Value Investing, Videos

Interview with Chuck Akre, CEO, Akre Capital Management

Interview with Chuck Akre, CEO, Akre Capital Management

Get The Full Seth Klarman Series in PDF

Get the entire 10-part series on Seth Klarman in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

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