 to 1 in The Stock Market" and Warren Buffett's letters to Berkshire Hathaway shareholders, Akre coined the term "compounding machines" to describe businesses that are capable of compounding the shareholders' capital at high rates for long periods of time with little risk of permanent loss (not temporary quotational loss) of capital.[ citation needed ]

Akre is said to have invested in Berkshire Hathaway in 1977. Deeply influenced by Buffett's ideas on investing, Akre keeps a framed letter that Warren Buffett sent him on his office wall. Akre, for example, puts a strong emphasis on finding the competitive advantage of the companies he invests in. "We spend a lot of time trying to figure out what's causing this," he said in an interview with CNN Money. "What is it that allows them to have what the world calls 'the economic moat'?" [4]

The investment portfolio is quite tight: Akre's FBR Focus fund often may only have between two and three [3] dozen investments, with the top 10 consisting of 75% of the total assets. Small and mid-cap stocks are the usual targets for investment, because they generally have higher growth rates. He often holds companies for many years. [4]

The company was hit hard by the recession in 2008. "In 2008 we got it wrong. That's just the reality," he told CNN Money. From that point forward they began spending more time with government, economic policy, and sustainability experts in order to "help us think about the world in general in ways that are better than we have in the past." [4]

From December 1996 to October 2009, FBR focus had achieved annualized returns of 12.5%, which "trounced the Russell 2000 Growth index, a measure of small, fast-growing companies, by ten percentage points per year, on average," according to Kiplinger, an investment advice website, which added the company to its list of 25 recommended funds. [5]

Notable investments

Akre has made significant long-term investments in several public companies, including American Tower, Bandag (now Bridgestone), International Speedway, O'Reilly Automotive (the biggest independent retailer of aftermarket car parts), Ross Stores, Dollar Tree, MasterCard, Markel Corporation, Aeropostale and Penn National Gaming. In these investments, he has tended to focus on the long-term compounding results rather than short-term gyrations in stock price.

Related Research Articles

Investment is traditionally defined as the "commitment of resources to achieve later benefits". If an investment involves money, then it can be defined as a "commitment of money to receive more money later". From a broader viewpoint, an investment can be defined as "to tailor the pattern of expenditure and receipt of resources to optimise the desirable patterns of these flows". When expenditure and receipts are defined in terms of money, then the net monetary receipt in a time period is termed as cash flow, while money received in a series of several time periods is termed as cash flow stream. Investment science is the application of scientific tools for investments.

<span class="mw-page-title-main">Warren Buffett</span> American business magnate (born 1930)

Warren Edward Buffett is an American business magnate, investor, and philanthropist. He is currently the chairman and CEO of Berkshire Hathaway. He is one of the best-known fundamental investors in the world as a result of his immense investment success possessing a net worth of over $108 billion as of February 2023, making him the world's fifth-wealthiest person.

A mutual fund is an investment fund that pools money from many investors to purchase securities. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICAV in Europe and open-ended investment company (OEIC) in the UK.

<span class="mw-page-title-main">Berkshire Hathaway</span> American multinational conglomerate holding company

Berkshire Hathaway Inc. is an American multinational conglomerate holding company headquartered in Omaha, Nebraska, United States. Its main business and source of capital is insurance, from which it invests the float in a broad portfolio of subsidiaries, equity positions and other securities. The company has been overseen since 1965 by its chairman and CEO Warren Buffett and vice chairman Charlie Munger, who are known for their advocacy of value investing principles. Under their direction, the company's book value has grown at an average rate of 20%, compared to about 10% from the S&P 500 index with dividends included over the same period, while employing large amounts of capital and minimal debt.

A dividend reinvestment program or dividend reinvestment plan (DRIP) is an equity investment option offered directly from the underlying company. The investor does not receive dividends directly as cash; instead, the investor's dividends are directly reinvested in the underlying equity. The investor must still pay tax annually on his or her dividend income, whether it is received as cash or reinvested.

<span class="mw-page-title-main">Value investing</span> Investment paradigm

Value investing is an investment paradigm that involves buying securities that appear underpriced by some form of fundamental analysis. The various forms of value investing derive from the investment philosophy first taught by Benjamin Graham and David Dodd at Columbia Business School in 1928, and subsequently developed in their 1934 text Security Analysis.

Janus Capital Group, Inc. was an American publicly owned investment firm headquartered in Denver, Colorado.

Investment management is the professional asset management of various securities, including shareholdings, bonds, and other assets, such as real estate, to meet specified investment goals for the benefit of investors. Investors may be institutions, such as insurance companies, pension funds, corporations, charities, educational establishments, or private investors, either directly via investment contracts or, more commonly, via collective investment schemes like mutual funds, exchange-traded funds, or REITs.

In finance, an investment strategy is a set of rules, behaviors or procedures, designed to guide an investor's selection of an investment portfolio. Individuals have different profit objectives, and their individual skills make different tactics and strategies appropriate. Some choices involve a tradeoff between risk and return. Most investors fall somewhere in between, accepting some risk for the expectation of higher returns. Investors frequently pick investments to hedge themselves against inflation. During periods of high inflation investments such as shares tend to perform less well in real terms.

A stock fund, or equity fund, is a fund that invests in stocks, also called equity securities. Stock funds can be contrasted with bond funds and money funds. Fund assets are typically mainly in stock, with some amount of cash, which is generally quite small, as opposed to bonds, notes, or other securities. This may be a mutual fund or exchange-traded fund. The objective of an equity fund is long-term growth through capital gains, although historically dividends have also been an important source of total return. Specific equity funds may focus on a certain sector of the market or may be geared toward a certain level of risk.

Growth investing is a style of investment strategy focused on capital appreciation. Those who follow this style, known as growth investors, invest in companies that exhibit signs of above-average growth, even if the share price appears expensive in terms of metrics such as price-to-earnings or price-to-book ratios. In typical usage, the term "growth investing" contrasts with the strategy known as value investing.

In finance, return is a profit on an investment. It comprises any change in value of the investment, and/or cash flows which the investor receives from that investment, such as interest payments, coupons, cash dividends, stock dividends or the payoff from a derivative or structured product. It may be measured either in absolute terms or as a percentage of the amount invested. The latter is also called the holding period return.

In the theory of capital structure, internal financing is the process of a firm using its profits or assets as a source of capital to fund a new project or investment. Internal sources of finance contrast with external sources of finance. The main difference between the two is that internal financing refers to the business generating funds from activities and assets that already exist in the company whereas external financing requires the involvement of a third party. Internal financing is generally thought to be less expensive for the firm than external financing because the firm does not have to incur transaction costs to obtain it, nor does it have to pay the taxes associated with paying dividends. Many economists debate whether the availability of internal financing is an important determinant of firm investment or not. A related controversy is whether the fact that internal financing is empirically correlated with investment implies firms are credit constrained and therefore depend on internal financing for investment. Studies show that the availability of funds within a company is a major driver for investment decisions. However, the success and growth of a company is almost entirely dependant on the financial management and the use of internal financing does not explicitly mean success or growth for the firm. The financial manager can use a range of sources including but not limited to retained earnings, the sale of assets, and the reduction and control of working capital to drive expansion and better utilise funds. The availability of internal finance does not have a massive effect on firm growth.

A private equity firm is an investment management company that provides financial backing and makes investments in the private equity of startup or operating companies through a variety of loosely affiliated investment strategies including leveraged buyout, venture capital, and growth capital. Often described as a financial sponsor, each firm will raise funds that will be invested in accordance with one or more specific investment strategies.

John P. Reese is an American author, financial columnist, and money manager. He has written two books about investing, and is a columnist for several international financial publications, including Forbes magazine and Forbes.com; Canada's The Globe and Mail; RealMoney.com ; and the Israeli newspaper Globes.

<span class="mw-page-title-main">Early history of private equity</span> Aspect of history

The early history of private equity relates to one of the major periods in the history of private equity and venture capital. Within the broader private equity industry, two distinct sub-industries, leveraged buyouts and venture capital experienced growth along parallel although interrelated tracks.

Needham & Company is an independent investment bank and asset management firm specializing in advisory services and financings for growth companies. Needham & Company is a wholly owned subsidiary of The Needham Group, which also operates a private equity investment business and an investment management business.

<span class="mw-page-title-main">Corporate finance</span> Framework for corporate funding, capital structure, and investment decisions.

Corporate finance is the area of finance that deals with the sources of funding, and the capital structure of corporations, the actions that managers take to increase the value of the firm to the shareholders, and the tools and analysis used to allocate financial resources. The primary goal of corporate finance is to maximize or increase shareholder value.

Fundsmith is a London-based investment management company, founded in 2010 by Terry Smith. As of December 2019, Fundsmith manages £26bn in assets. Smith has been referred to as "the English Warren Buffett" after achieving superior investment returns with strategies similar to the U.S. investor.

Permanent Portfolio Family is an American mutual fund investment company founded in 1982. The company's products consist of four mutual funds. Its flagship fund, the Permanent Portfolio, is based on the investment strategies of Harry Browne.

References

  1. ↑ "Guru Profile: Chuck Akre and the Three-Legged Stool". finance.yahoo.com. Retrieved April 16, 2020.
  2. ↑ "The Guru Who Hunts for 'Compounding Machines' - GuruFocus.com". www.gurufocus.com. Retrieved April 16, 2020.
  3. 1 2 3 Gould, Carole, "INVESTING WITH/Charles T. Akre Jr.; FBR Small Cap Value Fund," The New York Times, February 9, 2003
  4. 1 2 3 4 5 Beth Kowitt, A fund by any other name, CNN, May 14, 2009
  5. ↑ Andrew Tanzer, "Akre Focus Joins the Kiplinger 25", Kiplinger, October 15, 2009
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.