Why Chuck Acre Says ‘Buy and Hold’ Is Too Easy
I am at my worst as an investor when I am focused on the macro. It’s not that we don’t care what the market is going to do. It’s that there is nothing that suggests we have any skill in making those predictions, so we don’t bother.
— Chuck Akre
Last Monday, we looked at Chuck Akre for the first time. Today we dive deeper into the approach that has led to his outsize returns over his more than 50 years in the business.
Some have called Akre a “buy-and-hold” investor, but he disagrees.
It’s too easy to call it buy and hold. That’s not, in fact, what we do. What we want to do is own businesses that are exceptional until they are no longer exceptional. If you are selling because of a missed earnings report or the trend of the market or something, you’ve stopped looking at the rate of return the company can achieve over time.
— Chuck Akre
Akre describes the slow-moving way that his company buys into and sells out of businesses. He calls himself a "nibbler" when buying and says his company, Akre Capital, seldom move a lot of money at once. The same is true when selling. Akre believes you shouldn't easily dump businesses you own just because something has changed in the short term.
Akre notably holds relatively few stocks in his nearly $15 billion of funds under management. Datorama says Akre Capital Management holds shares in only 18 companies, which is an extraordinarily low number in the funds management industry. His largest holdings are MasterCard, O’Reilley Automotive, Moody's, and Visa.
He told the story of O'Reilly Automotive, in which he had held a position for years without buying any more shares. Then, in 2017, the stock plummeted from $290 to the $160s. Akre and his team tripled their position as it moved down, at a cost that worked out averaging in the $190s. A year later, the share price was back in the $260s.
People say the market is overvalued, but if you are only looking at certain names, you will always find times when those names are undervalued. That’s what we’re waiting for.
— Chuck Akre
If you want more on Akre, check out William Green's enjoyable and surprisingly profound book, Richer, Wiser, Happier: How the World's Greatest Investors Win in Markets and Life. Akre Is one of the investors profiled.
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