Billionaire David Abrams founded in 1999 in Boston. The fund follows a fundamental, value-oriented approach and its investments are made with a focus on the long-term horizon. Abrams holds a diversified portfolio of assets, including domestic and foreign equity securities, debt, distressed securities, and private and illiquid investments. Before founding Abrams Capital, David Abrams spent a decade at the renowned value investor Seth Klarman’s Baupost Group. Mr. Klarman’s personal foundation invested in Abrams Capital, which over the years managed to earn its investors billions of dollars and even made Abrams himself a billionaire.
Since its launch in 1999, Abrams Capital registered average annualized returns of around 15%. This is impressive especially since Abrams Capital is basically a one-man shop, which employs a small staff, including investment analysts Drew Pluhar and Travis Rhodes, COO Michael Josephson, CFO Frederic Leif, and Head of Trade Michael Piper. In addition, Mr. Abrams personally approves all trades.
Abrams Capital is also unlevered, which means that it does not invest with borrowed money and usually holds a significant amount of cash, probably taking after his mentor Seth Klarman, who prefers to hold cash rather than invest in securities with low safety margins. The fund’s latest 13F filing shows its conservative approach as it is relatively concentrated and most positions were unchanged during the second quarter.
Overall, David Abrams’ fund equity portfolio is worth $2.52 billion as of the end of June. The 13F filings contains 18 positions, including three new holdings: Altaba Inc (NASDAQ:AABA), Cars.com Inc (NYSE:CARS), which and Suburban Propane Partners LP (NYSE:SPH). During the second quarter, Abrams Capital also increased its stake in two companies, trimmed four holdings and closed its position in Microsoft Corporation (NASDAQ:MSFT), having unloaded 4.98 million shares between April and June.
Following funds like Abrams Capital is a great way to identify profitable investment opportunities, since they employ resources and skills that are not always available to smaller investors. Even though there are some lags behind the time that a fund makes an investment and the time it reveals it, due to their long-term focus, it can be still useful to try and replicate them. However, trying to replicate the portfolio of individual funds can be risky, especially in the last couple of years when a lot of big hedge funds made bad bets, which resulted in huge losses.
One way to reduce the risk, is to select several funds and follow them into the stocks that they are collectively most bullish on. This is where our research comes in handy. At Insider Monkey, we follow over 600 hedge funds and analyze their quarterly 13F filings in order to determine their collective sentiment towards thousands of stocks. However, we focus on their small-cap picks as part of our investment strategy, which returned over 45% since February 2016. We share the stocks that are part of our strategy with the subscribers to our quarterly and monthly newsletters, that you can read more about here.
With this in mind, let’s take a look at Adams Capital’s top picks from its latest 13F filing, as well as some other stocks that the fund was bullish on heading into the third quarter.