David Abrams’ Top Small-Cap Picks: Lamar Advertising Co (LAMR), Clear Channel Outdoor Holdings, Inc. (CCO)

Page 1 of 2

Hedge funds generate a significant portion of their alpha in their small-cap investments, primarily because there is less publicly available information about these stocks. At Insider Monkey, we’ve empirically tested this phenomenon, and according to our own analysis, investing in hedge funds’ top small-cap picks has generated an alpha of about 120 basis points per month.

We started publishing a quarterly newsletter at the end of August, and since then, until the end of December, this strategy returned 14.3% vs. 2.1% for the S&P 500 index (learn more about our small-cap strategy).

Using our database of 13F filings from the SEC, let’s take a look at one hedge fund in particular: David Abrams’ Abrams Capital Management. We’ll give a brief run-through of the fund’s small-cap holdings (see Abrams Capital Management’s full 13F portfolio). Each has a market capitalization between $1 billion and $5 billion, which is the same criterion used in our market-beating strategy.

Lamar Advertising (LAMR)

Lamar Advertising Co (NASDAQ:LAMR) is Abrams’ No. 1 stock holding overall, worth over 28% of his 13F portfolio at the end of the last filing period. It’s not often that we see a fund with nearly $1 billion in 13F assets under management have such a large percentage of their portfolio invested in one particular small-cap. So, the obvious question is: why is Abrams so bullish on Lamar?

Well, for starters, the billboard advertising company’s industry-level outlook is promising, as it slowly upgrades its ad portfolio digitally. Due to the fact that digital billboards offer ad space to multiple customers, revenue per board is inherently increased. Now, the Street expects this bullish trend to positively impact Lamar’s bottom line, as the average analyst is projecting EPS growth in excess of 100% this year.

Now, it’s worth mentioning that the stock currently trades at a PEG above 2.0, but if it can post Q4 earnings above the 10-cent consensus, there’s more upside to be had. Lamar reports next quarter’s financials on February 27th; we’ll be watching this date closely.

Next up we have Arbitron Inc. (NYSE:ARB), sitting at fourth in Abrams’ portfolio, good for his second favorite small-cap. Arbitron provides market research to players in all aspects of the media world, from mobile advertisers to television networks. The company’s most notable services are audience measurement, local and regional qualitative customer data, and various software programs.

One of the company’s key growth drivers is its ability to install “annual price escalators” in its clients’ contracts. Keeping this in mind, the sell-side expects Arbitron’s earnings growth to accelerate notably over the next five years, forecasting an annual expansion of 13-14%. Over the past half-decade, EPS growth averaged just 2.9% a year. While the value isn’t outstanding—a PEG of 1.7 and a forward P/E of 18.5x—growth-oriented investors can be satisfied with Arbitron.

Which two stocks remain?

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!