We recently published a list of 10 Best Stocks to Buy for the Long-Term According to Charles Akre. In this article, we are going to take a look at where KKR & Co. Inc. (NYSE:KKR) stands against other 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.
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.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A modern looking financial adviser sitting in front of a trading monitor, gesturing to a group of investors.
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.”
Overall, KKR ranks 3rd on our list of best stocks to buy for the long-term according to Charles Akre. While we acknowledge the potential of KKR 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 KKR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
