Below is the list of top 5 stock picks of value investor David Abrams. For a detailed discussion about David Abrams’ investment philosophy and portfolio management strategy please see Top 10 Stock Picks of Value Investor David Abrams.
5. Change Healthcare Inc. (NASDAQ:CHNG)
Abrams Capital Management’s stake value: $362 million
Percentage of Abrams Capital Management’s portfolio: 7.96%
Number of hedge fund holders: 48
Abrams Capital Management is the leading stakeholder in Change Healthcare Inc. (NASDAQ:CHNG) as of December. The firm has been holding a stake in the company since the first quarter of 2021. The company’s stock price rallied since the beginning of this year amid the extension of a merger agreement between Optum and Change Healthcare. As part of the extension, Optum is going to pay a $650 million fee to Change Healthcare in the event the merger is unable to be completed because of the court’s decision.
Of the 924 hedge funds tracked by Insider Monkey, 48 were bullish about the company as of December. Abrams Capital Management was the leading stakeholder in the company.
4. Asbury Automotive Group, Inc. (NYSE:ABG)
Abrams Capital Management’s stake value: $365 million
Percentage of Abrams Capital Management’s portfolio: 8.02%
Number of hedge fund holders: 32
Holding a long-term stake in Asbury Automotive Group, Inc. (NYSE:ABG) has paid off for Abrams Capital Management. This is because the company’s stock price soared 155% in the past five years and most of the price appreciation occurred in the past two years. Its stock price has further upside considering high price targets from analysts. The median target price for Asbury is $249, which is significantly higher than the current price of around $160. Together with its subsidiaries, Asbury Automotive Group operates in the United States as an automotive retailer. It provides new and used vehicles, as well as car repair and replacement parts, maintenance services, and collision repair services.
The number of bullish bets increased substantially in Asbury during the fourth quarter of 2021. It was in 32 hedge funds’ portfolios as of December compared to 22 positions in the previous quarter.
3. Meta Platforms, Inc. (NASDAQ:FB)
Abrams Capital Management’s stake value: $405 million
Percentage of Abrams Capital Management’s portfolio: 8.89%
Number of hedge fund holders: 224
Meta Platforms, Inc. (NASDAQ:FB) is the third-largest stock holding of Abrams Capital according to the fourth quarter filings. The firm first initiated a position in the company in the fourth quarter of 2018 and left its stake unchanged over the past eight quarters. Shares of Meta Platforms remained under pressure over the past two quarters. Despite that, the stock price of the social media platform is up 55% in the past five years.
In the fourth quarter investor letter, Boyar Value Group, an investment management firm, mentioned a few stocks including Meta Platforms. Here is what Boyar Value Group stated:
“Corporate executives can have many different reasons for selling shares (anticipation of tax law changes, philanthropy, diversification, and much more), but the sheer number of billionaire founders who sold shares in 2021 should raise eyebrows and might well be signaling a market top. Bloomberg’s Ben Steverman and Scott Carpenter report not only that Mark Zuckerberg of Meta Platforms Inc. (formerly known as Facebook) sold shares in his company almost every day last year but also that the founders of Google sold ~$3.5 billion worth of stock (the first time either Sergey Brin or Larry Page has sold shares since 2017).”
2. Alphabet Inc. (NASDAQ:GOOG)
Abrams Capital Management’s stake value: $424 million
Percentage of Abrams Capital Management’s portfolio: 9.3%
Number of hedge fund holders: 158
Alphabet Inc. (NASDAQ:GOOG) is one of the largest contributors to Abrams Capital’s performance over the years. Shares of the communication services company gained 217% in the past five years. It is among the internet companies that are gaining momentum in the post-pandemic environment. This is because economic reopening and easing traveling policies are bringing more advertisement revenue for the company.
In the fourth quarter investor letter, Vulcan Value Partners, an investment management firm, mentioned a few stocks including Alphabet. Here is what Vulcan Value Partners stated:
“In contrast, we made a different kind of mistake about a decade ago. Google, now Alphabet, performed very well for us while we owned it. The company kept outperforming our assumptions and we kept lowering them to be conservative. “Trees do not grow to the sky.” The stock kept going up and our value grew but did not keep pace with the stock. It hit our estimate of fair value and we sold it with a nice gain, patting ourselves on the back. We kept following the company and what they actually did over the next several years was roughly double the assumptions we used to value it. Therefore, our value was too conservative, and we sold it too cheaply, missing many years of compounding. Fortunately, we experienced some volatility several years ago that allowed us to purchase Alphabet (Google) again with a margin of safety.”
1. Lithia Motors, Inc. (NYSE:LAD)
Abrams Capital Management’s stake value: $698 million
Percentage of Abrams Capital Management’s portfolio: 15.31%
Number of hedge fund holders: 56
David Abrams investment firm is the leading stakeholder in Lithia Motors, Inc. (NYSE:LAD) as of December. The firm held $698 million worth of stake in the company, accounting for 15.31% of the entire portfolio. Lithia Motors is the second-largest automotive retailer in the United States. The company’s stock price surged more than 200% in the past five years amid increasing revenue and earnings. The company posted 51% revenue growth in fiscal 2021 compared to the past year.
Elite funds are also showing confidence in Lithia Motors. It was in 56 portfolios as of December compared to 39 positions in the previous quarter.
You can also take a look at 10 Monthly Dividend Stocks to Buy in April and 10 Consumer Technology Stocks to Invest In According to Ken Fisher
