In last year's choppy economy,
was one of the few to outpace the market, his Akre Focus fund (
) returning 11.1% compared to 2.1% for the S&P 500. A
bottom-up value investor, Akre invests according to a strategy
trademarked the "three-legged school," which involves researching
for companies with three primary characteristics:
- Enduring high returns on capital and pricing power in
excess of input costs
- Managers who operate in the best interest of all
- Extensive reinvestment opportunities and reinvestment
If a company meets the criteria, he waits for a reasonable
valuation to purchase it, according to his website.
Akre has a talent for acquiring stocks at their low points.
Currently, he owns just 2 stocks out of 37 that are trading at
close to their 52-week lows: Annaly Capital Management Inc. (
) and Monro Muffler/Brake Inc. (
Annaly Capital Management (
With 1,535,925 shares held, Annaly Capital Management occupies 2%
of Akre's portfolio. He has held the stock since the fourth
quarter of 2008 when it traded for $14 per share on average; he
most recently reduced 4,300 shares in the third quarter for $17
each on average.
On Monday the stock trades for $14.68, close to its three-year
according to GuruFocus analysis
. It has declined more than 9% over the past year.
Annaly Capital Management is the largest real estate investment
trust (REIT) on the New York Stock Exchange whose primary
objective is to generate net income to return to shareholders
through its investment securities and dividends from
Annaly's stock stumbled pronouncedly in November when it released
its third-quarter results. Annaly reported GAAP net income of
$224.8 million, or $0.22 per share, compared to a net loss of
$921.8 million, or $0.98 per share, a year previously.
Excluding several factors, including unrealized gains or losses
on interest rate swaps and Agency interest-only mortgage-backed
securities and net loss on extinguishment of convertible senior
notes, net income fell to $449.8 million, or $0.45 per share,
from $622.9 million, or $0.65 per share, a year previously.
The company also shrank its dividend to $0.50 per share from
$0.60 per share a year previously. Its dividend yield, at 13.59%,
is close to a two-year low.
Annaly CEO, Wellington Denahan-Norris, commented on the company's
results. "The active involvement of policymakers in the mortgage
market, particularly the Federal Reserve's latest, open-ended,
large scale asset purchase program, has introduced unique
challenges for all investors. These policy decisions will have
consequences in a wide range of markets, not just Agency
mortgage-backed securities. We continue to pursue a conservative
stance in these conditions, as we assess relative value
opportunities across asset classes, on both sides of our balance
sheet and throughout our business."
Annaly's revenue per share over the last five years has declined
at an annual rate of 22.3% and EBITDA at 16.5%. Free cash flow
concurrently grew at a rate of 94.7% and book value at 5.7%. Its
share price, at $14.64, is currently below its book value per
share of $17.53.
See its 10-year financials here
The company has a P/E of 10.3, P/B of 0.89 and P/S of 8.34.
NLY data by GuruFocus.com
Monro Muffler/Brake Inc. (
Akre bought 400,000 shares of Monro Muffler/Brake Inc. in the
third quarter for $35.20 each on average. It occupies 1.1% of his
Monro is an automotive undercar repair and tire services
provider, operating 853 stores in 19 states.
The company trades for $31.89 per share, close to its two-year
low. Its stock has gradually declined since the start of the
year, and is up 136.5% over the past five years.
In its second quarter ended Sept. 29, 2012, it revealed a 1.9%
year-over-year sales increase to $176.5 million, and 23.6%
decline in net income to $11.6 million. Sales at comparable
stores declined 4.6%, while the total sales increase was due to
sales at new stores and recently acquired stores. The company
opened 18 new locations and closed one during the quarter.
"Our second quarter performance continues to reflect the ongoing
challenges facing consumers in the current economic environment.
With high gas and food prices compounded by high unemployment,
cautious consumers continue to defer and trade down from higher
cost automotive maintenance and repair purchases," John Van Heel,
Monro's president and CEO said in a statement.
Over the last five years, Monro has increased revenue per share
at a rate of 11.1%, EBITDA 17.8%, free cash flow 28.8% and book
value 10.9% annually. Its current share price of $32.01 is almost
three times book value of $11.24. See its 10-year financials
The company's P/E is 21.85; its P/B ratio at 2.86 is close to a
three-year low; and its P/S ratio at 1.45 is close to a two-year
MNRO data by GuruFocus.com
Due to current visibility, business and economy trends,
acquisitions and fiscal 2013 being 52 instead of 53 weeks, the
company revised downward its expectations. It now anticipates
sales to decline 3.5% to 2%, and earnings per share to be in a
range of $1.36 to $1.50, instead of $1.50 to $1.65.
Chuck Akre's other new buys during the third quarter were Verisk
), Hartford Financial Services Group (
) and Colfax Corp. (
). See his portfolio here.About GuruFocus: GuruFocus.com tracks
the stocks picks and portfolio holdings of the world's best
investors. This value investing site offers stock screeners and
valuation tools. And publishes daily articles tracking the latest
moves of the world's best investors. GuruFocus also provides
promising stock ideas in 3 monthly newsletters sent to