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David C. Abrams is the founder of Abrams Capital Management, LLC, which reported $1 billion total assets in its last 13F filing. Abrams graduated from University of Pennsylvania with a B.A. degree in History. Prior to forming Abrams Capital Management in 1999, Abrams worked at Seth Klarman’s Baupost Group for 10 years. In the nearly 12 years since Abrams started his fund he has achieved an annualized return of around 20 percent (net of fees).

Abrams likes concentrated bets on a few good picks. He had only eleven different positions in his 13F portfolio at the end of March. He believes great companies with great management. At Wharton Investment Management Club's Speaker Series Abrams stated that "Good jockeys will do well on good horses, but not on broken down nags."

In the first quarter of 2011, Abrams sold out 1 security and bought 3 new securities. During that quarter, Abrams sold out 150,000 shares of Capitol Federal Financial (NASDAQ:CFFN). He also reduced his Arbitron (NYSE:ARB) position to $119 million by selling 593,835 shares during the first quarter of 2011. In the same quarter Abrams placed new bets on H & R BLOCK (NYSE:HRB) by buying 10 million shares. He also purchased 0.6 million shares of Lubrizol Corp (LZ) and 2 million shares of Iron Mountain (NYSE:IRM) during the first quarter of 2011.

Here is how Abrams’ picks performed since the end of March 2011:

Stock

Value (Millions)

Return
Since Mar 31,2011

BLOCK H & R INC (HRB)

170.4

-4.8%

SLM CORP (NASDAQ:SLM)

151.4

4.9%

LIBERTY MEDIA CORP NEW (LINTA)

129.5

7.8%

ARBITRON INC (ARB)

118.8

4.9%

CROWN CASTLE INTL CORP (NYSE:CCI)

114.8

-2.7%

LUBRIZOL CORP (LZ)

80.4

0.5%

IRON MOUNTAIN INC (IRM)

62.5

5.9%

MCGRAW HILL COS INC (MHP)

60.0

7.9%

CLEAR CHANNEL OUTDOOR HLDGS (NYSE:CCO)

48.3

-0.3%

CAREFUSION CORP (NYSE:CFN)

47.9

3.0%

PENNYMAC MTG INVT TR (NYSE:PMT)

21.0

-4.8%

Value Weighted Return of Holdings

1,005

2.1%

SPY

N/A

-0.2%

Abrams' 13F portfolio has gained 2.1% since the end of first quarter 2011, vs. a 0.2% lost for the SPY. HRB was Abrams’ biggest investment at the end of March 2011. HRB has lost 4.8% since then, underperforming the SPY’s -0.2% return. Andreas Halvorsen’s Viking Global and Richard Breeden’s Breeden Capital Management also had HRB in their portfolios at the end of March.

SLM was Abrams’ second biggest investment at the end of March 2011. SLM has gained 4.9% since then, outperforming the SPY’s -0.2% return. Abrams has $151 million invested in SLM. Jonathon Jacobson’s Highfields Capital Management and Leon Cooperman’s Omega Advisors also had huge positions in SLM at the end of March.

Arbitron Inc. (ARB) has gained 4.9% since March, outperforming the SPY by 5.1 percentage points. Abrams had nearly $119 million (which is equal to 10% of the total market cap) invested at the end of March. ARB recently traded at $41.8. The stock has a market cap of $1.1 billion and P/E ratio of 24. Abrams also profited short term sells and buys of ARB shares. During July-August 2010 he bought 352,564 shares of ARB at an average of $25 per share. He sold 584,035 shares of ARB at an average of $40 per share between February 24, 2011 and April 1, 2011. We believe investors can beat the market by imitating Abrams trades.

Long Term Holdings

Stock

Value (Millions)

Return
Since May 25,2008

SLM CORP (SLM)

151.4

-32.1%

LIBERTY MEDIA CORP NEW (LINTA)

129.5

6.9%

ARBITRON INC (ARB)

118.8

-8.8%

CROWN CASTLE INTL CORP (CCI)

114.8

1.2%

MCGRAW HILL COS INC (MHP)

60.0

16.1%

Average Cumulative Return of Long Term Holdings

575

-6.8%

SPY

N/A

2.3%

The above table shows the performance of Abrams’ long-term stock holdings. Unfortunately Abrams' long term holdings have lost 6.8% since May 2008 vs. a 2.3% gain for the SPY.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: David Abrams' Favorite Stock Picks