Chuck Akre’s ‘Three-Legged Stool’ Approach and His Top 5 Stock Picks

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In this article, we take a look at Chuck Agre’s top 5 stock picks. If you want to check out our detailed analysis of Akre’s “Three-Legged Stool” approach, go directly to Chuck Akre’s “Three-Legged Stool” Approach and His Top 10 Stock Picks.

5. O’Reilly Automotive, Inc. (NASDAQ:ORLY)

Akre Capital Management’s Stake Value: $1 billion

Percentage of Akre Capital Management’s Portfolio: 7.36%

Number of Total Hedge Fund Holders: 48

O’Reilly Automotive, Inc. (NASDAQ:ORLY) is the second automotive retailer in Akre’s top 10 stock picks. It is a US based auto-parts retailer providing aftermarket automotive spare parts, tools and accessories. It caters to both the professional automotive service providers as well as Do-It-Yourself (DIY) customers. 

A total of 48 hedge funds are invested in O’Reilly Automotive, Inc. (NASDAQ:ORLY) as of the first quarter of 2022, with a total equity of $2.6 billion. Akre Capital Management holds $1 billion worth of equity in the company alone, making it the leading shareholder. 

BofA analyst Elizabeth Suzuki upgraded O’Reilly Automotive, Inc. (NASDAQ:ORLY) to ‘Buy’ from ‘Neutral’ rating with an unaltered $730 price target as part of a general research note on the auto aftermarket industry. Given the recent downturn in stocks across her hardline retail coverage, Suzuki argues that the auto parts retail stocks are frequently thought of as more defensive, “staples-like” within the Consumer-Discretionary sector. 

Suzuki further added that her review of O’Reilly Automotive’s Q1, 2022 earnings-miss reflects “primarily a function of sell-side mismodeling of SG&A growth”, which did not properly factor-in the unsustainably low level of SG&A as a percentage of sales in the Q1 quarter.

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