4 Best Value Stocks to Buy According to David Abrams

In this article, we discuss 4 best value stocks to buy according to David Abrams. If you want to read our detailed analysis of the performance of Abrams Capital Management, go directly to read 8 Best Value Stocks to Buy According to David Abrams. 

4. U-Haul Holding Company (NYSE:UHAL)

Abrams Capital Management’s Stake Value: $190 million
P/E Ratio: 14.15

U-Haul Holding Company (NYSE:UHAL) is an Arizona-based rental company that provides trucks, trailers, and self-storage units for rent. It is a subsidiary of Amerco, which is an American life insurance company. In its fiscal Q3 2023, the company reported revenue of $1.38 billion. Its self-storage revenues for the quarter stood at $190.4 million, up from $159.4 million during the same period last year.

Abrams Capital Management ended Q1 2023 with over 3.6 million shares in U-Haul Holding Company (NYSE:UHAL), worth roughly $190 million. The company represented 6% of David Abrams’ portfolio.

At the end of Q1 2023, 28 hedge funds tracked by Insider Monkey reported having stakes in U-Haul Holding Company (NYSE:UHAL), growing from 22 in the previous quarter. These stakes have a collective value of over $715.6 million.

3. Energy Transfer LP (NYSE:ET)

Abrams Capital Management’s Stake Value: $222.4 million
P/E Ratio: 9.52

Energy Transfer LP (NYSE:ET) is an American energy company, based in Texas. As of the close of Q1 2023, Abrams Capital Management had over 17.8 million shares in the company worth roughly $222.4 million. The company made up 7.03% of David Abrams’ portfolio.

Energy Transfer LP (NYSE:ET) is also a dividend stock that has raised its dividends consistently for the past five years. The company offers a quarterly dividend of $0.3075 per share and has a dividend yield of 9.61%, as of May 22.

As per Insider Monkey’s database, 35 hedge funds reported having stakes in Energy Transfer LP (NYSE:ET) in Q1 2023. These stakes have a collective value of over $591.2 million.

2. Asbury Automotive Group, Inc. (NYSE:ABG)

Abrams Capital Management’s Stake Value: $442.8 million
P/E Ratio: 4.71

Asbury Automotive Group, Inc. (NYSE:ABG) is a Georgia-based car dealership company that has operations in various parts of the US. In the first quarter of 2023, the company reported revenue of $3.6 billion and its net income came in at $181 million. During the quarter, it repurchased shares worth over $21 million.

Asbury Automotive Group, Inc. (NYSE:ABG) was the third-largest holding of Abrams Capital Management at the close of Q1 2023. The hedge fund owned stakes worth roughly $443 million in the company, which represented 14% of its portfolio.

As of the close of Q1 2023, 27 hedge funds tracked by Insider Monkey had stakes in Asbury Automotive Group, Inc. (NYSE:ABG), with a total value of over $1.4 billion.

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

Abrams Capital Management’s Stake Value: $538.2 million
P/E Ratio: 5.53

Lithia Motors, Inc. (NYSE:LAD) was the largest holding of Abrams Capital Management at the end of Q1 2023. The hedge fund owned over 2.3 million shares in the automotive dealership company, worth over $538.2 million. The company represented 17.02% of David Abrams’ portfolio.

As of the March quarter of 2023, 37 hedge funds in Insider Monkey’s database reported having stakes in Lithia Motors, Inc. (NYSE:LAD), compared with 40 in the previous quarter. The consolidated value of these stakes is roughly $1.7 billion.

Right Tail Capital mentioned Lithia Motors, Inc. (NYSE:LAD) in its Q1 2023 investor letter. Here is what the firm has to say:

“The original research premise fit right into Right Tail’s wheelhouse: a set of good businesses trading at attractive long-term valuations. Valuations look inexpensive at mid to high single digit multiples of earnings. Historically, these businesses have traded at 10-15x P/E multiples despite having more leverage and holding more inventory than they do today. In some ways, the historical multiples feel appropriate given their delicate relationships with manufacturers and cyclicality; on the other hand, these businesses have produced solid mid-teens returns with attractive reinvestment opportunities suggesting they are better than average companies. Adding another wrinkle to the puzzle, these businesses have over-earned the last few years due to Covid (car shortages, consumers flush with cash, etc.).

As I began the work, the compelling return potential warranted additional research. Lithia Motors (LAD), for example, has laid out a 2025 earnings per share target of $55-60. If the company reaches $55 in earnings and trades at a 12x P/E, we’d have a stock price of $660 – this would be a triple from today’s prices and produce a ~45% IRR over 3 years. The businesses are also producing lots of cash currently (LAD has earned ~$40 per share the last few years) creating additional capital allocation optionality.”

You can also take a look at 10 Large-Cap Stocks with Insider Buying and 15 Stocks Warren Buffett Sold

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