Value Investing, Videos

Chuck Akre: How To Identify Compounding Machines | Talks at Google

by The Acquirer's Multiple

One of our favorite investors here at The Acquirer’s Multiple – Stock Screener is Chuck Akre.

Akre is the Managing Member, Chief Executive Officer and Chief Investment Officer at Akre Capital Management. Akre has been in the securities business since 1968. He founded Akre Capital Management in 1989 and relocated the business to Middleburg, Virginia, in 2002, where it still resides.

Akre is famous for his investment approach which he believes is perfectly captured by the visual of a “three-legged stool.” Akre says, “This metaphoric three legged stool describes what we look for in an investment: (1) extraordinary business, (2) talented management and (3) great reinvestment opportunities and histories. I have an old three-legged milking stool in our conference room and it is clear by looking at it that it is sturdy and durable.  We believe our stool is just as sturdy and durable based on our many years of experience!”

One of the best resources for investors is the series of presentations at Google by a number of investing gurus called Google Talks. One of our favorites is Akre’s presentation in which he discusses identifying businesses that are compounding machines, it’s a must watch for all investors:

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This original article was posted by Johnny Hopkins at The Acquirer’s Multiple..

Author: The Acquirer's MultipleThe Acquirer’s Multiple® is the valuation ratio used to find attractive takeover candidates. It examines several financial statement items that other multiples like the price-to-earnings ratio do not, including debt, preferred stock, and minority interests; and interest, tax, depreciation, amortization. The Acquirer’s Multiple® is calculated as follows: Enterprise Value / Operating Earnings* It is based on the investment strategy described in the book Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations, written by Tobias Carlisle, founder of acquirersmultiple.com. The Acquirer’s Multiple® differs from The Magic Formula® Earnings Yield because The Acquirer’s Multiple® uses operating earnings in place of EBIT. Operating earnings is constructed from the top of the income statement down, where EBIT is constructed from the bottom up. Calculating operating earnings from the top down standardizes the metric, making a comparison across companies, industries and sectors possible, and, by excluding special items–earnings that a company does not expect to recur in future years–ensures that these earnings are related only to operations. Similarly, The Acquirer’s Multiple® differs from the ordinary enterprise multiple because it uses operating earnings in place of EBITDA, which is also constructed from the bottom up. Tobias Carlisle is also the Chief Investment Officer of Carbon Beach Asset Management LLC. He's best known as the author of the well regarded Deep Value website Greenbackd, the book Deep Value: Why Activists Investors and Other Contrarians Battle for Control of Losing Corporations (2014, Wiley Finance), and Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors (2012, Wiley Finance). He has extensive experience in investment management, business valuation, public company corporate governance, and corporate law. Articles written for Seeking Alpha are provided by the team of analysts at acquirersmultiple.com, home of The Acquirer's Multiple Deep Value Stock Screener. All metrics use trailing twelve month or most recent quarter data. * The screener uses the CRSP/Compustat merged database “OIADP” line item defined as “Operating Income After Depreciation.”