Akre Capital Management's Top Holdings Are Trading Near 52-Week Lows

The firm's four largest 13F positions have become much cheaper this year

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Sep 28, 2022
Summary
  • Akre Capital Management's top four holdings are all trading near 52-week lows.
  • They could provide value opportunities for fans of the firm's famous 'three-legged stool' approach.
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Akre Capital Management is an investment firm founded by

Chuck Akre (Trades, Portfolio) in 1989. Akre serves as the chairman and Chief Investment Officer of the firm, and the portfolio managers of the Akre Focus Fund are John Neff and Chris Cerrone. The firm’s portfolio management team aims to invest in a small number of quality businesses run by good managers who reinvest their free cash flow wisely. These are the three components that make up the unique “three-legged stool” investment philosophy which the firm is known for.

According to GuruFocus calculations based on the firm’s quarterly 13F reports with the SEC, Akre Capital Management’s equity portfolio has managed to outperform the S&P 500 on average since its founding, which is an incredible feat. Nevertheless, there are years when it has done worse than the index, and so far, 2022 seems to be one of those years, with the firm’s top four holdings plummeting near 52-week lows.

Investors should be aware that 13F reports do not provide a complete picture of a guru’s holdings. They include only a snapshot of long equity positions in U.S.-listed stocks and American depository receipts as of the quarter’s end. They do not include short positions, non-ADR international holdings or other types of securities. However, even this limited filing can provide valuable information.

Mastercard Inc.

U.S. electronic payments processing giant Mastercard Inc. (

MA, Financial) was Akre Capital Management’s largest holding as of its most recent 13F for the second quarter of 2022, taking up 14.81% of the equity portfolio.

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At $286.51 per share, the stock is trading 1.71% above its 52-week low. The GF Value chart rates Mastercard as significantly undervalued.

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Mastercard’s growth has been steadily reliable throughout its history as the growth in popularity of credit and debit cards combines with the natural inflation protection of its business model. Morningstar (

MORN, Financial) analysts are estimating a future three-to-five-year revenue growth rate of 14.29%, which is higher than its past three-year revenue growth rate of 10.1%.

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American Tower Corp

The firm’s second-largest holding was American Tower Corp. (

AMT, Financial). As of the end of the second quarter, its position in the communications infrastructure REIT took up 14.27% of the equity portfolio.

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On Sept. 28, shares of the company traded around $222.06 apiece, which is 1.80% above its 52-week low. The stock is modestly undervalued according to the GF Value chart.

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American Tower owns and operates wireless and broadcast communications infrastructure worldwide, with a focus on its home market in the U.S. As each generation of wireless technologies brings higher data consumption, American Tower expects to continue its strong growth trend. Morningstar analysts estimate a future three-to-five-year revenue growth rate of 7.98% for the company; the past three-year revenue growth rate was 7.1%.

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Moody's Corporation

Coming in third place with 12.42% of Akre Capital Management’s 13F portfolio is credit ratings and financial services giant Moody's Corporation (

MCO, Financial).

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Moody’s traded around $253.23 on Wednesday, which is 2.17% above its 52-week low. The GF Value chart rates the stock as modestly undervalued.

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In the short-term, Moody’s isn’t expected to do too well, as the credit ratings business will likely suffer from economic distress and tightening monetary policy reducing the demand for debt. Analysts from Morningstar estimate a future three-to-five year revenue growth rate of 2.5% for the company compared to its past three-year revenue growth rate of 13.1%.

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Visa Inc.

Mastercard’s main competitor in the U.S. payments processing space, Visa Inc. (

V, Financial), takes fourth place in the firm’s 13F equity portfolio with a weight of 8.27%.

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On Wednesday, shares of the company traded around $179.91 apiece, which is 2.90% above the 52-week low. The GF Value chart assigns Visa a rating of significantly undervalued.

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As Mastercard’s main competitor, Visa has similar positives driving its future growth potential. Visa has higher market share compared to Mastercard, but its growth has been slower in recent years. Analysts from Morningstar call for a three-to-five year revenue growth rate of 11.25% for Visa compared to its past three-year revenue growth rate of 7.6%.

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Disclosures

I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours. Click for the complete disclosure
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