Top fund manager Chuck Akre has been finding a lot of value in both the financial services industry and the discount retail industry, according to a Wall Street Journal piece that also delves into Akre’s broader strategy.
Akre focuses on companies with “skilled and honest managers who can earn high returns on capital and reinvest their free cash to generate continued above-average returns,” and he wants to get a good price, too, writes the Journal’s Daisy Maxey. “Mr. Akre doesn’t distinguish between growth and value or focus on any particular market capitalization, doesn’t mind holding relatively large chunks of cash and may zig when others zag.” An example is when he recently increased his stake in bond rating agency Moody’s, which fell 20% when one of its peers, Standard & Poor’s, was sued by the government.
Akre also believes in staying within his circle of competence. He invests very little in the technology and healthcare sectors, for example, even though they are big parts of the economy. “We’re just not very smart about either of those spaces,” Akre says.
Two areas that are in Akre’s circle of competence, and which he’s been high on: financial services and discount retailers. Financial services firms, including credit card companies Visa and Mastercard, took up nearly half his portfolio at the end of 2012. “The big tailwind is that only 15% of world-wide transactions, exchanges of value, are done electronically,” he says. He thinks that percentage will rise, helping boost those companies. As for discount retailers, Akre thinks that they will do well given that consumers are trying to stretch their dollars, Maxey says.