Abrams Capital Management, the Boston-based hedge fund headed by reclusive billionaire David Abrams, recently submitted its 13F filing with the SEC for the reporting period ending June 30, revealing a long US equity portfolio worth $1.91 billion. As is the case with most value-focused hedge funds, Abrams Capital Management also makes very few changes in its portfolio on a quarterly basis and places concentrated bets on the stock it likes. Hence, its major holdings at the end of June were the same that it had reported at the end of the March.
During the second quarter, the fund initiated a stake in only one stock and sold its entire holdings in two stocks. Since the fund’s top five equity holdings alone amassed nearly two-third of the value of its equity portfolio at the end of June, in this post, we will focus solely on those stocks and will review their performances this year.
We track hedge funds and prominent investors because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks delivered a monthly alpha of 80 basis points in our backtests that covered the period between 1999 and 2012 (see the details here).
#5 Wells Fargo & Co (NYSE:WFC)
– Shares Owned by Abrams Capital Management (as of June 30): 2.77 Million
– Value of Holding (as of June 30): $131.10 Million
Let’s start with Abrams Capital Management’s fifth-largest holding, Wells Fargo & Co (NYSE:WFC). The largest bank holding company in the U.S. has lost more than 15% of its market capitalization this year and its stock is back to levels it was trading at in early-2014. A large part of the loss that the stock has registered this year came in earlier this month after the company was fined $185 million for an account opening scandal in which its employees opened millions of fraudulent deposit and credit card accounts in order to meet their sales targets and collect bonuses. On September 20, while Wells Fargo & Co (NYSE:WFC)’s CEO, John Stumpf, was being grilled by the Senate Banking Committee, analysts at Morgan Stanley upgraded the stock to ‘Overweight’ from ‘Equal Weight’ citing its current annual dividend yield of 3.5% and its current trading price, which they said is “rarely this inexpensive. This is an opportunity.” However, at the same time, they lowered their price target on the stock to $53 from $56. At the end of June, there were 88 hedge funds covered by us that were long Wells Fargo & Co with the aggregate value of their holdings in it amounting to $28.44 billion.
#4 Manitowoc Foodservice Inc (NYSE:MFS)
– Shares Owned by Abrams Capital Management (as of June 30): 11.25 Million
– Value of Holding (as of June 30): $198.32 Million
Manitowoc Foodservice Inc (NYSE:MFS) became a separately traded public company in March this year following the completion of its spin-off from Manitowoc Company, Inc. Since then, the stock of Manitowoc Foodservice Inc (NYSE:MFS) has appreciated by over 35%. Some analysts who cover the stock think that it has run up significantly in the last few months and can be range-bound or see a correction going forward. For its most recent quarter, Manitowoc Foodservice Inc (NYSE:MFS) reported EPS of $0.12 on revenue of $368.40 million versus analysts’ expectation of EPS of $0.16 on revenue of $379 million. During the second quarter, the ownership of the company among funds covered by us came down by three to 19, but the aggregate value of their holdings in it increased by $60.74 million to $785.27 million.