Investment Approach

AKRE CAPITAL MANAGEMENT’S “THREE-LEGGED STOOL” INVESTMENT APPROACH

We focus our capital in a select number of what we believe to be extraordinary businesses. These companies meet specific standards related to the business itself, the people who manage it, and the discipline they demonstrate when it comes to reinvesting free cash flow:

icon box image

THE BUSINESS

We begin with the premise that our return on an investment has the ability to approximate the company’s growth in book value over time. As a result, we look for businesses that have historically compounded book value or shareholders’ equity per share at very high rates. These businesses, in our opinion, also have a high likelihood of producing such returns for the foreseeable future. High barriers to entry and significant pricing power tend to characterize these businesses.

icon box image

THE MANAGEMENT

The businesses in which we typically invest are run by highly skilled managers who have a demonstrable history of treating shareholders as though they were partners. Great managers possess equal parts of integrity and skill. One without the other is insufficient.

icon box image

DISCIPLINED REINVESTMENT

We strive to invest in businesses that, because of the integrity and skill of their management, can reinvest their free cash flow in a manner that continues to earn above-average returns. This reinvestment acumen generates compelling compounded growth in economic value per share.

COMPOUNDING MACHINE

These three areas of analysis – business, management, and reinvestment – are the key components of what we call our “three-legged stool.” When we find a business that satisfies all three of our requirements, we refer to it as a “compounding machine,” and we seek to purchase shares at a modest valuation.

We know from experience that these businesses are rare.

LEARN MORE ABOUT OUR INVESTMENT APPROACH