Author Topic: Chuck Akre sells most of his BRK  (Read 3828 times)

Liberty

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Chuck Akre sells most of his BRK
« on: May 12, 2020, 07:16:58 AM »
https://www.dataroma.com/m/holdings.php?m=AC

BRK.B down by 83% and BRK.A down by 93% in his latest 13F.
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karthikpm

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Re: Chuck Akre sells most of his BRK
« Reply #1 on: May 12, 2020, 07:25:16 AM »
I saw that.. little troubling for me .

thepupil

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Re: Chuck Akre sells most of his BRK
« Reply #2 on: May 12, 2020, 07:35:31 AM »
I don't find it troubling. Berkshire doesn't really fit all that well with Akre's current investment strategy given its lack of very high returning re-investment opportunities.

This was 75 (90 bps, forgot to look for A shares) bps of their 13-F in Q1 2018 (as far back as free version of Whalewisdom goes) and is now 10 20 bps. It hasn't been a top position for a very long time and may not even be in the fund (could have been held in an Akre managed SMA) but I didn't confirm that.

Judge Berkshire and Akre separately, but I don't think this data point is worth anything. Is something going from 90 bps to 20 bps when the manager has like 70-80% top 10 name concentration important?

this isn't news.

https://www.akrecapital.com/investment-approach/

3 legged stool criteria, I would argue that Berkshire scores poorly on a relative basis in what I've bolded / enlarged. It scores well on others and is far cheaper than a lot of what Akre owns, but Akre does not prioritize cheapness.

BUSINESS

Enduring, predictable high ROEs* and FCF**
Identifiable, sustainable competitive advantages
Pricing power in excess of costs, inflation protection
Easy to understand
Normally avoid return-regulated industries
Strong balance sheets
icon box image
MANAGEMENT

Management with exceptional skill, integrity, and passion
Treat shareholders like partners
Indifferent to Wall Streetís short-term focus
Lean corporate culture fosters independence, accountability
Compensation rationally determined
icon box image
REINVESTMENT

Pattern of disciplined reinvestment
Extensive opportunities to reinvest FCF organically or through acquisitions
« Last Edit: May 12, 2020, 07:44:28 AM by thepupil »

karthikpm

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Re: Chuck Akre sells most of his BRK
« Reply #3 on: May 12, 2020, 07:48:45 AM »
I don't find it troubling. Berkshire doesn't really fit all that well with Akre's current investment strategy given its lack of very high returning re-investment opportunities.

This was 75 (90 bps, forgot to look for A shares) bps of their 13-F in Q1 2018 (as far back as free version of Whalewisdom goes) and is now 10 20 bps. It hasn't been a top position for a very long time and may not even be in the fund (could have been held in an Akre managed SMA) but I didn't confirm that.

Judge Berkshire and Akre separately, but I don't think this data point is worth anything. Is something going from 90 bps to 20 bps when the manager has like 70-80% top 10 name concentration important?

this isn't news.

https://www.akrecapital.com/investment-approach/

3 legged stool criteria, I would argue that Berkshire scores poorly on a relative basis in what I've bolded / enlarged. It scores well on others and is far cheaper than a lot of what Akre owns, but Akre does not prioritize cheapness.

BUSINESS

Enduring, predictable high ROEs* and FCF**
Identifiable, sustainable competitive advantages
Pricing power in excess of costs, inflation protection
Easy to understand
Normally avoid return-regulated industries
Strong balance sheets
icon box image
MANAGEMENT

Management with exceptional skill, integrity, and passion
Treat shareholders like partners
Indifferent to Wall Streetís short-term focus
Lean corporate culture fosters independence, accountability
Compensation rationally determined
icon box image
REINVESTMENT

Pattern of disciplined reinvestment
Extensive opportunities to reinvest FCF organically or through acquisitions


That's a good analysis. Do you consider Berkshire return regulated due to energy and insurance ? Insurance has always been a big part of their portfolio.  BHE is a good example of reinvestment of excess capital. I am more worried about a lot of their smaller businesses and how they will survive a prolonged downturn.

racemize

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Re: Chuck Akre sells most of his BRK
« Reply #4 on: May 12, 2020, 07:52:18 AM »
+1 pupil, surprised so many people reacting to the sale of less than 1% of a company that doesn't meet his requirements in the first place.

longterminvestor

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Re: Chuck Akre sells most of his BRK
« Reply #5 on: May 12, 2020, 07:58:08 AM »
Hope he called the 1-800 number and sold them directly back to BRk (doubt it). 

Casey

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Re: Chuck Akre sells most of his BRK
« Reply #6 on: May 12, 2020, 08:09:04 AM »
Interesting news, but I don't find it concerning. You can understand why Akre would sell it based on the kind of businesses they talk about wanting to own. Especially when you had the opportunity to buy some pretty interesting companies in March.

thepupil

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Re: Chuck Akre sells most of his BRK
« Reply #7 on: May 12, 2020, 08:10:52 AM »
I consider Berkshire highly regulated because it has ~$100 billion of accounting equity (more by market value) in utilities and railroads. While railroads are less regulated than in the past, the history of the industry is one of very high regulation and Buffett's letters include the railroad in discussions of the partnership with regulators/government/constituents IIRC.

Berkshire is the 4th or 5th largest bank by look-through owned deposit share.

Berkshire is a large insurance company.

Berkshire has not demonstrated ability to re-invest the bulk of its free cash flow in high returning acquisitions or organically over the past few years. Instead it has piled up excess capital (as discussed throughout the board).

Berkshire is my family's largest position, but I just don't think it meets Chuck and team's criteria and I once spoke to Tom Saberhagen when he was there and asked him why they owned Berkshire and he described it as a legacy position that didn't really meet their criteria because of its size/stodginess/relatively low rate of intrinsic value compounding.


Jurgis

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Re: Chuck Akre sells most of his BRK
« Reply #8 on: May 12, 2020, 08:14:59 AM »
I guess what's interesting is that Akre still holds 4+% of MKL. I don't see why MKL is more attractive than BRK. I also don't quite understand holding something like MKL in a fund. You're basically buying a company that holds a bunch of stocks and not even at a discount. Also somewhat true for BRK, but BRK at least has pretty big wholly owned businesses part.
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LC

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Re: Chuck Akre sells most of his BRK
« Reply #9 on: May 12, 2020, 08:32:31 AM »
Why did they sell Berkshire now?

Berkshire has owned highly regulated businesses for years. Same with its bank portfolio. It hasn't met those aspects of Akre's criteria for a long time - so why sell now?

Perhaps Akre doesn't believe Berkshire fits the remainder of his criteria, perhaps:

Enduring, predictable high ROEs* and FCF**
Identifiable, sustainable competitive advantages
Pricing power in excess of costs, inflation protection

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