The Akre Focus Fund takes the buy-and-hold strategy seriously, according to an article in The Wall Street Journal.

John Neff, one of the $9.8 billion fund’s portfolio managers, explains that investment decisions are made based on four criteria:

  1. Analysis of a company’s business model, which involves looking for a “significant competitive advantage, high return on capital and attractive growth prospects.”
  2. Strong leadership in the form of “management teams with equal parts skill and integrity, because one without the other doesn’t do you any good.”
  3. Free cash flow—they look for a “significant reinvestment of free cash flow back into the business and high rates of return on that reinvestment.”
  4. Attractive share price.

According to Neff, a company that meets all of these criteria can become a “compounding machine,” and such investments have resulted in a concentrated portfolio with low turnover. He explains further that the fund doesn’t set price targets at which it will sell and will keep a position in a strong business even if prices go up. The article notes, “It will often go years between altering its positions as it waits on the best opportunities.”

For more market trends, visit ETF Trends.

Subscribe to our free daily newsletters!
Please enter your email address to subscribe to ETF Trends' newsletters featuring latest news and educational events.