Akre Capital Management, the firm founded by Chuck Akre (Trades, Portfolio), disclosed this week that its top five buys for the first quarter included new positions in Adobe Inc. (ADBE, Financial) and Live Nation Entertainment Inc. (LYV, Financial) and position boosts in Brookfield Asset Management Inc. (BAM, Financial), Mastercard Inc. (MA, Financial) and CoStar Group Inc. (CSGP, Financial).
Headquartered in Middleburg, Virginia, Akre Capital Management selects investments using a classic value approach. The firm seeks companies with strong business models, consistent earnings growth, high return on equity, low price-to-free-cash-flow ratios and shareholder-friendly management.
The firm’s $10.29 billion equity portfolio contains 28 stocks as of quarter-end, with a turnover ratio of 13% and 44.33% weight in financial services, the portfolio’s largest sector in terms of weight. Real estate comes in second with a weight of 23.91%.
Adobe
The firm purchased 1.14 million shares of Adobe, giving the position 3.52% weight in the equity portfolio. Shares averaged $342.56 during the first quarter.
The San Jose, California-based company provides a wide range of software and services for content creation and document management, including Photoshop and the “Portable Document Format” PDF file. GuruFocus ranks Adobe’s profitability 9 out of 10 on several positive investing signs, which include expanding operating margins and a return on equity that is near a 10-year high of 31.68% and outperforms 93.35% of global competitors.
Despite high profitability, Adobe’s valuation ranks 1 out of 10 on several signs of overvaluation, including price-book and price-sales ratios that are near 10-year highs and underperform over 89% of global competitors.
Gurus with large holdings in Adobe include PRIMECAP Management (Trades, Portfolio) and Ken Fisher (Trades, Portfolio).
Live Nation Entertainment
The firm purchased 5,481,238 shares of Live Nation Entertainment, giving the stake 2.42% weight in the equity portfolio. Shares averaged $62.33 during the first quarter.
The Beverly Hills, California-based company operates over 235 venues around the world and the online ticketing platform Ticketmaster. GuruFocus ranks Live Nation’s profitability 5 out of 10: Although the company’s three-year revenue growth rate of 12.4% outperforms 78.37% of global competitors, operating margins are underperforming 56.41% of global entertainment companies despite expanding over the past five years.
Brookfield Asset Management
The firm added 4.541 million shares of Brookfield Asset Management, increasing the holding 72.66% and the equity portfolio 1.30%. Shares averaged $38.60 during the first quarter.
The Toronto-based company owns and manages commercial property, power and infrastructure assets. GuruFocus ranks Brookfield’s profitability 8 out of 10 on the back of a return on equity that outperforms over 60% of global competitors and a three-year revenue growth rate that outperforms 77.16% of global asset managers.
Despite high profitability, Brookfield’s financial strength ranks a low 3 out of 10 on the back of interest coverage and debt ratios underperforming over 82% of global asset managers.
Mastercard
The fund added 459,438 shares of Mastercard, increasing the position 8.62% and the equity portfolio 1.08%. Shares averaged $298.41 during the first quarter.
GuruFocus ranks the Purchase, New York-based payment processor’s profitability 10 out of 10 on several positive investing signs, which include a high Piotroski F-score of 7, a five-star business predictability rank and an operating margin that has increased approximately 1.5% per year over the past five years and is outperforming over 88% of global competitors.
CoStar
The firm added 188,312 shares of CoStar Group, increasing the holding 75.32% and the equity portfolio 1.07%. Shares averaged $652.12 during the first quarter.
The Northwest, Washington-based company provides commercial real estate data and marketplace listing platforms. GuruFocus ranks CoStar’s profitability 8 out of 10 on the back of expanding operating margins and consistent revenue growth.
Signs of high financial strength include a strong Altman Z-score of 13.32 and an interest coverage ratio in the high double-digits and that outperforms over 86.21% of global real estate competitors.
Disclosure: No positions.
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