In addition, new generics that are coming to market on Copaxone and Provigil, Teva Pharmaceutical Industries Ltd (NYSE: TEVA)’s profitable drugs, are seen as near-term negatives on the stock. On the plus side, the stock is priced at only 18 times trailing earnings against a sector average of 102 times earnings, and the company has a global presence with recent moves into emerging markets. As the Affordable Health Care Act comes into full swing in 2014, the demand for generic drugs (to which Teva Pharmaceutical Industries Ltd (NYSE: TEVA) dominates) and the requirement for more doctors to prescribe generics, looks to play out very nicely.
Finally, finishing the list of top five is Wesco Aircraft Holdings Inc (NYSE:WAIR). Since acquiring WAIR during the first quarter of last year, Abrams has increased his holding of the company by 14,340%. Obviously, there is something very enticing about this airline parts and services company. Its bottom line has improved very dramatically as it continues to cut costs in tandem with rising revenues, and the stock is priced 2 times its book value compared to 4 times book in the remaining sector. As airlines continue to consolidate and consumer demand improves, the trickle down effect on those companies that keep the planes flying will become more prominent. Analysts rate the stock a buy with their next target at $15.90.
In short, Abrams’ strategy to invest in undervalued stocks is quite evident from most of these top five picks; Lamar is the only one priced expensively to the rest of the market. The hedgie’s equity portfolio is concentrated among 16 stocks in diverse sectors such as pharmaceuticals, finance and services, with Sallie Mae, Wesco and Teva Pharmaceutical Industries Ltd (NYSE: TEVA) all looking like solid bets at the moment.