Home Value Investing Interview with Chuck Akre, CEO, Akre Capital Management

Interview with Chuck Akre, CEO, Akre Capital Management

Interview with Chuck Akre, CEO, Akre Capital Management

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I went through college first 00:59 is a pre-med student and then as a 01:02 literature major and but nonetheless 01:06 when I graduated I have an interest in 01:10 and desire to to go out and create some 01:16 financial success and and talk to 01:22 actually this is probably not uncommon 01:24 but I went and talked to career 01:25 counselors in New York and and the idea 01:30 they suggested was go be a securities 01:32 analyst or broker and and I came back to 01:37 to Washington after that visit and 01:39 knocked on every brokerage door in 01:43 Washington in the summer of nineteen 01:46 sixty eight and a couple of them were 01:49 kind enough to entertain the idea and I 01:52 could start out as a as a rookie 01:56 stockbroker which is in fact what i did 01:58 in the summer of nineteen sixty eight 02:00 and having comment the business with no 02:06 financial background whatsoever it 02:10 didn't soon cause me to 02:13 ask questions such as what makes a great 02:18 investor and more to the point what 02:21 makes a great investment and and invest 02:24 I was off on my journey to to make that 02:28 discovery and I worked at a brokerage 02:33 firm in Washington DC that when I joined 02:36 them was the single most important 02:39 brokerage in and banking firm in 02:41 Washington at that time having been the 02:44 capital markets raised capital raiser 02:47 for companies like Geico and Marietta 02:51 and all of the department stores and 02:53 drugstores and utilities and so on in 02:55 Washington but the world was changing 02:58 rapidly and and that firmed changed more 03:03 slowly because of changes in generations 03:06 at that firm and and as a result of that 03:09 it was fortuitous for me because it 03:12 allowed me to kind of follow my own nose 03:16 and in that nose took me into this issue 03:20 of what makes a great investment and and 03:24 along the way you know I I did some 03:26 things at the firm that that were 03:28 helpful in that regard including running 03:30 their research department and and 03:32 ultimately being part of a small group 03:36 which we ran as a sort of a boutique 03:39 institutional broker idea based broker 03:42 in the in the early 80s but but along 03:47 that way I confronted the historical 03:51 data about where the best returns on 03:55 different asset categories are and at 03:58 least when I was looking at it early on 04:00 and I think still to this day the best 04:03 returns over a long period of time had 04:04 come from common stocks and over a long 04:08 period of time in those days it was 04:11 probably 60 years or something like that 04:13 the returning long-term to return in 04:16 common stocks was in the neighborhood of 04:18 ten percent and that was better than all 04:22 the other asset categories unlevered and 04:24 and so it cost me to ask the 04:27 well what's important about ten percent 04:29 why and that is to make believe number 04:31 and what I concluded then and I'm not 04:35 dissuaded from today is that he'd 04:38 correlated with what I believe was the 04:40 real long-term return on the owners 04:42 capital of all of those different kinds 04:45 of businesses with all those different 04:47 kinds of balance sheets across those 60 04:49 years ie a number which was in the low 04:52 teens when you got rid of all what I 04:54 call the accountant garbage and 04:56 therefore a return that's in high single 04:59 digits or low teens as a compound annual 05:03 return loosely correlates with what that 05:07 returned them the owners capital is and 05:09 so from that I formulated the notion 05:14 that my return in an asset would 05:18 approximate the RO II over a long period 05:21 of years given the absence of any 05:23 distributions and given a constant 05:26 valuation