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

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

The 10 Biggest Outlet Malls in USA

The 5 Most Popular Rap Songs of All Time

The 10 Countries that Eat the Most Meat

The10 Most Expensive Countries to Fly To

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!