Tracking David Abrams' Abrams Capital Management Portfolio - Q4 2015 Update

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Includes: BEN, BKS, BNED, CCO, CHTR, CNL, ENT, INXN, KERX, MGI, MSFT, MTW, OPB, VIP, WFC, WU
by: John Vincent

Summary

David Abrams’ 13F portfolio increased ~31% this quarter from $1.40B to $1.83B. The number of positions increased from 14 to 16.

Abrams Capital Management added Franklin Resources and Time Warner Cable while increasing Manitowoc, Cleco, and VimpelCom during the quarter.

The top-three positions are Western Union, Microsoft Corporation, and Franklin Resources and they add up to ~47% of the portfolio.

This article is part of a series that provides an ongoing analysis of the changes made to David Abrams' US stock portfolio on a quarterly basis. It is based on Abrams' regulatory 13F Form filed on 02/12/2016. Please visit our Tracking David Abrams' Abrams Capital Management article for an idea on his investment philosophy and our last update for the fund's moves during Q3 2015.

This quarter, Abrams' US long portfolio increased 30.91% from $1.40B to $1.83B. The number of holdings increased from 14 to 16: Franklin Resources and Time Warner Cable were newly added. The top three stakes are at 46.89% of the 13F portfolio while the top five holdings are at 61.86%. The largest position by far is Western Union and it accounts for 21.16% of the US long portfolio.

Stake Disposals:

None.

New Stakes:

Franklin Resources (NYSE:BEN): BEN is a large (top-three) 10.62% of the 13F portfolio position established this quarter at prices between $35 and $42. The stock currently trades below that range at $32.32. For investors attempting to follow Abrams, BEN is a good option to consider for further research.

Time Warner Cable (NYSE:TWC): The 6.71% stake in TWC was purchased this quarter at prices between $179 and $192 and the stock is now at $185.

Note: Time Warner Cable is being acquired by Charter Communications (NASDAQ:CHTR). In May 2015, CHTR offered a cash-and-stock deal valued at $195 per share ($100 cash).

Stake Decreases:

Opus Bank Irvine (NASDAQ:OPB): OPB is a 3.23% of the US long portfolio position. It had an IPO in April 2014 at $30 per share. Prior to the IPO, Abrams had an ownership stake of just below 10% in the business and that got converted into equity. Last quarter saw a ~10% trimming at prices between $34.56 and $39.75 and that was followed with a ~22% reduction this quarter at prices between $36 and $40. The stock currently trades at $30.33.

Stake Increases:

Barnes & Noble Inc. (NYSE:BKS): BKS is a 3.53% of the US long portfolio position. The stake was established in Q1 2014 and almost doubled the following quarter in the mid-teens price-range. Last three quarters have also seen a combined ~80% increase. Overall, his cost-basis is at around $10 after adjusting for the Barnes & Noble Education spin-off transaction that closed in July 2015. The stock is now at $8.35.

Note: A regulatory Form 4 filing on 02/08/2016 shows the ownership stake at 10.42M shares (13.63% of the business). This is compared to 7.4M shares in the 13F.

Barnes & Noble Education Inc. (NYSE:BNED): BNED is a 4.47% of the portfolio stake. It was established as a result of the spinoff of BNED from Barnes & Noble: shareholders of Barnes & Noble received 0.632 shares of BNED for each share of BKS held. After close of the transaction, the position was more than doubled to 7.15M shares at prices between $11.80 and $14.93. This quarter saw a further ~15% increase at prices between $8.70 and $15.27. The stock currently trades at $9.95.

Note 1: A regulatory 13G/A filing on 01/14/2016 shows the ownership stake at 8.76M shares (18.16% of the business). This is compared to 8.22M shares in the 13F.

Cleco Corporation (NYSE:CNL): CNL is a fairly large 6.74% of the portfolio stake established last quarter at around $54. This quarter saw a ~97% increase at prices between $48.50 and $53.74. The stock currently trades at $53.67.

Keryx Pharmaceuticals (NASDAQ:KERX): KERX is a small 1.52% of the portfolio position established last quarter at prices between $3.38 and $10.31. The stock currently trades at $3.42. This quarter saw a ~10% increase.

Note 1: A regulatory 13G filing on 02/12/2016 shows Abrams owning 5.6M shares (5.32% of the business). This is compared to 5.5M shares in the 13F.

Note 2: Seth Klarman (Baupost Group) has a ~25% business stake in Keryx Pharmaceuticals. Keryx had a $125M capital raise in October 2015 in a private placement transaction with Baupost (zero-coupon convertible notes due 2020 with $3.74 conversion price). The implied dilution would take Klarman's ownership to ~43%.

Manitowoc Company Inc. (NYSE:MTW): MTW is a 6.06% of the portfolio position established last quarter at prices between $14.57 and $19.60. This quarter saw a ~44% increase at prices between $14.15 and $17.36. The stock currently trades at $14.97. For investors attempting to follow Abrams, MTW is a good option to consider for further research.

Note 1: A regulatory 13G/A filing on 01/22/2016 shows Abrams owning 8.74M shares (6.4% of the business). This is compared to 7.23M shares in the 13F.

Note 2: Manitowoc has seen recent activist involvement. Carl Icahn reached an agreement with Manitowoc in February 2015 whereby he got a board seat. Also, Manitowoc's Cranes and Food Services businesses will be separated in a spinoff.

VimpelCom Ltd. (NASDAQ:VIP): VIP is a 3.26% of the US long portfolio position established in Q1 2015 at prices between $3.43 and $5.61 and increased by ~69% the following quarter at prices between $4.95 and $6.37. Last quarter saw a stake doubling at prices between $4.09 and $5.97 and that was followed with a 78% increase this quarter at prices between $3.01 and $4.30. The stock currently trades near the low end of his purchase price ranges at $3.41.

Kept Steady:

Clear Channel Outdoor Holdings (NYSE:CCO): CCO is a 1.03% of the US long portfolio stake. It is a very long-term position that has been in the portfolio since 2009. The stake has been kept almost steady since. In March 2012, CCO paid a special-dividend of $6.08 per share and that recouped almost the entire outlay on this investment. The stock currently trades at $3.55.

Global Eagle Entertainment (NASDAQ:ENT): ENT is a 2.70% of the US long portfolio position first purchased in Q4 2013 at prices between $9.12 and $15.66 and increased by two-thirds in Q3 2014 at prices between $9.60 and $13.75. The stock currently trades near the low end of his purchase price ranges at $9.28. Abrams controls 6.48% of the business.

InterXion Holding NV (NYSE:INXN): INXN is a 3.87% of the US long portfolio position established in Q3 2014 at prices between $26.58 and $29.01. It was increased by ~190% in Q4 2014 at prices between $24.97 and $28.60. The stock currently trades just outside those ranges at $29.67. Abrams controls 3.4% of the business.

Microsoft Corporation (NASDAQ:MSFT): MSFT is the second-largest stake at 15.11% of the US long portfolio. It was established in Q1 2014 at prices between $36 and $40.30 and increased by ~45% in Q3 2014 at prices between $42.74 and $47.52. The stock currently trades at $50.48.

MoneyGram International Inc. (NASDAQ:MGI): MGI is a 1.76% of the US long portfolio position established in Q4 2014 at prices between $8.15 and $12.93. It was increased by ~89% in Q1 2015 at prices between $7.93 and $9.44 and another ~17% the following quarter at prices between $7.75 and $10.61. The stock currently trades at $5.63. Abrams controls 9.64% of the business.

Wells Fargo (NYSE:WFC): WFC is a top-five 8.23% of the US long portfolio position established in Q4 2013 at prices between $41.30 and $45.50. The stock currently trades at $47.31.

Western Union (NYSE:WU): WU is Abrams' largest stake at 21.16% of the US long portfolio (~4.2% of the business). The position was first purchased in Q4 2013 at prices between $16.37 and $19.29 and increased by ~23% in Q2 2014 at prices between $15.25 and $17.25. The stock currently trades at $17.55.

The spreadsheet below highlights changes to Abrams' US stock holdings in Q4 2015:

Click to enlarge

Disclosure: I am/we are long KERX.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.