Tracking David Abrams' Abrams Capital Management Portfolio - Q1 2016 Update

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

Summary

David Abrams’ 13F portfolio increased this quarter from $1.83B to $2.12B. The number of positions increased from 16 to 18.

Abrams Capital Management increased Franklin Resources and Barnes & Noble Inc. while adding Northstar Asset Management during the quarter.

The top-three positions are Western Union, Franklin Resources, and Microsoft Corporation 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 05/13/2016. 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 Q4 2015.

This quarter, Abrams' US long portfolio increased 15.74% from $1.83B to $2.12B. The number of holdings increased from 16 to 18. The top three stakes are at 47.34% of the 13F portfolio while the top five holdings are at 61.51%. The largest position by far is Western Union and it accounts for 19.69% of the US long portfolio.

Stake Disposals:

Cleco Corporation (NYSE:CNL): CNL was a fairly large 6.74% of the portfolio stake established in Q3 2015 at around $54. Last quarter saw a ~97% increase at prices between $48.50 and $53.74. The elimination this quarter was at prices between $45 and $55. The stock currently trades at $55.37.

Manitowoc Company Inc. (NYSE:MTW): MTW was a 6.06% of the portfolio position established in Q3 2015 at prices between $14.57 and $19.60. Last quarter saw a ~44% increase at prices between $14.15 and $17.36. Manitowoc spun-off Manitowoc Food Service (NYSE:MFS) in March and the terms called for MTW shareholders to receive one share of MFS for each share of MTW held. Abrams held on to MFS and eliminated MTW.

Note: Manitowoc had seen activist involvement. Carl Icahn had a board seat and was instrumental in the MFS spinoff transaction.

New Stakes:

Manitowoc Foodservice Inc. : The large (top-five) 7.84% MFS stake was acquired as a result of the spin-off of Manitowoc Foodservice from Manitowoc Company. Abrams held MTW shares for which they received MFS shares in the ratio 1:1. MFS started trading at ~$12 and currently goes for ~$16. It has returned ~25% in two months.

Northstar Asset Management (NYSE:NSAM): NSAM is a fairly large 4.24% of the 13F portfolio stake established this quarter at prices between $9.31 and $12.14. The stock currently trades at $11.69.

Northstar Realty Finance Corp. (NYSE:NRF): NRF is a ~2% position purchased this quarter at prices between $8.57 and $17 and the stock is now at $13.29.

TICC Capital Corp. (NASDAQ:TICC): TICC is a minutely small 0.01% of portfolio position established this quarter at prices between $4.42 and $6.11. The stock currently trades at $5.39.

Stake Decreases:

None.

Stake Increases:

Barnes & Noble Inc. (NYSE:BKS): BKS is a fairly large 6.08% 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 had seen a combined ~80% increase while this quarter saw a further ~40% increase at prices between $7.33 and $12.45. 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 $11.10.

Barnes & Noble Education Inc. (NYSE:BNED): BNED is a 4.06% 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 at prices between $11.80 and $14.93. Last quarter saw a further ~15% increase at prices between $8.70 and $15.27. The stock currently trades at $8.69. There was a ~7% further increase this quarter at prices between $8.73 and $11.39.

Note: A regulatory Form 4 filing on 4/8/2016 shows a very minor stake reduction following the quarter: ~9.5K shares disposed at $8.77.

Franklin Resources (NYSE:BEN): BEN is a large (top-three) 14.66% of the 13F portfolio position established last quarter at prices between $35 and $42 and increased by ~51% this quarter at prices between $31.45 and $39. The stock currently trades at $35.07. For investors attempting to follow Abrams, BEN is a good option to consider for further research.

Keryx Pharmaceuticals (NASDAQ:KERX): KERX is a small 1.26% of the portfolio position established in Q3 2015 at prices between $3.38 and $10.31. The stock currently trades at $5.46. Last quarter saw a ~10% increase while this quarter saw another ~4% increase.

Note: Seth Klarman (Baupost Group) has a huge ownership 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 takes Klarman's ownership to ~35% of the business.

VimpelCom Ltd. (NASDAQ:VIP): VIP is a 3.78% 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. Q3 2015 saw a stake doubling at prices between $4.09 and $5.97 and that was followed with a 78% increase last quarter at prices between $3.01 and $4.30. The stock currently trades near the low end of his purchase price ranges at $3.58. This quarter also saw a very minor ~3% increase.

Kept Steady:

Clear Channel Outdoor Holdings (NYSE:CCO): CCO is a 0.74% 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 $6.11.

Global Eagle Entertainment (NASDAQ:ENT): ENT is a 2.01% 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 below the low end of his purchase price ranges at $7.04. Abrams controls 6.48% of the business.

InterXion Holding NV (NYSE:INXN): INXN is a 3.84% 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 outside those ranges at $34. Abrams controls 3.4% of the business.

Microsoft Corporation (NASDAQ:MSFT): MSFT is the third-largest stake at 12.99% 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 $50.51.

MoneyGram International Inc. (NASDAQ:MGI): MGI is a 1.48% 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 well below those ranges at $5.94. Abrams controls 9.64% of the business.

Opus Bank Irvine (NASDAQ:OPB): OPB is a 2.56% 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. Q3 2015 saw a ~10% trimming at prices between $34.56 and $39.75 and that was followed with a ~22% reduction last quarter at prices between $36 and $40. The stock currently trades at $35.81.

Time Warner Cable (NYSE:TWC): The 6.39% stake in TWC was purchased last quarter at prices between $179 and $192 and the stock is now at $210.

Note: Time Warner Cable is being acquired by Charter Communications (NASDAQ:CHTR) in a cash-and-stock deal and the transaction is expected to close in the next few days.

Wells Fargo (NYSE:WFC): WFC is a top-five 6.33% of the US long portfolio position established in Q4 2013 at prices between $41.30 and $45.50. The stock currently trades just outside that range at $47.61.

Western Union (NYSE:WU): WU is Abrams' largest stake at 19.69% 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 $19.05.

The spreadsheet below highlights changes to Abrams' US stock holdings in Q1 2016:

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.