At The Motley Fool, we understand that it often pays to zig when Wall Street zags, but that doesn't mean that we don't pay attention to what leading fund managers are buying and selling. And funds that aren't always in lockstep with the broader market can be a particularly valuable source of insight.
Every quarter, fund managers overseeing more than $100 million must disclose their quarter-end holdings publicly by filing Securities and Exchange Commission Form 13-F. The form lists all U.S.-traded securities the manager held at the end of the quarter. Although the form doesn't disclose the manager's short positions or the manager's intraquarter trades, it can shine a bright light on his or her "long" stock bets.
Q3 2011 update
Chuck Akre founded Akre Capital Management in 1989. Akre is a value investor who licks his lips at times like these, when the market is slumped. Here's how he described an ideal kind of investment, in a 2007 letter to shareholders:
When a high-quality management team is coupled with a high-return business with ample reinvestment opportunities, we have what we have described over the years as a "compounding machine" -- a business that can compound our capital for long periods of time at an above average rate.
Is Akre really worth paying attention to, though? Well... yeah. According to the folks at GuruFocus, Akre gained about 164% in the first decade of this century, compared with just 16% for the S&P 500.
The total market value of Akre Capital Management's disclosed equity holdings as of Sept. 30, 2011 -- the latest quarter for which data is available -- was $573 million across 30 holdings. Akre's 10 largest positions and associated changes in number of shares held as of Sept. 30, 2011 were:
American Tower (NYSE: AMT ) -- increased 3.1%.
MasterCard (NYSE: MA ) -- increased 0.8%.
Dollar Tree (Nasdaq: DLTR ) -- increased 0.2%.
Ross Stores (Nasdaq: ROST ) -- increased 1.6%.
Markel (NYSE: MKL ) -- increased 17.8%.
Enstar Group -- increased less than 0.1%.
O'Reilly Automotive -- reduced 11.4%.
Lamar Advertising -- reduced 9.5%.
CarMax -- increased 0.8%.
TJX -- unchanged.
During the quarter, Akre Capital Management also increased its position in Berkshire Hathaway, TD AMERITRADE, LPL Investment Holdings, and Diamond Hill Investment, in each case by at least 20%. It sold out of several stocks entirely, such as WMS Industries, Aeropostale, and Assured Guaranty.
TD AMERITRADE has investors pleased that it's been maintaining its commission rates, refusing to join a price war and focusing instead on making sure its customers see a good value in the prices they pay. Some have wondered whether it might gobble up competitor E*TRADE (Nasdaq: ETFC ) , but so far E*TRADE has been maintaining its independence.
Selected Q3 2011 commentary
Akre Capital Management has nearly 43% of its assets in the consumer services sector, with another 40% in financial stocks. Its distribution hasn't changed too significantly in the past few quarters.
Here's where the firm has been winning and losing and making new bets:
Recent winner
A winner during the quarter was Apple, gaining almost 14% when the S&P 500 sank by about 14%. Apple is a new holding for Akre, though, so its shares likely didn't spend the entire quarter in the portfolio. Apple's success is no mystery -- its iPads, iPhones, and other offerings have been selling like iHotcakes, and its innovations continue, such as with the suggestion that iPods might replace retail cash registers. The company has a three-star (out of five stars) rating at Motley Fool CAPS.
Recent loser
Lamar Advertising didn't do so well, dropping about 38%. Fellow Fool Sean Williams suggested selling it back in February, citing its hefty valuation and significant debt. Oh, and unprofitability and declining revenue, as well. Things may turn around for the company once the economy improves, and it has recently reported rising revenue. The company has a one-star rating in Motley Fool CAPS.
New bets
Hartford Financial Services (NYSE: HIG ) common shares are another newcomer to the Akre portfolio, drawing investor attention with a seemingly low price due to the low interest rate environment, among other things. It might take a while before its intrinsic value is realized, but in the meantime, the stock pays a dividend yield above 2%. Hartford has a three-star rating at Motley Fool CAPS.
We should never blindly copy any investor's moves, no matter how talented the investor. But it can be useful to keep an eye on what smart folks are doing. 13-F forms can be great places to find intriguing candidates for our portfolios.
Looking for promising investments? Here are "5 Stocks with Explosive Potential" and "4 Stocks as Cheap as They've Ever Been."
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