Chuck Akre of Akre Capital Management was on Patrick O’Shaughnessy’s Invest Like The Best podcast. After listening to this twice in one day. I’ve taken the pleasure of transcribing a fair amount of the podcast, which I will post after this. In this post I will share some takeaways and my favorite quotes.
One of the things that’s very clear is Chuck believes in asking questions, asking simple questions. Or as he says in the podcast, have imagination and curiosity. Ask these questions: What does that mean? What does that tell you? Why is that? What business are they in? What does the business do? What’s going on?
In short: seek truth and seek an understanding. But don’t get lost in the weeds. Keep things simple. And by simplifying, try to understand the big context. The big, slower moving context.
Frequent readers will quickly guess my favorite quote: “Every day is a learning day.” I like to say “never stop learning” or, if you prefer positive language, “always be learning.”
Every day is full of opportunities to learn something new or reflect on a story or personal experience and extract new meaning. Don’t be stubborn in your thoughts. Keep and nurture an open mind.
Chuck Akre has clearly done a lot of thinking and reflecting. The podcast is full of insightful stories and lessons. Listen here: Chuck Akre – The Three-Legged Stool – [Invest Like the Best, EP.135] – Patrick O’Shaughnessy
Chuck Akre quotes
“Every day is a learning day.”
“I spend a lot of time reading, that’s how ideas bubble up in my universe.”
“We’re not smart enough to dance with all the dances.”
“Imagination and curiosity are what’s hugely important. We’ve discovered things over the years purely by being curious. And continuing to keep involved in the search process to find these exceptional businesses.”
“We usually use free cash flow return on owner’s capital.”
“Our experience is once a guy sticks his hand in your pocket, he’ll do it again.”
“If we own exceptional businesses, one of the hardest things to do is not sell them.”
The three-legged stool:
1. “Leg one is the quality of the business enterprise.”
2. “Leg two is the quality and the integrity of the people who run the business.”
3. “Leg three is what is their record and opportunity for reinvestment?”
(Business model) + (People model) + (Reinvestment model)
“Once we have all those things in place then we just aren’t willing to pay very much for these businesses.”
“Find a company with above average returns. Ask: What business is it in? If it’s above average for the business, then they are in a different business. Goal is to find out what business they are in.”
“If you read any research from Wall Street, and we read very little, there is no one who talks about that, who talks about the rates of return they are earning on their capital.”
Signs in Chuck Akre’s office:
“Everything should be made as simple as possible but no simpler.”
“The bottom line of all investing is the rate of return.”
“Follow your passion. And read like crazy. And be curious, about everything.”
“I’m always looking for ways to understand pricing power, because pricing power is key.”
“It’s a rare occasion where the CEO articulates an idea where he shows he understands the idea of compounding the economic value per share.”
“You only need to be right in your investment decisions once or twice in a career. Once or twice in a career. And the challenge is how do you identify that.”
[Talking about his clients’ capital]
“They’ve done well so we’ve done well.”