Akre Capital’s John Neff Boosts Cash, Cites Market Caution and Quality Focus
John Neff, CEO and CIO of Akre Capital Management, has significantly increased the firm’s cash position this year — from 1.4% to 8.1% — a move he describes as a strategic effort to stay patient and disciplined as valuations climb. “We’re building dry powder,” Neff told MarketWatch, noting there’s no immediate catalyst, just a readiness to act when opportunity strikes.
In his latest Q2 shareholder letter, Neff reflected on the harsh realities of even the best investing strategies. He cited the 2021 study, Even God Would Get Fired as an Active Investor, which revealed that even with perfect foresight into the top-performing stocks, investors would still endure brutal drawdowns — up to 76% in some periods. Even a theoretically omniscient hedge fund would face nearly 50% declines at times.
Backing up his long-held belief in compounding and business quality over simple value metrics, Neff referenced research from Morgan Stanley’s Michael Mauboussin and Dan Callahan.
Their findings showed that the top six U.S. stocks since 1926 — including Apple, Microsoft, Nvidia, and Amazon — suffered average drawdowns of 80%. While many stocks never fully recovered, the highest-quality companies nearly doubled in value within five years of bottoming.
Neff’s approach emphasizes resilience over rebounds. During the COVID crash in March 2020, Akre Capital invested $1.1 billion but avoided airlines and cruise lines.
Though those sectors initially bounced, they faltered long-term. “Airlines just aren’t quality businesses,” he said. In contrast, Akre’s 2020 picks have compounded at 22% annually (excluding dividends) since then.
The Akre Focus Fund’s current top holdings include Constellation Software, Mastercard, Visa, Brookfield, KKR, and Moody’s. Asked about stablecoin legislation and the impact on payment networks, Neff downplayed the threat. “To the extent they become useful for payments, they’ll likely just be another currency integrated into the system,” he said.
For now, Neff is staying patient — waiting for the right moment to put his growing cash reserves to work.
