10 Best Cheap Stocks To Buy Now According To Billionaire Abrams

Published March 6, 2021 at 7:00 pm EST Updated August 19, 2026 at 4:48 am EDT

In this article, we will discuss the 10 best cheap stocks to buy now according to billionaire Abrams.

David Abrams‘ hedge fund, which managed to outperform the broader market index with a 15% average return in the first fifteen years since inception, saw strong share price gains from the majority of its top ten holdings during the pandemic year. The $10 billion hedge fund manager has made only a few but smart changes in its equity portfolio during 2020. Only two stocks including TransDigm Group (NYSE: TDG) Incorporated and Energy Transfer Limited (NYSE: ET) met the buying criteria set by David Abrams.

The self-made billionaire started 2021 with 17 stock positions. His hedge fund Abrams Capital Management has extended the strategy of holding large positions in few companies, with the top three positions represented 38% and the top ten holdings accounted for 87% of the overall portfolio based on the latest 13F filings. However, he has spread investments across several sectors including communications, consumer discretionary, healthcare, Utilities, industrials and transports. Abrams’ strategies are working because seven out of his top 10 stock positions outperformed the broader market index so far in 2020.

David Abrams, who worked 10 years for Seth Klarman‘s investment firm Baupost Group, has significantly lowered his portfolio exposure towards the financial sector. The firm sold out its Franklin Resources (NYSE: BEN) position during the fourth quarter, reducing financial stocks weighting to 6.50% of the overall portfolio compared to 13.70% at the beginning of the year.

David Abrams of Abrams Capital Management

Before moving on to the 10 best cheap stocks to buy now according to billionaire Abrams, let’s take a brief look at his educational and professional background. After completing his BA in history, David Abrams made an unintended entrance into an investing career and then joined value investing legend Seth Klarman before starting his own firm Abrams Capital Management in 1999. Seth Klarman’s protégé, who is also known as “one man wealth machine”, always suggest investors to adopt a long-term approach and be patient when it comes to investing in stock markets.

“Being patient is very good, but there has to be a limit,” David Abrams said. His firm closely watches securities for five years before deciding to invest as he says the long term is made up of a lot of short terms. The investing legend says his firm buy opportunities in both struggling and shining companies. “We make a lot of money from mucking around in the garbage, and we also buy nice shiny things, and we care what we pay for both,” he said.

While David Abrams’ reputation remains intact, the same can’t be said of the hedge fund industry as a whole, as its reputation has been tarnished in the last decade during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

Let’s start reviewing 10 best cheap stocks to buy now according to billionaire Abrams because it’s always wise to follow legendary investors investing strategies for stock portfolio construction.

10. Kinder Morgan Inc (NYSE: KMI)

The Boston based hedge fund has been holding a position in Kinder Morgan Inc (NYSE: KMI) since the first quarter of 2018. Although KMI stock price outperformed the broader market index so far this year but the stock fell sharply in the last twelve months due to tumbling financial numbers and lower commodity prices. On the positive side, the hedge fund has bagged massive dividends from Kinder Morgan. The company currently offers a dividend yield of 6.69%.

Kinder Morgan is among the best cheap stocks to buy now according to billionaire Abrams. The company expects to generate net earnings in the range of $2.1 billion for 2021 compared to net earnings of $119 million in 2020. The forecast for the adjusted EBITDA is standing around $6.8 billion and DCF is likely to come around $4.4 billion.

9. Willis Towers Watson Public Limited Company (NASDAQ: WLTW)

The billionaire investor has been enjoying both dividends and share price gains from his position in Willis Towers Watson Public Limited Company (NASDAQ: WLTW) since 2016. It is ranked ninth among the 10 best cheap stocks to buy now according to billionaire Abrams. Shares of Willis Towers rallied almost 5% year to date, extending the five years gains to 90%. In addition to share price gains, the Boston based hedge fund has also been enjoying hefty dividends from Willis Towers. The company currently offers a dividend yield of 1.28% and it has raised dividends in the last two straight years.

WLTW is favored by several value funds counting Cantillon Capital and First Eagle Investment Management among its top 2 holders in Insider Monkey’s database. WLTW was in the portfolios of 58 hedge funds at the end of December. This figure stood at 51 at the end of September. Water Island Capital and Berry Street Capital are among the new additions to the list of hedge funds with bullish WLTW positions.

8. Teva Pharmaceutical Industries Limited (NYSE: TEVA)

David Abrams has also been holding a big stake in Teva Pharmaceutical Industries Limited (NYSE: TEVA) over the last three years. It is the eighth largest stock holding of Abrams Capital Management, accounted for 6.60% of the overall portfolio at the end of the fourth quarter. Shares of Teva outperformed the broader market index year to date despite a sluggish performance in the past couple of years.

In a Q3 investor’s letter, Miller Value Partners stated reasons for the pressure on Teva Pharmaceutical’s share price. Here is what Miller Value Partners said:

“Teva Pharmaceuticals (TEVA) declined 26.9% during the quarter as the market continues to be concerned on opioid liabilities as well as price fixing lawsuits. The company report 2Q results with total revenue of $3.87B below consensus of $4.024B, but reiterated 2020 company guidance of $16.6-17B (consensus of $17.041B). The company reported 2Q Adjusted EBITDA of $1.108B versus $1.099B expected and reiterated 2020 Adjusted EBITDA of $4.5-4.9B ($4.637B consensus) and adjusted EPS of $2.30-2.55 ($2.53 consensus) and Free Cash Flow of $1.8-2.2B. The company was hit after the US Department of Justice alleged in a lawsuit that TEVA provided illegal copays from 2006-2015 on a drug to treat MS. The allegation is $300mm of false claims which TEVA would be liable for 3x that in potential damages if they were to lose in court.”

7. Amerco (NASDAQ: UHAL)

UHAL ranks 7th on our list of the 10 best cheap stocks to buy now. The hedge fund’s strategy of holding a stake in Amerco (NASDAQ: UHAL) generated robust gains in 2020 and extend that momentum into 2021. Shares of the moving and storage operator for household and commercial goods rose 72% in the last twelve months, thanks to strong revenue growth trends. The company has generated 26% year-over-year revenue growth in the latest quarter.

Third Avenue Management, a disciplined, value-oriented asset manager and investment fund, highlighted few stocks including Amerco in Q3 investor’s letter. Here is what Third Avenue Management said:

“During the period, the Fund reduced its exposure to the common stock of AMERCO. The proceeds from this reduction was primarily used to fund a new investment position.”

6. Alphabet Inc. (NASDAQ: GOOGL)

Google parent Alphabet Inc. (NASDAQ: GOOGL) is among the 10 best cheap stocks to buy now according to Abrams. The billionaire investor first initiated a position in Alphabet during the second quarter of 2018 and his firm benefitted from the position. This is because shares of Alphabet soared close to 48% in the last twelve months, extending the five years gains to 180%.

Bretton Fund, which returned of 11.52% for the quarter, commented on few stocks including Alphabet in a Q4 investor’s letter. Here is what hedge fund said:

“Google (aka Alphabet) was one of our best performing stocks last year, returning 30.9%, while its earnings per share increased 19%. As lockdowns first went into place in the spring, many advertisers hit pause on their campaigns, waiting—like a lot of us—to see what the world would look like. And then—like a lot of us—advertisers adjusted. Travel companies cut back their campaigns, while ads for other goods, like athleisure wear and video games, picked up the slack. Google had a rough second quarter, but was back in the swing of things by the next quarter.”

5. PG&E Corporation (NYSE: PCG)

David Abrams strategy of initiating a stake in PG&E Corporation hasn’t worked in favor of his hedge fund yet. Shares of PCG fell 29% in the last twelve months and extended the underperformance into 2021. It is the fifth-largest stock holding David Abrams 13F portfolio, according to the latest filings.

In a Q2 investor letter, Baupost Group commented on few stocks including PG&E Corporation. Here’s what Baupost Group said:

“Fortunately, our investment in the subrogation claims and equity of Pacific Gas and Electric, the firm’s largest position, was not impacted by the COVID-19 fallout. As we expected, PG&E’s bankruptcy plan was confirmed by the judge overseeing the case, and the company emerged from bankruptcy on July 1st. Importantly, upon emergence, cash was placed in a trust for the benefit of the subrogation creditors. A substantial initial distribution from this trust, estimated to be roughly 80% of anticipated recoveries, is expected to be paid later this month.”

4. Asbury Automotive Group Inc (NYSE: ABG)

Seth Klarman’s protege’s stock-picking strategy also worked in the case of Asbury Automotive Group Inc (NYSE: ABG) because shares of the automotive retailer jumped 15% year to date, enlarging twelve months gains to 78%. The hedge fund first initiated a position in Asbury during the third quarter of 2017. It is among the 10 cheap stocks to buy according to billionaire Abrams.

In a Q1 investor’s letter, Diamond Hill Capital commented on few stocks including Asbury Automotive Group. Here is what Diamond Hill Capital said:

“Car dealer Asbury Automotive Group, Inc. recently agreed to purchase a dealership in Dallas, Texas, to improve its poor new vehicle mix and geographic exposure; however, the deal fell through because the business needs cash to survive the impact of the coronavirus. We believe the core Asbury business is weak (although well run) and that the slowdown in sales from the coronavirus will have a long-term impact on the business.”

3. Facebook Inc (NASDAQ: FB)

Billionaire Abrams is bullish over the future fundamentals of the social media giant Facebook Inc (NASDAQ: FB) amid its strong growth prospects. The firm held FB shares worth million $329 at the end of the fourth quarter, representing the third-largest stock holding of the 13F portfolio.

Kinsman Oak Capital Partners Inc., an independent Toronto-based boutique investment firm, highlighted few stocks including Facebook in an investor letter. Here’s what Kinsman Oak Capital Partners stated:

“Our view on Facebook (FB) may be somewhat controversial. The bear case for FB boils down to antitrust risk and valuation. Facebook, although to a lesser degree, is a relative value bargain as well. We believe the company possesses an element of platform risk that Alphabet does not but, compared to the rest of the market, the stock still seems undervalued. We compared Facebook to the Russell 2000, an index full of cyclical businesses that are considered no-brainers at the beginning of a recovery and popular re-opening stocks that are poised to go higher after the vaccine is distributed (Appendix E). Facebook is significantly cheaper, growing faster, has a larger economic moat, superior margin profile, and requires less capex.

In short, we believe the obfuscated earnings power makes Facebook appear more expensive than it really is.”

2. Transdigm Group Inc (NYSE: TDG)

Although shares of Transdigm Group Inc (NYSE: TDG) are still struggling to trade in green in the last twelve months, Billionaire Abrams strategy of buying Transdigm shares at dip during the first quarter of 2020 benefited his hedge fund. Abrams Capital Management initiated a stake in Transdigm at an estimated price of $320 a share in Q1, down significantly from the current $570 level.

In a Q2 investor’s letter, Vulcan Value Partners stated that Transdigm Group is a good stock to buy. Here is what Vulcan Value Partners said:

“TransDigm Group Inc. is an aerospace manufacturing firm that provides highly engineered, niche components for use on commercial and military aircraft. The vast majority of the company’s profits come from aftermarket sales. Most of its products are small volume, low cost items that are sole sourced from TransDigm. It is economically unlikely for a new company to compete on any particular product because volumes on individual components are not large enough to justify the investment in manufacturing facilities and regulatory approval. The company produces high levels of free cash flow, has long equity duration, a strong business model, and an effective, shareholder-oriented management team who are good capital allocators.”

1. Lithia Motors, Inc. (NYSE: LAD)

David Abrams is also bullish over the future fundamentals of automotive retailer Lithia Motors, Inc. (NYSE: LAD) as his hedge fund has increased the stake by 7% to 19.57% of the overall portfolio during the fourth quarter. It is one of the best cheap stock picks according to the billionaire Abrams.

In the Q3 investor’s letter, Cartenna Capital highlighted few stocks including Lithia Motors. Here is what Cartenna Capital said:

“Another key winner during Q3 for the Fund was our long position in Lithia Motors Inc. (“LAD” or “Lithia”). LAD represented a compelling opportunity to own a best-in-class auto dealer at a significant discount and whose fundamental drivers including vehicle miles driven, new/used unit volumes and used pricing, were rapidly accelerating off April’s trough levels. Our thesis centered on three idiosyncratic advantages of Lithia over other auto dealers. First, Lithia’s geographic breakdown offered meaningful exposure to highly dense urban areas like the Tri-State Region (NYC) and coastal California cities, where we believed public transportation and ride sharing would lose share to private automobile transportation. Second, LAD’s rapidly growing used-car business (13.7% same-store sales in 2019) was positioned to disproportionately benefit the Company as 75% of Lithia’s used car inventory is 4+ years old. Used cars of this age are typically less commoditized, more recession resistant and generate higher margins. The third, and most compelling, idiosyncratic opportunity emerged as Lithia’s management revealed a new digital retail strategy. With this new Driveway.com platform, we immediately deemed Lithia to be the best positioned to address the entire vehicle ownership lifecycle in a digital world, take market share, and expand its multiple as new investors appreciated the omnichannel story. Further, Lithia’s new “50 and 50 Plan” outlines a path to achieve $50b1n of revenue and $50 of earnings per share by 2025 (2019: $12.9b1n revenue, $11.76 EPS). Even after a run to $227 per share in late September, LAD continues to offer a tremendous risk-reward profile.”

Please also see Billionaire Seth Klarman’s Top 10 Stock Picks for 2021 and 10 Best Junior Gold Mining Stocks To Buy Now