During the second quarter, Akre Capital Management LLC acquired one new holding and sold out of another. The fund bought Fortive Corp. (FTV, Financial) and sold Arlington Asset Investment Corp. (AI, Financial).
Chuck Akre (Trades, Portfolio) founded Akre Capital, where he serves as CEO, in 1989. The fund is team managed. Their investment philosophy is called the “three-legged stool” approach. This approach examines a company’s growth in book value over time, its management and its ability to reinvest its free cash flow in a manner that continues to earn above-average returns. The fund holds stock in 27 companies with a toal size of $4.9 billion. The turnover rate is 16%.
Fortive
In Fortive, Akre purchased 750,000 shares at an average price of $47.83 per share. The transaction had an impact of 0.69% on the portfolio.
Fortive is an industrial company headquartered in Everett, Washington. The company focuses on professional instrumentation and industrial technologies. It is a new company, having split off from Danaher (DHR, Financial) in July. The company has a market cap of $18.5 billion with an enterprise value of $1.6 billion.
Since the company is in its infancy, little financial data is available; however, GuruFocus ranked its financial strength 5 of 10 and its profitability and growth 2 of 10. It has a forward price-earnings (P/E) ratio of 21.8.
In comparison, its parent company, Danaher, which designs, manufactures and markets professional, medical, industrial and commercial products, has a market cap of $55.9 billion with an enterprise value of $66.5 billion. It has a P/E of 16.13 with a forward P/E of 21.9. Its price-book (P/B) ratio is 2.24 and its price-sales (P/S) ratio is 2.6. GuruFocus ranked its financial strength 6 of 10 and its profitability and growth 9 of 10.
The company’s operating margin is 16.7%, and its net margin is 15.8%. Its Piotroski F-Score is 7, indicating a healthy business condition. Its Altman Z-Score is 2.6, placing it in the grey zone.
Akre is the sole investor in Fortive among the gurus. Among the gurus invested in Danaher, Dodge & Cox is the largest shareholder.
Arlington Asset Investment
Akre sold all 10,000 shares in Arlington at an average price of $12.94 per share. The fund had been involved with the company since the fourth quarter of 2013.
Arlington is an investment company that acquires and holds mortgage-related assets. It has a market cap of $335.7 million with an enterprise value of $247.2 million. Its forward P/E is 5.13 and its P/B is 0.78. GuruFocus ranked its financial strength 5 of 10 and its profitability and growth 7 of 10.
The company’s operating margin is 180.2% and its net margin is 221.3%. Its Piotroski F-Score is 5, indicating a stable business condition.
Among the gurus invested in Arlington, Jim Simons (Trades, Portfolio) is the largest shareholder.
Disclosure: I do not own stock in any companies mentioned in the article.
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