3. Asbury Automotive Group Inc. (NYSE:ABG)
Abrams Capital Management’s Stake Value: $358.7M
Percentage of Abrams Capital Management’s 13F Portfolio: 9.64%
Number of Hedge Fund Holdings: 27
Based in Duluth, Georgia, Asbury Automotive Group Inc. (NYSE:ABG) is an American company which operates automobile dealerships in various parts of the United States. It was ranked at #360 on the 2022 Fortune 500 list, and with over 145 dealerships and 198 franchises, it is the sixth largest automotive retailer in the U.S. as of August 2022. As of the second quarter of 2022, Abrams Capital Management is the second largest stakeholder in Asbury Automotive Group Inc. (NYSE:ABG), owning more than 2.1 million shares worth $358.7 million. This means that the stock makes up for 9.64% of Abrams’ 13F portfolio for the quarter.
On August 1, JPMorgan analyst Rajat Gupta raised the firm’s price target on Asbury Automotive Group Inc. (NYSE:ABG) to $205 from $195, maintaining a Neutral rating on the stock.
LRT Capital Management, an investment management firm, mentioned Automotive Group Inc. (NYSE:ABG) in their Q2 2022 investor letter. This is what they had to say:
“Asbury Automotive Group (NYSE:ABG) is one of the largest automotive retailers in the United States. It operates 90 dealerships consisting of 112 franchises and 25 collision repair centers. The company’s stores offer new and used vehicles, parts, and service, as well as finance and insurance (F&I) products. Franchise agreements controlled by automotive manufactures and state laws create an environment of tightly controlled market entry and restricted competition.
The dealership industry is highly fragmented with 93.5% of dealers having only between 1-5 locations according to data from 2020. In fact, dealers with over 50 locations account for only 0.1% of the industry – a testament to the huge opportunity for consolidation that lies ahead. Industry dynamics, including the rising complexity of automobiles and the need for omnichannel distribution are favoring better capitalized and larger dealer groups. We believe Asbury Automotive Group (NYSE:ABG) has several distinct advantages, particularly its highly profitable parts and service business, its overexposure to the luxury vehicle business, which carriers the best margins, and its Clicklane omnichannel strategy. Asbury’s (NYSE:ABG) management has also been acting in the best interests of its shareholders by allocating capital towards acquiring dealerships to aggressively expand its business, and occasionally repurchasing stock when attractive acquisitions targets could not be found.
ABG (NYSE:ABG) is not a fast-growing SaaS business, but when paying a valuation of ¼ of the overall stock market, one does not need to make heroic assumptions about the future to enjoy strong returns as shareholders. We believe that over the next several years, Asbury (NYSE:ABG) will continue to acquire dealerships, occasionally buy back stock and invest to improve its digital shopping experience. We wrote about Asbury in detail in our August 2021 Investor Letter.”
