In this piece, we will take a look at the 10 best stocks to buy for the long-term, according to Charles Akre.
“Above-average returns at below-average risk” is the mantra that defines Charles Akre, one of the most successful asset managers on Wall Street. As the founder of Akre Capital Management, he is a celebrated value-oriented investor. He is best known as a collector of great business, which he has invested in for many years to generate optimum value.
His dedication to long-term planning and systematic valuation has consistently yielded exceptional results. Akre’s investment portfolio has generated more than 300% returns over the past ten years.
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He has become one of the most successful investors focusing on an investment philosophy dubbed the “three-legged stool” approach. The investment approach advocates for examining business models’ rates of return and reinvestment opportunities before investing. Likewise, Akre advocates investing in companies with enduring competitive advantages, robust balance sheets, and long-term earnings growth prospects.
Unlike most investors focusing on market trends, Akre’s philosophy focuses on finding companies trading at fair value. By avoiding popular stocks, the value investor has succeeded in concentrating on cheap opportunities that most investors often overlook. He also adopts a strategic approach that goes beyond buying and holding stock for the long term.
Instead, Akre consistently evaluates the core business strengths and fundamental aspects of companies. His focus on “outstanding businesses” indicates that he has carefully considered factors like competitive advantage, growth potential, and top-notch management. Consequently, the best stocks to buy for the long term, according to Charles Akre, are companies well poised to navigate short-term market fluctuations. Similarly, they are companies that capitalize on long-term compounding effects.
In contrast to passive index investing, Akre’s approach necessitates active monitoring of a company’s performance to ensure that it maintains the standards of an exceptional business. Having a thorough understanding of the management team, business operations, and industry dynamics is also essential.
The value investor also advocates for diversification as one of the ways of spreading the risk and shrugging off market volatility. Therefore, Akre Capital Management’s portfolio is spread across technology, financial services and other sectors. While the overall market has been trending over the past year, resulting in overstretched valuations, Akre believes there is still value to unlock. Nevertheless, he expects the financial markets to remain volatile.
“…The US stock market and quite likely the markets of Western Europe can continue to be very volatile as they respond to good news and bad news, which will pop up on a regular basis. From my perspective, this is actually good news-that kind of volatility will increasingly give us opportunities periodically… Therefore, markets can go up even when economic activity has not picked up. But my expectation is a fair amount of volatility for some time,” said Charles Akre.
Charles Akre of Akre Capital Management
Our Methodology
To compile our selection of the best stocks to buy for the long-term, according to Charles Akre, we began by analyzing Akre Capital Management’s 13F portfolio and chose to highlight the stock holdings that have remained within the portfolio for at least 5 years. Next, we assessed the number of hedge fund investors associated with each stock as of the end of the third quarter of this year. Finally, the stocks were ranked in ascending order based on the value of Charles Akre’s stakes in the companies.
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10 Best Stocks to Buy for the Long-Term, According to Charles Akre
10. Berkshire Hathaway Inc. (NYSE:BRK-A)
Akre Capital Management’s First Major Purchase: 2010
Akre Capital Management’s stake value: $7.03 million
Number of Hedge fund holders as of Q3: 120
Berkshire Hathaway Inc. (NYSE:BRK-A) is a financial services company that deals with insurance, freight rail transportation, and utility businesses. Given its track record in identifying and investing in exceptional companies with consistent returns, it is one of the best stocks to hold for the long term. The firm has delivered an average annual return of 20% since 1965.
The investment company also stands out owing to the diversified nature of its portfolio. Berkshire Hathaway Inc. (NYSE:BRK-A) invests in nearly 70 companies. Some of the holdings that account for a significant chunk of the firm’s revenue include railroad operator BNSF, insurer Geico, and energy company Berkshire Hathaway Energy. Other outstanding holdings include Apple, American Express, and Bank of America.
In addition, Berkshire Hathaway Inc. (NYSE:BRK-A) stands out owing to its cash haul, which it returns to shareholders through buybacks. After slashing holdings in some high-profile names like Apple, the firm had a record $325.2 billion as of November. The huge free cash in the balance sheet also leaves the investment firm in a solid financial position to invest in new opportunities.
In the third quarter of 2024, Berkshire Hathaway Inc. (NYSE:BRK-A)’s revenues slipped 0.2% year over year to $93 billion. The decline came amid lower revenues in the Insurance segment. Operating earnings were also down 6.2% to $10.1 billion.
9. CarMax, Inc. (NYSE:KMX)
Akre Capital Management’s First Major Purchase: 2010
Akre Capital Management’s stake value: $100.37 million
Number of Hedge fund holders as of Q3: 44
CarMax, Inc. (NYSE:KMX) is a retailer of used vehicles and related products. Its competitive edge as one of the best stocks for the long term stems from operating a network of 247 used car superstores. In addition, its business model extends beyond retail sales, with a significant wholesale operation that moves over 500,000 units annually. CarMax, Inc. (NYSE:KMX) has been pursuing strategic initiatives to unlock new growth opportunities. Its Innovation Center in Virginia is developing new technologies and processes to enhance operational efficiency and customer experience.
CarMax, Inc. (NYSE:KMX) intends to open two more stores, a stand-alone reconditioning centre, and an auction facility in addition to the three new stores it has already opened this year. To sustain growth momentum and deliver exceptional customer experiences, it also plans to keep refining its Omni channel platform and cost management initiatives in tandem with these expansions.
The used cars retailer is also expanding its CarMax Auto Finance offerings segment to include a whole spectrum credit book. The expansion should lead to deeper penetration rates and bolster profit margins. The strategic initiatives are also expected to result in a 25% increase in EBITDA, with earnings per share expected to increase by 53% over the next ten quarters.
Madison Mid Cap Fund stated the following regarding CarMax, Inc. (NYSE:KMX) in its Q3 2024 investor letter:
“We trimmed our positions in Moelis and CarMax. We reduced our position in CarMax, Inc. (NYSE:KMX) coincident with our addition of the two automotive retailers. While we are positive on CarMax’s prospects, we want to ensure we manage our portfolio’s overall exposure to the new and used car markets.”
8. Danaher Corporation (NYSE:DHR)
Akre Capital Management’s First Major Purchase: 2013
Akre Capital Management’s stake value: $493.60 million
Number of Hedge fund holders as of Q3: 98
Danaher Corporation (NYSE:DHR) is a healthcare company that designs, manufactures, and markets professional, medical, industrial, and commercial products and services. While the stock has been flat for the year, its diverse portfolio and strategic positioning affirm why it is one of the best stocks to buy for the long term.
The company is well-positioned within its sector thanks to its strong portfolio and exposure to diverse geographies and product categories. Danaher Corporation (NYSE:DHR)’s operations are spread across several crucial areas, such as bioprocessing, molecular diagnostics, and laboratory equipment. The company’s key bioprocessing business has already returned to growth by impressive third-quarter results delivered on October 22, 2024.
Revenues in the quarter were logged in at $5.8 billion, up 3% year-over-year and better than the $5.59 billion expected. Earnings per share came in at $1.71, topping consensus estimates of $1.57 a share. During the quarter, the bioprocessing unit bounced to low-single-digit growth. The segment has been under pressure due to destocking from larger clients following the COVID-19 pandemic.
Danaher Corporation (NYSE:DHR) is well poised to generate high single-digit core revenue growth and margin expansion heading into next year. Due to improved operational efficiency, it is also expected to convert 100% of its net income into free cash flow.
Here is what Madison Sustainable Equity Fund said about Danaher Corporation (NYSE:DHR) in its Q3 2024 investor letter:
“Danaher Corporation (NYSE:DHR) released its 2024 Corporate Sustainability Report. It highlighted several milestones across its three pillars of sustainability (building the best team, innovating products that improve lives and the planet, and protecting the environment). The company has committed to setting greenhouse gas emission reduction targets in line with the Science Based Targets initiatives (SBTi), including reaching net-zero value chain emissions by 2050.”
7. Roper Technologies, Inc. (NASDAQ:ROP)
Akre Capital Management’s First Major Purchase: 2014
Akre Capital Management’s stake value: $834.34 million
Number of Hedge fund holders as of Q3: 40
Roper Technologies, Inc. (NASDAQ:ROP) is a diversified technology company that develops software and engineered products for niche markets. The stock has underperformed the market, going by a 3.36% year-to-date gain compared to a 26% gain for the S&P 500.
Nevertheless, Roper Technologies, Inc. (NASDAQ:ROP) is one of the best long-term stocks to buy as it demonstrates resilience in a challenging market landscape. Strong financial results and strategic moves underscore the company’s long-term prospects and growth metrics. The technology company delivered better-than-expected third-quarter results on October 23, 2024.
Revenue in the quarter increased 13% year-over-year to $1.76 billion as distributable earnings per share surged 6% to $3.40. Its free cash flow increased 15% to $719 million, affirming financial health and ability to fund future growth initiatives. Roper Technologies, Inc. (NASDAQ:ROP) raised its full-year guidance amid continued expansion of its recurring revenue base and improving demand for business mission-critical solutions.
The company has also turned to acquisitions to accelerate growth. It is in the process of acquiring Transact Campus for $1.5 billion. The acquisition should increase its Card Systems/Integrated Security Solutions sector market share.
Conestoga Capital Advisors stated the following regarding Roper Technologies, Inc. (NASDAQ:ROP) in its Q3 2024 investor letter:
“Roper Technologies, Inc. (NASDAQ:ROP) operates a collection of market-leading vertical software franchises and industrial technology businesses. The company reported an uncharacteristic miss in revenue, the first in nearly three years. Its smart meter business, Neptune, faced operational issues during the quarter (since corrected), leading to delayed revenue. Looking ahead, the highly acquisitive company is seeing an attractive pipeline of M&A targets that should see more reasonable valuations in the coming months, a key source of earnings growth.”
6. Visa Inc. (NYSE:V)
Akre Capital Management’s First Major Purchase: 2012
Akre Capital Management’s stake value: $899.56 million
Number of Hedge fund holders as of Q3: 165
Visa Inc. (NYSE:V) is a payment technology company that operates VisaNet, a transaction processing network. The network enables authorization, clearing, and settlement of payment transactions. With the global digital payment market projected to reach USD 361.3 billion by 2030, growing at a CAGR of 21.1%, it is arguably one of the best long-term stocks to buy amid this growth.
Visa Inc. (NYSE:V) revenue has grown from $12.7 billion a decade ago to over $35 billion in fiscal 2024. Given their growing convenience, the growth is poised to continue amid the rise of cashless transactions. Visa should be one of the biggest beneficiaries as a provider of the base layer service that connects consumers’ merchants and banks. Given that Visa operates the largest credit card network, which powers over 4 billion cards worldwide while working with over 14,500 financial institutions, opportunities for growth are endless.
In its fiscal fourth quarter, Visa Inc. (NYSE:V) launched the Yueda Card to strengthen its push for cross-border payments. Its revenues in the fourth quarter were up 12% year over year to $9.6 billion as the company benefits from increased consumer spending and global reach as global interest rates come down.
5. O’Reilly Automotive, Inc. (NASDAQ:ORLY)
Akre Capital Management’s First Major Purchase: 2011
Akre Capital Management’s stake value: $1.06 Billion
Number of Hedge fund holders as of Q3: 41
O’Reilly Automotive, Inc. (NASDAQ:ORLY) is one of the largest retailers and suppliers of automotive aftermarket parts, tools, supplies, equipment, and accessories. It provides new and remanufactured automotive complex parts and maintenance items, such as alternators, batteries and brake system components. Its stock is up by more than 34% for the year, signaling investor confidence about the company’s growth metrics.
The outperformance underscores the retailer’s strong performance in a competitive market amid a challenging macro environment. Nevertheless, O’Reilly Automotive, Inc. (NASDAQ:ORLY) has stood against its peers by capitalizing on growth initiatives and robust consumer demand in the automotive industry. The company delivered impressive third-quarter results on October 23, 2024.
Sales in the quarter were up 4% to $4.36 billion as gross profit also increased 4% to $2.25 billion. Net income increased 2% to $665 million as diluted earnings per share soared 6% to $11.41. The strong Q3 results come as O’Reilly Automotive continues to benefit from a robust culture and efficient supply chain in the automotive industry.
In addition, O’Reilly Automotive, Inc. (NASDAQ:ORLY) is benefiting from an aggressive expansion drive. It has already opened 37 new stores in the US and Mexico, strengthening its revenue base. It has also expanded its footprint into Canada with the acquisition of Vast Auto.
TimesSquare Capital U.S. Focus Growth Strategy stated the following regarding O’Reilly Automotive, Inc. (NASDAQ:ORLY) in its Q3 2024 investor letter:
“O’Reilly Automotive, Inc. (NASDAQ:ORLY), a specialty retailer of aftermarket auto parts and accessories, rose 9%. The company reported weaker-than-expected second quarter results, which management attributed to a soft demand environment. Wet spring weather and budget-conscious consumers impacted the do-it-yourself segment. However, their professional mechanic/do-it-for-me business was stable and in line with Street estimates. O’Reilly has reduced variable costs without sacrificing service levels.”
4. American Tower Corporation (NYSE:AMT)
Akre Capital Management’s First Major Purchase: 2012
Akre Capital Management’s stake value: $1.41 Billion
Number of Hedge fund holders as of Q3: 73
American Tower Corporation (NYSE:AMT) provides wireless communication infrastructure and manages over 224,000 communication sites. It also boasts of a highly interconnected footprint of U.S. data center facilities. It is one of Charles Akre’s top stock holdings despite underperforming the broader market, going by its 8% year-to-date drop.
Despite recent underperformance, American Tower Corporation (NYSE:AMT) is a solid long-term investment because of its strong role in the 5G rollout. Over 50% of its towers already support 5G, and this will keep driving demand for its services. As a key player in wireless infrastructure, the company benefits from the growing need for data and 5G network expansion. Its extensive infrastructure is essential for supporting wireless networks and meeting the rising demand for mobile data.
The company also stands to gain from the increasing demand for data services and data centers, especially with the rise of artificial intelligence. Its diverse portfolio, including data centers and both domestic and international towers, provides a strong foundation for long-term growth. By diversifying, American Tower has capitalized on global trends in data usage and wireless connectivity.
By 2029, analysts predict that mobile data usage will triple, requiring ongoing network infrastructure investment. Consequently, American Tower is positioned to profit from the rising demand for data services, which fits nicely with the core business model.
Here is what Mar Vista Strategic Growth Strategy stated the following regarding American Tower Corporation (NYSE:AMT) in its Q3 2024 investor letter:
“American Tower Corporation’s (NYSE:AMT) stock rebounded nearly 20% during the third quarter, helped by the tailwind of lower interest rates. The stock has now appreciated more than one-third since U.S. 10-Yr Treasury interest rates peaked in late April 2024. As a levered REIT, lower rates benefit AMT’s equity value through a lower cost of debt and a higher value for its long-duration cash flows. Fundamental expectations did not change materially during the quarter as the company modestly increased their growth expectations for the year. The long-term global opportunities for 5G deployment, edge-of-network computing, and datacenters, remain attractive and are not fully reflected in the current stock price, in our opinion.”
3. KKR & Co. Inc. (NYSE:KKR)
Akre Capital Management’s First Major Purchase: 2018
Akre Capital Management’s stake value: $1.49 Billion
Number of Hedge fund holders as of Q3: 66
KKR & Co. Inc. (NYSE:KKR) is a global investment firm managing various alternative asset classes, including private equity, credit, and real assets, with strategic partners overseeing hedge funds. The stock has outperformed the overall market, going by the 91.02% year-to-date gain.
KKR & Co. Inc. (NYSE:KKR) has maintained strong growth in AUM, with its fee-paying AUM growing 19.3% year-over-year to $506 billion by the end of Q3. Likewise, it recorded a $25 billion increase in organic new capital raised in Q3 and $122 billion in the last 12 months. Additionally, it has $108 billion spread across the firm’s different investment strategies, which allows it to take advantage of future investment opportunities.
The firm delivered solid Q3 earnings on October 24, 2024. Revenues increased by 44.5% year-over-year to $4.8 billion. More significantly, net premium revenues increased by 182.1% to $621.2 million from last year’s same quarter. In addition to solid financial results, KKR & Co. Inc. (NYSE:KKR) is pursuing strategic deals that have the potential to unlock new growth opportunities. It has already shown interest in acquiring Japan’s optical equipment maker Topcorn Corp. The investment firm has also shown interest in investing in Seven & i’s supermarkets unit.
Baron Fifth Avenue Growth Fund stated the following regarding KKR & Co. Inc. (NYSE:KKR) in its Q3 2024 investor letter:
“During the quarter, we also initiated a new position in KKR & Co. Inc. (NYSE:KKR), one of the largest alternative asset managers in the world with $601 billion of assets under management (AUM). We believe alternative asset management is one of the best secular growth areas of financial services, and KKR should be a prime beneficiary. Founded in 1976 as one of the earliest leveraged buyout firms, KKR was led for decades by co-founders Henry Kravis and George Roberts. Since going public in 2010 as a pure-play private equity (PE) firm, KKR has successfully diversified into other private asset classes, including private credit, real estate, and infrastructure investing. AUM has risen nearly 10-fold since 2010 (an 18% CAGR), and PE’s share of firm AUM has shrunk to less than one-third. These non-PE asset classes are less penetrated than PE and provide a substantial runway for KKR to continue growing its funds, fees, and earnings. KKR also has significant growth opportunities in Asia, which it first entered in 2005 and where alternative asset management is far less penetrated compared to Western countries. In 2021, KKR successfully transitioned leadership from Kravis and Roberts to co-CEOs Scott Nuttall and Joe Bae, longtime KKR employees responsible for many of the growth initiatives that are driving KKR’s success today.
In addition to its globally diversified asset management business, KKR has significant exposure to the growth of private credit through its ownership of Global Atlantic, an insurance company with $183 billion of AUM. Global Atlantic is a beneficiary of the shift of illiquid credit assets into the private markets where they are better matched from a funding duration perspective and can deliver higher yields than publicly traded fixed income securities with the same credit ratings. KKR also has a strategic holdings segment that includes co-investments in a portfolio of high-quality businesses managed by KKR’s PE funds. These balance sheet investments should generate a durable stream of earnings and dividends for KKR that will be reinvested back into the business or returned to shareholders. We believe the company’s above-market growth is enabled by its brand, track record of strong returns, proven management team, deep client relationships, and diversified business which gives the company more growth avenues compared to peers. At the company’s Investor Day in April, management guided to 20% annualized growth in fee-related earnings and 30% annualized growth in earnings per share, reaching $7 to $8 by 2026. KKR management expects earnings to more than quadruple to over $15 per share within 10 years, representing a 16% CAGR. We think KKR’s diversified platform of leading businesses gives the company multiple ways to grow earnings as they execute into the expanding market for alternative assets, which should bode well for the stock over the long run.”
2. Moody’s Corporation (NYSE:MCO)
Akre Capital Management’s First Major Purchase: 2012
Akre Capital Management’s stake value: $1.60 Billion
Number of Hedge fund holders as of Q3: 67
Moody’s Corporation (NYSE:MCO) is one of the best stocks to buy for the long term to diversify an investment portfolio in the financial services sector. The company develops and offers products and services supporting institutional clients’ risk management activities. It is one of Charles Akre’s biggest holdings that’s outperforming, going by a 30.74% year-to-date gain.
Its outperformance has to do with its near monopoly position in the credit rating business. Moody’s Corporation (NYSE:MCO) delivered solid third-quarter results on October 22, 2204, affirming strong demand for rating services to assess and manage credit and economic risks. Revenue in the quarter was up 23% to $1.8 billion as earnings per share increased 32%. Transactional revenue spiking 70% and outpacing global issuance underscores the resilience of Moody’s core business.
Moody’s Corporation (NYSE:MCO) has moved to strengthen its long-term prospects by acquiring Numerate Growth Technologies. The acquisition is poised to improve its Lending Suite by integrating a complete loan origination and monitoring solution. It should also integrate with its Numerated AI-driven platform and risk data segments.
1. Mastercard Incorporated (NYSE:MA)
Akre Capital Management’s First Major Purchase: 2010
Akre Capital Management’s stake value: $1.94 Billion
Number of Hedge fund holders as of Q3: 131
Mastercard Incorporated (NYSE:MA) is a technology company that provides transactions, processing, and other payment-related products and services. It has about 3.4 billion credit cards in circulation and 150 million accepted by merchants worldwide. Consequently, it boasts of a solid revenue base that generates solid recurrent revenues on transaction fees.
As interest rates around the world come down, borrowing costs should drop, resulting in significant improvements in consumer purchasing power. As more people resort to shopping and making payments away from cash, the Mastercard stands to be one of the biggest beneficiaries.
Mastercard Incorporated (NYSE:MA) is already up 26.31% year-to-date and is trading near all-time highs. The stellar performance has to do with investors reacting to the company’s robust financial performance year to date. Its revenue has been up by about 17% over the past 12 months, and it has been benefiting from continuous innovation and expansion in the digital payment space.
Additionally, Mastercard Incorporated (NYSE:MA) has benefited from strong cross-border volumes, resilient consumer spending and diversification. Revenues from services and solutions contributed to 37.5% of total revenue in the first nine months of the year, which was up from 37% in 2023. Likewise, net revenues rose by 14% in the third quarter, and adjusted income grew by 13%.
Mastercard Incorporated (NYSE:MA)’s operating margin has already risen to 55%, demonstrating the company’s ability to maintain profitability. Its profit margins should receive a significant boost as card payment volume is poised to grow by 9% between 2025 and 2027, excluding China.
Conventum – Alluvium Global Fund stated the following regarding Mastercard Incorporated (NYSE:MA) in its Q3 2024 investor letter:
“We have discussed over the last couple of years our evolving investment process to become increasingly focussed on quality. In June 2022 we undertook the first step of that process – making changes to our quantitative screen. Specifically, we loosened the requirements with regard to traditionally measured “cheapness” (how the business is priced relative to its past earnings) and tightened the “quality” criteria (the returns the business has generated relative to capital employed in the past). Both Mastercard Incorporated (NYSE:MA) and Visa have remained in the screen since those changes were introduced. Our initial, somewhat rudimentary analysis, concluded that these businesses were just way too expensive for us. However, we revisited this more recently and we now concede that we failed to appreciate the value associated with such high quality businesses.
Visa (originally known as BankAmericard credit card program) was founded in 1958 by Bank of America (BofA). It was the first card to offer consumers revolving credit. Mastercard (originally known as Interbank, then Mastercharge), was founded in 1966 by a group of Californian banks to compete with it. Not long after, BofA gave up control of the BankAmericard credit card program, and became the second credit card program offered by a cooperative of banks. The way these businesses evolved ensures alignment of interests, with their success dependent on banks all cooperating and agreeing to underwrite transactions. Visa and Mastercard simply developed, implemented and maintained data matching systems to facilitate the network. Fast forward to today, and Visa and Mastercard are the two largest credit card payment processors, with widespread acceptance, robust infrastructure, and extremely strong brand recognition. They have become essential intermediaries in the global payment ecosystem, benefiting from their extensive merchant and bank partnerships as well as consumer trust. Together they dominate payments processing globally (outside of China)…” (Click here to read the full text)
While we acknowledge the potential of Mastercard Incorporated (NYSE:MA) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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