Akre Capital Management recently disclosed its 13F portfolio updates for the fourth quarter of 2022, which ended on Dec. 31.
Chuck Akre (Trades, Portfolio) founded Akre Capital Management in 1989 and serves as the chairman and Chief Investment Officer of the firm. The portfolio managers of the Akre Focus Fund are John Neff and Chris Cerrone. Headquartered in Middleburg, Virginia, the firm’s portfolio management team invests 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 the firm’s latest 13F report, it only acquired one new holding during the period, Brookfield Asset Management Ltd (BAM, Financial), which came about when the original Brookfield Asset Management renamed itself as Brookfield Corp. (BN, Financial) and spun off part of its business with its old name. Meanwhile, it sold out of Salesforce Inc. (CRM, Financial) and Snowflake Inc. (SNOW, Financial), which are both tech stocks that the firm only just added to the portfolio within the past couple of years.
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.
Brookfield Asset Management Ltd
The firm ended the quarter with a new stake in Brookfield Asset Management Ltd (BAM, Financial) worth 3,691,684 shares. It also added another 29.92% to its Brookfield Corp. (BN, Financial) holding for a total of 17,366,753 shares. During the quarter, Brookfield Asset Management shares averaged $30.09 apiece. At that price, the stake takes up 0.96% of the equity portfolio. Brookfield Corp. shares averaged $33.83, giving the stake an estimated portfolio weight of 4.94%.
As an alternative asset manager, Brookfield has made many spinoffs of its business divisions in the past, but this one is notable because it renamed the core business and gave the spinoff its old name. Brookfield Corp. retains 75% ownership of the spinoff.
Brookfield Asset Management focuses on investing clients’ capital for the long-term with a focus on real estate, infrastructure, renewable power and transition, private equity and credit. Meanwhile, Brookfield Corp. focuses on deploying its own capital across three core pillars: asset management, insurance solutions and operating businesses.
Given that Akre Capital ended the quarter with an increase in Brookfield Corp. on top of a new stake in Brookfield Asset Management, it’s safe to say the guru did indeed invest in either the parent company before the spinoff, or both companies after the spinoff.
Salesforce Inc.
The firm sold out of its 3,095,500-share stake in Salesforce Inc. (CRM, Financial), which previously took up 3.93% of the equity portfolio. Shares traded for an average price of $145.92 during the quarter. GuruFocus estimates the position has lost 35.28% since it was initiated in the second quarter of 2021.
Salesforce is a subscription-based cloud software provider headquartered in San Francisco, California. It provides corporate customers with market-leading sales, marketing, customer relationship management, analytics and application development tools.
While Salesforce is still consistently seeing revenue growth, its earnings really haven’t improved overall since 2018, potentially proving the boost from the Covid-related work-from-home environment to be temporary. However, a cohort of activist investors in the stock appears to think the issue could be due more to the company’s management structure and growth strategy, and they could potentially be gearing up for a proxy fight.
Snowflake Inc.
Akre Capital also sold out of its 1,000,000-share Snowflake Inc. (SNOW, Financial) holding, which previously had a 1.50% equity portfolio weight. During the quarter, shares traded for an average price of $152.57. GuruFocus estimates the position is down 4.37% since it was first bought in the second quarter of 2022.
Snowflake’s big draws for customers and investors alike are that its data warehousing offering is cloud native and that all of Snowflake’s components run on Alphabet’s (GOOG, Financial) (GOOGL, Financial) Google Cloud, Microsoft’s (MSFT, Financial) Azure and Amazon’s (AMZN, Financial) Amazon Web Services. This means it can be integrated into a user’s existing cloud infrastructure.
As a pure-play cloud-native data warehousing company, Snowflake has huge long-term potential, but in the short-term, investors’ fears are growing that a protracted recession could dent the industry’s momentum. Slowing momentum brings the danger that unprofitable growth stocks like Snowflake could see investors fleeing for the hills.
See also
Akre Capital’s 13F equity portfolio consisted of 21 holdings valued at a total of $11.06 billion as of Dec. 31, 2022. The turnover for the period was 3%. You can view the full portfolio update as well as previous trades here.
As of the quarter’s end, the firm’s top holdings were Mastercard Inc. (MA, Financial) with 18.44% of the equity portfolio, Moody’s Corporation (MCO, Financial) with 14.36% and American Tower Corp. (AMT, Financial) with 13.39%.
By sector, the firm was most invested in financial services, real estate and consumer cyclical stocks. Technology is a small but growing portion of the asset allocations.
