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questions for Chuck Akre, Akre Focus (AKREX)?

David_Snowball
edited August 2014 in Fund Discussions
We're talking tomorrow (a/k/a Wednesday) at 9:00 Central. Sorry 'bout the short notice, but he had to reschedule an earlier conversation and this one became available on short notice.

My list:

how have you been training your new co-managers, especially given the scurrilous defection of their predecessors? Might this reasonably be read as a matter of succession planning?

the fund celebrates its fifth year at the end of August. In its first couple years, the fund was classified as a midcap and about 80% of the portfolio was in stocks. That's its a large cap fund (albeit with a large midcap component) and about 90% in stocks. Does that reflect a changing opportunity set, a change necessitated by the fund's $3.3 billion asset base or something else?

what do you estimate the strategy's capacity to be?
A back of the envelope calculation suggests that $2.4 billion is the "right" answer if you want to continuing investing in your smallest names and are looking for 30 equally-weighted stocks; about $8 billion if you want to continue investing in your smallest names but maintain individual small cap positions at 1% of the portfolio.
Anything ticking your brains?

David

Comments

  • rjb112
    edited August 2014
    I'm in AKREX, so I'll be very interested to read your report David, thanks
  • VintageFreakVintageFreak
    I have 3 questions
    1) Succession Planning
    2) Succession Planning
    3) Succession Planning

    In his previous charge he trained his analysts how to manage fund (whatever that means) and they were lured back by FBR (now Hennessey). Now he again has comanagers whom he is teaching to be REAL comanagers, who may leave to start their own firm?

    I'm just very skeptical and have therefore stopped sending new money to AKREX for a while now. Chuck has to bend over backward explaining this fund can go on without him.
  • RedRockHiker
    Very satisifed AKREX shareholder here (since 2009). I've noticed the drift upwards in average market capitalization lately and used this fund earlier in the year to replace the slumping SGROX (which also has a lot of midcaps) as my large cap growth fund. He seems to be largely capitalization agnostic, so it would be good to know if he thinks this trend will hold steady or continue in the short term. Of course, the name of the manager is more important than the name of the fund, but if FBR Focus, now Hennessey Focus is any indication, he is as good of a teacher as he is a stock picker, so I am a little less concerned about succession then I once was. (I may be overweighting the lack of a meltdown PRHSX had when the fund manager and 2 analysts abruptly left last year in this analysis). I don't think Chuck sees capacity as an issue anytime soon. The current 4-5% cash level seems about the norm for him, and definitely less than the crazy high levels in 2009-2010. However, he may not see many other opportunities right now than his current holdings (low 30s, I believe), since it seems like the % of the fund in his top picks has been gradually increasing lately.
  • BrianW
    Here's another satisfied shareholder and holdover from the FBRVX days. His last fund still has companies he (Chuck) picked. I guess you can say its great that his previous 'students' didn't screw it up, but, it's clear the students aren't nearly as good as the teacher. I'm glad I jumped ship when he left. And, I can only wonder if his leaving hastened the end of FBR.
  • AndyJ
    edited August 2014
    What does he do for risk control? It's been a great fund so far, but the trailing/forward PE's are up to 27/24 (per M* - the AKREX fact sheet doesn't mention P/E), so how much upside can there be left in it this market cycle, and how much risk is there of really significant losses in a correction or recession?
  • rjb112
    AndyJ said:

    What does he do for risk control? It's been a great fund so far, but the trailing/forward PE's are up to 27/24 (per M* - the AKREX fact sheet doesn't mention P/E), so how much upside can there be left in it this market cycle, and how much risk is there of really significant losses in a correction or recession?

    AndyJ, excellent question about the PE's.....I'm interested in that too.
    Where did you find the trailing PE ratio? I only found the forward PE on M*, below:

    image
  • AndyJ
    edited August 2014
    Hi rjb, the only way I know how to find trailing P/E at M* is to put the fund in a Portfolio Manager watchlist and set up 'My View' to include trailing P/E; it's one of the data points on the long menu of statistics you can pick for that page. -Cheers, AJ
  • rjb112
    AndyJ said:

    Hi rjb, the only way I know how to find trailing P/E at M* is to put the fund in a Portfolio Manager watchlist and set up 'My View' to include trailing P/E; it's one of the data points on the long menu of statistics you can pick for that page. -Cheers, AJ

    Very interesting AndyJ. That will come in handy. Thanks.

    image
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