The U.S. consumer's newfound thrift makes investments in healthy discount retailers a sound move, according to Chuck Akre, manager of the Akre Focus Fund Ticker:(AKREX).
“With 17% of the population unemployed or under-employed, we know that there is very little opportunity for this decade to look like the last decade, in terms of personal consumption,” said Mr. Akre, founder of Akre Capital Management LLC.
The bottom-up stock-picker with a keen emphasis on value, said some of his biggest holdings are TJX Companies Inc. Ticker:(TJX), Ross Stores Inc. Ticker:(ROST), and Dollar Tree Inc. Ticker:(DLTR).
“There is a strongly held view that U.S. consumer spending is going to continue to be constrained by employment issues, a lack of credit, higher taxes, and the need to save more and pay down debt,” he said. “I don't know anyone who hasn't altered their spending patterns over the last two years.”
The appeal of certain discount retailers, he said, is that they are characterized by being “strong companies, with high levels of growth and low debt.”
Mr. Akre manages the fund to be relatively concentrated, with about 25 stocks. The objective is to hold positions for a long time.
While he is “modestly altering” his style of investing in the wake of the 2008 financial crisis, Mr. Akre is managing the portfolio in a manner similar to the way he managed the FBR Focus Fund Ticker:(FBRVX).
Mr. Akre, who had managed the $1 billion FBR fund from its 1996 inception, ended the subadvisory relationship early last year, and launched the Akre fund on Aug. 31, 2009.
In his typically deliberate fashion, Mr. Akre still has about 20% of the Akre fund's $230 million sitting in cash waiting for the right investment.
In addition to the discount retail allocation, he is anticipating some reward from his investments in certain electronic brokerage businesses, including OptionsXpress Holdings Inc. Ticker:(OXPS), TradeStation Group Inc. Ticker:(TRAD), and TD Ameritrade Holding Corp. Ticker:(AMTD).
“Right now, volatility is down and trading volume is down, but the valuations are modest and these are businesses that are leveraged to higher interest rates,” he said.
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