Transcription
In this video, I want to talk about Chuck Akre and his team because they just bought software stocks. They increased substantially their exposure to software companies. They bought Salesforce, ServiceNow. They bought more CoStar, more Roper Technologies, more FICO. So, it's a very bold bet.
As you probably know, software companies are down, software stocks are down this year and you have what is called the SAS apocalypse. Well, it seems like Akre Capital Management is taking the other side of the bet, the contrarian bet, saying that nothing will ever happen. And these businesses are of quality. They will improve and they will benefit from AI. This is what we're going to talk about today. And we learned about this new update of the portfolio a few days ago. So, I want to make an update on this one.
In case this is your first video from this channel, welcome. My name is Kristoufer Knoll. I've been investing in the stock market for almost a decade now and I have achieved a performance of 25% per year. And Chuck Akre is a great inspiration of mine. Now, he is retiring. He's not really managing the portfolio, but his team is managing Akre Capital Management. Okay?
What we are seeing is very bold because he is reducing the exposure to the winners. What made him a fortune, like MasterCard, biggest position, he's trimming. What made him a fortune with Moody's, with Visa, trimming and trimming. He's also trimming Book Brookfield and KKR, so funds, alternative funds. All the big giants of the portfolio were trimmed. And he used all these proceeds, all these trimming, to buy companies that were uh suffering at the moment, the stocks that were suffering at the moment.
We will We will see if you click on activity if he sold some specific things. He sold 100% of Danaher. It was a opening position starter position less than 1% and CarMax 0.06%. Nothing really interesting here. So all the winners were trimmed and all the losers were added. It's a very contrarian move. It's the only super investor that is doing this.
He bought more Roper Technologies so serial acquirer. He bought more CoStar CoStar that is decelerating and the stock is going down and down and down and down. The stock is back to COVID lows but the company is still not dead, right? It's a software company. He It's now 7% of their portfolio. He bought 30% more FICO. FICO is going down and down and now being flat. A full disclosure, I'm a FICO shareholder. It should be like 5% of my portfolio.
Chuck Akre and his team have been buying FICO. No, where is it? Where am I? FICO. Chuck Akre and his team have been buying FICO for a while actually. Look at this. They bought FICO in Q2 2025. At the time, where was FICO? Let me show you the chart so you understand clearly. In Q2 2025 so what between March and June something like this. Between March and June we were there. Let's say they bought at $1,700. First buy. And it was 0.16% of their portfolio so peanuts. Then you wait one quarter and they bought 3% so it became 3.7% of their portfolio or something like this. When it dropped at 1,500 dollars. Okay, so a cheaper price. Next quarter, they bought more. Okay, so Q4 2025, the price was 1,500 dollars or something. 600, 500, 600. And now, for the first quarter of 2026, they added even more, 1 percent more. And the stock price is much lower, 1,000. 1,100 dollars. This is when I bought the dip, by the way. My average price is 1,100 dollars.
Since then, what has happened to the company? The stock is down because now we have a duopoly and not a monopoly with the Vantage Score. You have a new competitor that emerged. And not surprising, right? We had this in the back for years. And the competitor is being pushed by the government. So this is the main worry people have. What if they lose their monopolistic position? For the moment, it's too early to judge. We literally don't have the data whether this Vantage Score company with the bureaus, I mean, it's not a company. It's a new score managed by the three credit bureaus. I we don't know if this will take some traction. And we don't know if FICO will lose market share. For the moment, the Vantage Score has a 2 percent market share. And for Isaac, roughly 98 percent. So, clear monopoly here.
They created the FICO scores to judge whether someone will be able to borrow money to the bank or not. You can pull scores and they increased their prices pulling the scores for years. A few years ago, the FICO score was 60 cent. And they then raised their to $1, $2, $5, and now $10. Which creates another worry. More regulation, price gouging. You increase your prices by too much, so we will regulate you. And same thing, there is a lot of risk, a lot of panic, but nothing happened for the moment. It's just an investigation that has not even started. So, just some people from the Senate not liking this price gouging. You see what I did here? Two worries people had. That is crashing the stock price. But for the moment, we are not seeing material changes. The two reasons why the stock went down are immaterial for the moment. So, it's only about the projection of the future.
You have great investors like Steve Eisman that are short. You have great legendary investors that are longs. So, Chuck Akre and his team, but also Jeff Gundlach holding and buying more to take advantage of the situation. What do you believe? Some Maybe you don't think anything, so you just dismiss the investment case. Maybe you hate this price gouging and you can short it. Or maybe you don't believe of this change and you think nothing will happen and you buy the dip. It seems like Chuck Akre and his team are buying the dip and I am buying the dip personally. So, be careful. I'm biased, obviously. I'm bullish. Uh but yeah, I'm I think nothing will ever happened. I was a shareholder in the past. I first bought FICO in 2021. And I had the exact same worries about the disruption, price gouging, not investigation led to nothing. After 9 months of investigation, zero change. Nothing ever happened. You can You could increase your prices and disruption competitors nothing ever happened. I'm seeing a a remake of this scenario of 2021. The bears are saying this time is different. I'm saying this time is not different. So, I'm buying the dip. Okay.
This is a company that can increase their prices. Look at this. The revenue is up and to the right and reaccelerating. The net income is up and to the right and reaccelerating. The free cash flow is up and to the right. Look at this in the blue. And reaccelerating and they don't make stupid acquisitions. They don't pay dividends because it's not tax efficient. What they do is very simple. They buy back shares. And if the stock pri- stock price goes down the stocks become cheap. They do more buybacks. And now the stocks the stock has become cheap. The forward P/E ratio is 25. So, they are doing their biggest buyback ever. Story is extremely simple. Also, the stock dropped because of high valuation. Before you had a P/E ratio of 100. >> [laughter] >> All right. So, the stock was overvalued by a lot. And then investigation price gouging and then new competitor with the Vantage Core purchased by the government. So, three reasons why the stock is down. And I believe now the stock is cheap. Okay. So, I'm very happy to see them to see this fund continuing to buy the dip. As the stock becomes cheaper and cheaper and cheaper, they buy the dip. And now it's a 6% position. But as you saw in the past in the chart, the stock can rebound. And if the stock doubles, it will become a big position like up to 10% of the portfolio. A core holding for them. So, they have some conviction over there.
By the way, if you want to become a better investor and improve your performance, I have a coaching program. It gives you the exact method I've used to generate 25% per year for almost a decade. More on that at the end of the video.
Now, O'Reilly they are selling one of their losers. Another one. Or they they cut their O'Reilly position by half. It's an auto parts company like AutoZone. And you have other super investors like Pat Dorsey selling out of AutoZone. So super investor Chuck Akre selling out. Cutting half of the position in O'Reilly. Okay, they are selling all their winners to buy losers. It's a contrarian bet. It's a very bold bet.
And by the way, you know why they make this bold bet? Because I don't know if you guys read their letters. I'm reading all of them. They talk about why they focus on software. Why they say "We've done the work. We don't see how these software companies will lose." And at the top of the letter, you see the performance. The fund performance versus the S&P 500. And you can see that now with the recent drawdowns in MasterCard, Visa, Moody's, all the outperformance is gone. So uh they have built a track record of outperforming the market for years, 10 years, 15 years, 20 years. Everything is gone. You have no alpha. Because your winners are no longer winning. MasterCard no longer winning. O'Reilly no longer winning. You don't have a clear outperformance. So they have to make a bold decision to get their outperformance back. So it's a make or break move. Either software stocks rebound and you get back your your outperformance, which justifies people paying them because they have fees, right? If you don't have outperformance, why pay them? I mean, you if your goal is to outperform the market and you don't outperform the market, you will lose plenty of clients. You will have redemptions. So, now they have to do something to justify people paying them. So, they have they are taking contrarian view. And it I think it's a make or break moment for the whole fund. Either they make a fortune because of software rebounding, life is good, they get their outperformance, they are cheered cheered, they have a new crown, wonderful. Or software stocks are down. And they lose their reputation. I think it's that important. I think it's a in very very important quarter for them. So, we will see.
I've read all the letters from Chuck Akre. I understand the philosophy of the fund. And after understanding the philosophy of the fund, I can tell you this. This is a make or break moment. It's not a simple easy quarter, easy to forget. No, no. It's extremely important. And after all their research, with all their analysts working on this, they are buying specific software stocks, not all software stocks, not the index. They are buying CoStar, Roper Technologies, FICO, Copart, this is not really software, but it's down. And then two new buys, Salesforce and ServiceNow. Big companies that are down a lot and crazy CEOs that are very competent. So, they are buying the SaaS apocalypse, betting on the retention rate, customer service, uh plenty of products, plenty of services. You have a wide range of products for these two companies and a huge retention rate. Clients stay. It's very sticky. You don't go away from ServiceNow very easily. And you have very charismatic CEOs. I mean, for Salesforce, you have Marc Benioff. You don't want to bet against Marc Benioff. It's like Elon Musk or Mark Zuckerberg. You just don't bet against these guys. It's too stressful because you will lose. And you know you will lose. So, now they did a big buyback program for Salesforce. And they report earnings in a few days. So, we will see how it goes. But, the stock is down a lot. And he the stock is hated at the moment. And it is not rebounding like for FICO. Down a lot and not rebounding. And what about ServiceNow? The stock is down a lot. They had earnings a few days ago. The stock was down like 17% in one day. The stock is just crashing immensely to prices we saw in 2020. So, 6 years of zero performance. And they are buying the dip. Because they think AI will not kill these businesses, but AI will improve these businesses. Salesforce is fighting back. They just released a new update called Salesforce headless. To just sell the happy API. ServiceNow released investor day. And during this investor day, they forecasted their future, the growth rate, how they will monetize AI. The vision is clear. The management team is competent. The business is excellent. The retention rate is immense. But, the stock is down. Because people do not believe them. If Chuck Akre and his team are right, they will print cash and they will deserve their crown. But, it's a very contrarian bet. Very bold move from them.
Other thing Other things of this portfolio update, they added a little bit to Copart. Copart is still down, but they are doing buybacks. The stock is cheap. They sold a little bit of Airbnb. I don't like Airbnb. I think Booking Holdings is the same, but better. Anyway, some people like Airbnb. Um CCC, it's a small ad, so nothing really relevant here. And then nothing nothing nothing nothing. They completely sold out of American Tower. It's the most famous company from Chuck Akre and they finally got out of it. They have been selling American Tower for so many years now. Let me remind you that in 2022, not so long ago, it was the second largest position. Just behind MasterCard. Look at this, 13% of the portfolio. And it's a 100 bagger. They multiply their investment by half. In 2020, it was their biggest position, American Tower. And they've been holding this for years and years and years and years. Look at this, I can go back to 2009, it was the largest position. 2010, largest position. 11, largest position. And finally, they exited this position. From 2023 onwards, they sold it. 2024, sold. 2025, they trimmed it again. Now 2026, it represents less than 1% of the position.
They are reducing exposure to their winners and then buying they are buying the dip on software stocks. It is a make or break quarter. It could not be more make or break for them. It could not be more risky. It's risky because you can lose your reputation if software stocks go down in 2026. Your performance will be horrible in 2026. So, your outperformance is definitely gone. And even if you look at the past 15 years, it will show underperformance. And you don't want this to happen for a big fund. Because this thing is happening for another fund called Fundsmith, the British Warren Buffett called Terry Smith. He bought companies at an expensive price during COVID, and he had 1 year of underperformance, 2 years of underperformance, 3 years of underperformance, 4 years, maybe 5 years, and all the alpha is gone. And you had crazy redemptions. The fund had an AUM, assets under management, of $25 billion, and and in 1 year, 2 years, it got cut in half, from 25 to 12. So, it can go really fast. If your outperformance is gone, people leave. Many people leave, you will have redemptions, so you have to sell some holdings here, so you will have more losses, and you can make adjustments, and you lose some fees, and that's bad. Your reputation is destroyed, your performance is destroyed. Good luck to Chuck Akre.
I am with them for Fair Isaac. For the other ones, I'm not a shareholder of Salesforce or ServiceNow. For FICO, let's see how it goes. Very promising, but very volatile for 2026.
If you like this content and you want to go deeper, I have a coaching program. In this program, you will learn my strategy to generate 25% annual returns. You will learn how to find winning opportunities. You will learn how to properly value any stock, when to buy, when to sell, so that you can build a strong portfolio filled with great companies. Additionally, inside this coaching program, you will have access to an exclusive community of like-minded investors, and also, you will have my personalized guidance to reach your investing goals. Click the first link in the description to get more information. You will get a video that explains how everything works, completely for free. No need for your email address. Just click the link in the description and I'll see you on the other side.