Chuck Akre is the founder of Akre Capital Management, which oversees over $10 billion in assets. He is a legendary investor who takes a “three-legged stool” approach to stock picking, in which he looks for companies that have a strong business model, good management teams and effective reinvestment of free cash flow.
One of the single attributes that he looks for in a potential investment is pricing power, which he defines as the ability to charge whatever price is necessary to provide a product or service that is in high demand. He uses the example of a plumber who can charge any amount to fix a toilet before a big party as an illustration of pricing power.
He also keeps his investment philosophy as simple as possible and avoids relying on complex quantitative models or academic credentials. He believes that pure knowledge alone is not enough to be a good investor1.
Akre’s stock selection process is based on his “three-legged stool” approach, which consists of three criteria that he looks for in a potential investment¹:
– A strong business model that can generate high returns on capital and has a durable competitive advantage.
– A talented and shareholder-friendly management team that can allocate capital wisely and grow the business over time.
– A reasonable valuation that offers a margin of safety and an attractive growth potential.
Akre is a long-term investor who focuses on quality rather than quantity. He prefers to invest in a concentrated portfolio of companies that he knows well and that can compound their value over time. He is also patient and willing to hold his stocks for years, even decades, as long as they meet his criteria¹.
Some examples of companies that Akre has invested in using his stock selection process include Mastercard, Moody’s, American Tower, Visa, and O’Reilly Automotive². These are companies that operate in growing and profitable industries, have strong brands and customer loyalty, and benefit from network effects and economies of scale¹.
I hope this helps you understand Chuck Akre’s stock selection process. If you want to learn more about his approach and philosophy, I recommend reading his shareholder letters¹ or watching his interviews on YouTube³.
(1) Stock Market Investing Strategy: Chuck Akre Reveals Top … – Insider. https://www.businessinsider.com/stock-market-investing-strategy-chuck-akre-top-attribute-he-seeks-2019-7.
(2) 3 Stocks Chuck Akre’s Firm, Chuck Royce See Value In – Forbes. https://www.forbes.com/sites/gurufocus/2022/03/31/3-stocks-chuck-akres-firm-chuck-royce-see-value-in/.
(3) Akre Capital , Portfolio, Holdings, 13F (2023-05-12) – GuruFocus. https://www.gurufocus.com/guru/chuck+akre/stock-picks.