Abrams Capital Management, founded by David Abrams, recently disclosed an ownership stake of just under 5.30 million shares in the newly spun-off Barnes & Noble Education Inc. (NYSE:BNED) via a Form 3 filed with the SEC. Even more to that, Abrams Capital Management reported purchasing an additional 149,793 shares, increasing the fund’s total stake in the company to nearly 5.45 million shares.
Abrams Capital Management is a Boston-based hedge fund founded by David Abrams in 1999. The investment firm takes a fundamental, value-oriented approach to investing and follows an opportunistic investment strategy. Abrams Capital Management invests in a wide range of vehicles such as distressed securities, private and/or illiquid securities, and global equity and debt securities. The firm’s investments are generally held for a long-term horizon and do not use leverage. David Abrams had worked at Seth Klarman’s Baupost Group for ten years prior to launching his own shop. It’s also worth mentioning that Abrams’ hedge fund has delivered an annualized return of approximately 15% since its foundation in 1999. As stated by its latest 13F filing with the SEC, Abrams Capital Management oversees a public equity portfolio with a market value of $1.47 billion as of June 30.
Let’s first take a step back and analyze how tracking hedge funds can help an everyday investor. Through our research we discovered that a portfolio of the 15 most popular small-cap picks of hedge funds beat the S&P 500 Total Return Index by nearly a percentage point per month on average between 1999 and 2012. On the other hand the most popular large-cap picks of hedge funds underperformed the same index by seven basis points per month during the same period. This is likely a surprise to many investors, who think of small-caps as risky, unpredictable stocks and put more faith (and money) in large-cap stocks. In forward tests since August 2012 these top small-cap stocks beat the market by an impressive 65 percentage points, returning over 123% (read the details here). Follow the smart money into only their best investment ideas all while avoiding their high fees.
Barnes & Noble Education Inc. (NYSE:BNED) rang the opening bell at the New York Stock Exchange on August 3, after spinning-off from its parent company Barnes & Noble Inc. (NYSE:BKS). Barnes & Noble Education is a provider of bookstore operation services and an industry leader with 724 campus stores serving colleges and universities throughout the United States. Following the spin-off, former Chief Executive Officer of Barnes & Noble, Michael Huseby, became the CEO of the newly spun-off company. It’s worth noting that the stockholders who held BKS common stock on July 27 received a distribution of 0.632 BNED common shares for each share of BKS common stock.
The freshly-appointed CEO of Barnes & Noble Education, Michael Huseby, believes that the spin-off will allow the company to focus on the key things that are important for its business. The access to the capital markets will enable the company to accomplish development ideas and plans that it has been wanting to implement for quite some time. Put simply, the spin-off will allow Barnes & Noble Education to accelerate its growth strategy by enhancing its business focus. According to Michael Huseby, the spun-off company will now channel more capital towards developing its digital platform through the company’s app, Yuzu. This app enables students to rent and save eTextbooks on their smart devices, which actually improves education and lowers costs. Nevertheless, the digital textbooks represent just the beginning of the company’s development strategy for its digital platform, as there are a lot of different media that can be brought into digital education. However, let’s not forget to mention that the competitive advantage of Barnes & Noble Education lies in the fact that the company owns on-campus bookstores. Thus, the company should also focus on pushing forward development plans in this segment as well.
Ultimately, Barnes & Noble Education intends to expand through both organic growth and mergers and acquisitions over the coming years. The organic growth is anticipated to come from its bookstores and websites, but the company has also revealed its plans to explore some of the strategic opportunities the company has with digital and content partners in order to grow the company more than just organically. The College segment delivered revenues of $1.77 billion for Barnes & Noble in the full fiscal year 2015 that ended May 2. At the same time, this segment saw an increase of 48 new stores last year, excluding the addition of 24 stores so far this year.