Abrams Capital Management, founded by David Abrams, keeps buying shares of Barnes & Noble Education Inc. (NYSE:BNED). In a recently-filed Form 4 with the U.S. Securities and Exchange Commission, the Boston-based hedge fund revealed the purchase of 68,244 shares at a price of $12.86 per share, lifting its stake to 6.30 million shares. Abrams Capital Management has been gradually increasing its stake in the company, as revealed by several Form 4 filings since mid-August, when we discussed the 5.45 million share-ownership stake held by the fund at that time. It’s worth noting that the current stake accounts for approximately 13.07% of the company’s outstanding common stock.
Abrams Capital Management LP is a value-oriented hedge fund founded by David Abrams in 1999. The investment firm holds approximately $8 billion in assets under management across three funds. Abrams Capital generally invests in a small number of beaten-down companies and maintains these investments over a long-term horizon. The firm’s main funds have delivered an average annualized return of roughly 15% since its inception, greatly outperforming both the average for hedge funds and the broader market. David Abrams, who worked at Seth Klarman’s Baupost Group LLC for a decade or so, is known to be extremely patient when it comes to investing; he can sit on a static portfolio without making any moves for months. The fund’s recent 13F filing with the SEC disclosed that Abrams Capital Management oversees a public equity portfolio with a market value of $1.47 billion as of June 30.
We follow hedge funds like Abrams Capital Management because our research has shown that their stock picks historically managed to generate alpha even though the filings are up to 45-days delayed. We used a 60-day delay in our back tests to be on the safe side and our research showed that the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Total Return Index by an average of 95 basis points per month between 1999 and 2012. After adjusting for risk, our calculations revealed that these stocks’ monthly alpha was 80 basis points. We have also been sharing and tracking the performance of these stocks since the end of August 2012, during which time they have returned 118%, outperforming the S&P 500 ETF by over 60 percentage points (see more details here).
Barnes & Noble Education Inc. (NYSE:BNED) provides bookstore operation services to more than five million college students via its 724 stores on campuses all over the United States. The company recently spun-off from its parent company Barnes & Noble Inc. (NYSE:BKS), which many believe was a good option for both companies, one that will allow Barnes & Noble Education to grow by enhancing its business focus. Nevertheless, it seems that the market does not believe in the growth strategy outlined by Barnes & Noble Education, as its stock has lost nearly 10% since the company started trading on the New York Stock Exchange on August 3.