In the fourth quarter, the Akre Focus Fund was up 0.14% for Retail shares and 0.22% for Institutional shares vs. 3.82% for the S&P 500 Total Return. For the full year, the Akre Focus Fund was up 8.29% for Retail shares and 8.60% for Institutional shares vs. 11.96% for the S&P 500 Total Return. Another way to look at it is that for 2016 we went from being just ahead of the market at the end of Q3 to being behind the market at year-end after the election.
It seems that the outcome of the election surprised many people. This sparked breathless speculation about future economic and policy changes. Various whole categories of stocks had unusually strong moves, and banks in particular had a strong rally that drove a lot of the Index return. Although we own many businesses deemed to be “Financials,” we do not own any banks.
As you would expect, our long-term strategy remains unchanged. Turnover is low at 13% for the fiscal year ending July 31, 2016, and we are pleased to be concentrated in our best multi-year “three-legged stool” investment opportunities. We believe these businesses continued on their respective paths of generating long-term economic growth.
The election and other events created some buying opportunities for us and we invested at a good pace in the quarter. We have continued to do so in January. The Fund has continued to attract new investors. At year-end, our cash level was down slightly from the prior quarter.
We often use market disruptions to our potential benefit. The wisdom of such “contrarian” moves may not be visible for many months, or perhaps even for years. Let us reiterate that we have great faith in all the holdings in the portfolio.
Chuck, Tom, & John
