Home Value Investing Chuck Akre’s Focus Fund Q1 2014 Commentary

Chuck Akre’s Focus Fund Q1 2014 Commentary

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From our perch in Middleburg it looks to us like the market continues to absorb the often unpleasant news from around the world. Every so often the market has indigestion. With the attendant back and forth of emotions, it follows that investment outcomes for the first quarter were fairly benign. Chuck Akre’s Akre Focus Fund Retail Class (MUTF:AKREX) and Akre Focus Fund Institutional Class (MUTF:AKRIX) returned 1.10% and 1.19% net of fees and expenses, respectively in the first quarter of 2014 versus the S&P 500 with a return of 1.81%.

Chuck Akre’s largest contributors

Our positions in Colfax Corp (NYSE:CFX) and O’Reilly Automotive Inc (NASDAQ:ORLY) were the largest contributors to performance over the quarter. Mastercard Inc (NYSE:MA) and Dollar Tree, Inc. (NASDAQ:DLTR) were the most meaningful detractors from performance over the quarter. At the end of the first quarter the Fund was approximately 91.4% invested and the portfolio held 31 positions.

We are not in the camp that feels the market is pricing businesses too richly. However, it is true that businesses, in general, are more richly valued than they were a year or two ago. As a generalization we have made no new purchases in businesses during the quarter, but it will not surprise you that we have our eyes on several.

After identifying what we believe are exceptional businesses, it is important for us to understand exactly what we feel makes them exceptional. Why are they earning above average returns on capital? In addition, we must have management teams who treat us as partners, and equally important, managers who identify ways to reinvest all excess capital generated to continue to earn above average returns on that new capital investment. Once we identify these companies, we work very hard to establish a rational entry price. In our experience we get started at what we believe are “fair” prices, and it is only on rare occasions that we get a true bargain price. The latter accelerates our potential for an above average compound rate of return.

Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling (877) 862-9556. The Fund’s annual operating expense (gross) for the Retail Class shares is 1.36% and 1.11% for the Institutional Class shares. The Fund imposes a 1.00% redemption fee on shares held less than 30 days. Performance data does not reflect the redemption fee, and if reflected, total returns would be reduced.

As always we thank you for your confidence in our firm’s ability to manage your assets. Do know that we treat each dollar as if it were our own, striving to achieve desirable outcomes.

Chuck Akre

Mutual fund investing involves risk. Principal loss is possible. The Fund is non?diversified, meaning it may concentrate its assets in fewer individual holdings than a diversified fund. Therefore, the Fund is more exposed to individual stock volatility than a diversified fund. The Fund invests in small and medium capitalization companies, which involve additional risks such as limited liquidity and greater volatility than larger capitalization companies.

The Fund’s investment objectives, risks, charges and expenses must be considered carefully before investing. The summary and statutory prospectus contains this and other important information about the investment company and it may be obtained by calling (877) 862?9556 or visiting www.akrefund.com. Read it carefully before investing.

Fund holdings and sector allocations are subject to change at any time and should not be considered a recommendation to buy or sell any security.

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