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“Good jockeys will do well on good horses, but not on broken down nags”, David Abrams, founder of Abrams Capital Management, said at Wharton Investment Management Club’s Speaker Series. Abrams likes to focus on a few good stocks. He only has 17 different positions in his 13F portfolio at the end of September. Abrams has a B.A. from University of Pennsylvania and he spent 10 years working at Seth Klarman’s Baupost Group (the 11th largest hedge fund in the world), before establishing his own hedge fund in 1999. Since then, Abrams Capital Management returned nearly 20% net of fees annually.

Here is Abrams’ portfolio as of September 30, 2011.

Company Name

Ticker

Value

Activity

BLOCK H & R INC

HRB

154802

14%

LAMAR ADVERTISING CO

LAMR

149737

216%

S L M CORP

SLM

142701

16%

LIBERTY MEDIA CORP NEW

LINTA

119183

0%

CROWN CASTLE INTL

CCI

109727

0%

ARBITRON INC

ARB

97373

-1%

TEVA PHARMACEUTICAL

TEVA

80805

New

CEPHALON INC

CEPH

75051

New

GOOGLE INC

GOOG

51504

New

CAREFUSION CORP

CFN

45150

11%

CLEAR CHANNEL OUTDOOR

CCO

31397

1%

PENNYMAC MORTGAGE INV TR

PMT

18183

0%

GENWORTH FINANCIAL INC

GNW

17220

New

SANOFI AVENTIS

SNY

14161

New

OMEGA HEALTHCARE INVESTORS

OHI

7965

New

ROYAL BANK SCOTLAND Cl 1

RBS

7229

2%

ROYAL BANK SCOTLAND Cl 2

RBS

6631

3%

ROYAL BANK SCOTLAND Cl 3

RBS

6100

64%

ROYAL BANK SCOTLAND Cl 4

RBS

3603

3%

SAFETY INSURANCE GROUP INC

SAFT

3017

New

ROYAL BANK SCOTLAND Cl 5

RBS

500

New

ROYAL BANK SCOTLAND Cl 6

RBS

491

New

MCGRAW HILL COS INC

MHP

 

Sold Out

Though only had 17 different positions in his portfolio, Abrams’ portfolio value is not small. At the end of September, the fund has a portfolio value of $1.14 billion, up from the $1.03 billion at the end of June. The number of positions is also slightly higher: it invested only in 12 different positions at the end of the second quarter. Abrams sold out his position in Mcgraw Hill Cos Inc (MHP) over the third quarter. In the second quarter, Abrams reduced his MHP position by 33% to $42.5 million. MHP returned 5.98% since the end of September, a little bit higher than the 5.75% of SPY.

Abrams increased his position in Lamar Advertising Co (NASDAQ:LAMR), which is also the second largest position in the fund as of September 30. Abrams tripled his holding in this stock to $150 million. The stock soared 38.93% since the end of September, heavily beating the market by over 33 percentage points. Abrams also increased his stakes in the first and third biggest positions in his fund: Block H&R Inc (NYSE:HRB) and SLM Corp (NASDAQ:SLM). He increased his position in HRB by 14% to $155 million and his position in SLM by 16% to $143 million. HRB returned 13.30% and SLM returned 1.20% since the end of September. The top three positions of Abrams Capital Management generated a weighted average return of 18.02% since the end of the third quarter.

During the third quarter, Abrams opened a new position in Cephalon Inc (NASDAQ:CEPH). The firm was acquired by Teva Pharmaceuticals Industries Ltd (NYSE:TEVA) on October 14, 2011. Abrams also bought new stakes in Google Inc (NASDAQ:GOOG), which returned 12.80% since the end of September, outperforming SPY by seven percentage points. Ken Fisher also had $363 million invested in GOOG. In addition, Abrams also opened new positions in Genworth Financial Inc (NYSE:GNW), Sanofi Aventis (NYSE:SNY), Omega Healthcare Investors Inc (NYSE:OHI) and Safety Insurance Group Inc (NASDAQ:SAFT).

Concentrating on good bets, Abrams made approximately 18% from his top three positions since the end of September. We believe that by focusing on Abrams Capital Management’s best stock picks, investors will be able to beat the market in the long term.

Source: Focus On David Abrams' Amazing Stock Picks