LKQ Corporation (NASDAQ: LKQ) and Berkshire Hathaway Inc. (NYSE: BRK.A) Among the Most Undervalued Akre Capital Holdings

in INVESTING IDEAS by

Here is what Wall Street believes are the most attractively priced stocks in Chuck Akre’s portfolio. Investors may want to take a closer look at the names below.


Akre Capital Management’s 7 Bullish Analyst Targets

Banks and brokerages often release 12 to 18 month price targets for the stocks they cover. Analyst upgrades and downgrades alone can often impact a company’s stock price.

“In the short run, the market is a voting machine but in the long run, it is a weighing machine.” – Benjamin Graham

The table below ranks stocks in Akre Capital Management’s portfolio with most bullish analyst targets:

Akre Capital Management 7 Bullish Analyst Targets
Ticker Name Upside (Analyst Target) % Of Portfolio
LKQ LKQ CORP 34.5% 1.6%
BRK.A BERKSHIRE HATHAWAY INC DEL 24.8% 0.2%
BRK.B BERKSHIRE HATHAWAY INC DEL 24.4% 0.8%
AMTD TD AMERITRADE HLDG CORP 24.1% 2.3%
DLTR DOLLAR TREE INC 23.2% 6.0%
ALRM ALARM COM HLDGS INC 18.3% 0.2%
ROP ROPER INDS INC NEW 13.7% 5.7%

LKQ Corporation (NasdaqGS: LKQ) appears to be the most undervalued stock in the fund based on the average price target from Wall Street analysts.

Berkshire Hathaway Inc. (NYSE: BRK.A) appears to be the second most undervalued stock in the portfolio. The company’s upside of 24.8% is very intriguing. With 24.4% margin of safety, Berkshire Hathaway Inc. (NYSE: BRK.B) is the third most attractively priced security.

Other notable holdings with nice upside potential includes TD Ameritrade Holding Corporation(NASDAQ: AMTD), Dollar Tree, Inc. (NASDAQ: DLTR), Alarm.com Holdings, Inc. (NASDAQ: ALRM) and Roper Technologies, Inc. (NYSE: ROP).


Why It’s Worth Monitoring Akre Capital Management Holdings

Akre Capital prides itself on being extremely discerning when selecting stocks. The investment team obsesses over the quality of the people running a business and the rate of return. In a 2014 interview, Akre said he looks for companies that he thinks are ‘compounding machines.’ At the time the firm owned Mastercard Inc (NYSE: MA) and Visa Inc (NYSE: V) which he pointed out have margins of over 30%, which is around three times that of the average US company.

Akre and his colleagues also refer to what they call the ‘three-legged stool’ approach to finding compounding machines. The three requirements are exceptional people running the business, reinvestment acumen and opportunities for reinvestment. The last point is important because even if the management team is good at allocating capital, they can’t generate returns if there are no opportunities.

In 2015, Akre wrote an article in which he asserts that rate of return is the most important metric to use when evaluating an investment. He said that in most cases this can be measured by the growth in the book value of a share.

Akre capital often holds positions for over ten years. As long as a company is able to keep increasing its economic value, the firm will hold a stock. Although the firm is a long-term investor, Akre doesn’t attribute its success to ‘buy and hold’ investing, but to the quality of the companies they buy.

Managers with more than $100 million in qualifying assets under management are required to disclose their holdings to the SEC each quarter via 13F filings. Qualifying assets include long positions in U.S. equities and ADRs, call/put options, and convertible debt securities. Shorts, cash positions, foreign investments and other assets are not included. It is important to note that these filings are due 45 days after the quarter end date. Therefore, Akre Capital Management’s holdings above represent positions held as of March 31st and not necessarily reflective of the fund’s current stock holdings.

However, most can agree that with thousands of stocks traded on U.S. exchanges, doing thorough research on each one is nearly impossible for smaller investors. Leveraging the resources of the largest hedge funds on Wall Street can be a powerful way to narrow down the list.

The ideas section of finbox.io tracks top investors and trending investment themes. You can get the latest data on the holdings discussed above at the Akre Capital Management page.

As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.

Expertise: Valuation, financial statement analysis. Matt Hogan is also a co-founder of finbox.io. His expertise is in investment decision making. Prior to finbox.io, Matt worked for an investment banking group providing fairness opinions in connection to stock acquisitions. He spent much of his time building valuation models to help clients determine an asset’s fair value. He believes that these same valuation models should be used by all investors before buying or selling a stock. His work is frequently published at InvestorPlace, Benzinga, ValueWalk, AAII, Barron’s, Seeking Alpha and investing.com. Matt can be reached at matt@finbox.io or at +1 (516) 778-6257.

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