Akre Capital’s John Neff Builds Cash Pile, Stays Focused on Quality Amid Uncertainty

John Neff, CEO and CIO of Akre Capital Management, is preparing for potential market dislocations by raising the firm’s cash position from 1.4% to 8.1% this year. In his Q2 shareholder letter, Neff said the move isn’t driven by any immediate catalyst, but rather a desire to stay ready. “We’ve made a point of raising our cash position in case our valuation discipline and patience gets rewarded in the weeks and months ahead,” he explained.

Neff leaned on historical research to frame his long-term approach. He referenced the 2021 study, Even God Would Get Fired as an Active Investor, which showed that even if an investor could perfectly predict the best-performing stocks over five years, they would still face major drawdowns — up to 76% during the Great Depression and roughly 40% in more recent crises.

He also pointed to research from Morgan Stanley’s Michael Mauboussin and Dan Callahan. They found that even the most successful companies — Apple, Microsoft, Nvidia, Alphabet, Amazon, and Exxon Mobil — experienced average peak-to-trough losses of 80%. And the median stock never fully recovered. However, the highest-quality businesses nearly doubled in value five years after bottoming.

Neff believes that insight supports Akre’s focus on business quality and compounding, which he says differs meaningfully from traditional value investing. “Those distinctions center on the primacy of business quality,” he noted.

During the March 2020 COVID selloff, Akre invested $1.1 billion but avoided sectors like airlines and cruise lines, which he did not consider durable businesses. While the airline sector (via the JETS ETF) initially rebounded 86%, its long-term performance faded. In contrast, Akre’s 2020 investments gained 75% in the first year and have since compounded at 22% annually, excluding dividends.

Today, Akre’s top holdings include Constellation Software, Mastercard, Visa, Brookfield, KKR, and Moody’s. On potential threats to Visa and Mastercard from stablecoins, Neff said he sees them more as new currencies to integrate into existing payment networks than as competitors.

In the face of a richly valued market, Neff’s message is clear: stay focused on quality, be patient, and keep cash ready for when the odds improve.