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Akre Focus Fund Commentary: 4th Quarter 2018

- By Holly LaFon

Our 2018 fourth quarter performance for the Institutional share class was -8.28% compared with S&P 500 Total Return at -13.52%. For the trailing twelve months ending December 31, 2018, performance for the Institutional share class was +5.55% compared with S&P 500 Total Return at -4.38%.

Our top four (and only positive) performers during the fourth quarter were American Tower (AMT), Dollar Tree (DLTR), SBA Communications (SBAC), and Ubiquiti Networks (UBNT). The top five contributors to full year 2018 performance were Mastercard, O'Reilly Automotive, American Tower, Visa, and Ubiquiti Networks.

Our five largest detractors from performance during the fourth quarter were Mastercard, Moody's, Visa, KKR, and Markel. On a full year basis, the five largest detractors were Dollar Tree, Markel, LKQ (which we exited during Q2), Enstar Group, and Focus Financial.

The sharp market downturn during the fourth quarter may or may not anticipate an economic slowdown or recession. When it comes to forecasting the macro-economy or the stock market broadly, we tend to side with Winston Churchill: "I always avoid prophesying beforehand, because it is much better to prophesy after the event has already taken place." Instead, the objects of our focus remain the quality of the businesses we own, the behavior of the people running those businesses, the reinvestment opportunity and acumen at those businesses, and the valuations we are offered by the market.

As to valuations, the market tremors of the fourth quarter unearthed surprisingly little in terms of opportunity. We would characterize our overall buying appetite as muted, our activity as "nibbling." We incrementally added to several of our most beaten-down positions during the quarter.

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Fund performance current to the most recent month-end may be lower or higher than the performance quoted and can be obtained by calling 1-877-862-9556. The Fund's annual operating expense (gross) for the Retail Class shares is 1.32% and 1.05% for the Institutional Class shares. The Fund imposes a 1.00% redemption fee on shares held less than 30 days. Performance data does not reflect the redemption fee, and if reflected, total returns would be reduced.

Mutual fund investing involves risk. Principal loss is possible. The Fund is non-diversified, meaning it may concentrate its assets in fewer individual holdings than a diversified fund. Therefore, the Fund is more exposed to individual stock volatility than a diversified fund. The Fund invests in small- and medium- capitalization companies, which involve additional risks such as limited liquidity and greater volatility than larger capitalization companies.

This article first appeared on GuruFocus.