Tracking David Abrams' Abrams Capital Management Portfolio - Q4 2016 Update

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Includes: BABA, BEN, BKS, BNED, CCO, CLNY, ENT, HCP, KERX, MGI, MSFT, OPB, OZM, QCP, SYT, T, TWX, UHAL, VEON, WBT, WFC, WLTW, WU
by: John Vincent

Summary

David Abrams’ 13F portfolio increased this quarter from $2.01B to $2.72B. The number of positions increased from 16 to 19.

Abrams Capital Management increased Och-Ziff Capital Management and Wells Fargo during the quarter. Also added 5 new stakes.

The top three positions are Western Union, Franklin Resources, and Microsoft Corporation, and they add up to ~40% 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 02/10/2017. 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 2016.

This quarter, Abrams' US long portfolio increased 35.19% from $2.01B to $2.72B. The number of holdings increased from 16 to 19. The top three stakes are at 40.13% of the 13F portfolio while the top five holdings are at 58.93%. The largest position by far is Western Union and it accounts for 17.23% of the US long portfolio.

Stake Disposals:

Northstar Realty Finance Corp. (NRF): NRF was a ~2% portfolio position purchased in Q1 2016 at prices between $8.57 and $17. It was disposed of this quarter at prices between $13 and $16.

Note: Northstar Asset Management, Northstar Realty Finance, and Colony Capital (NYSE:CLNY) combined in a transaction that closed last month.

Opus Bank Irvine (NASDAQ:OPB): OPB was a ~2% 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 $34.50 and $40 and that was followed with a ~22% reduction the following quarter at prices between $36 and $40. There was another one-third reduction in Q2 2016 at prices between $31.50 and $38. The disposal this quarter was at prices between $19.50 and $35.50. The stock currently trades at $21.05.

New Stakes:

Time Warner Inc. (NYSE:TWX): TWX is a large (top five) 10.81% portfolio stake established this quarter at prices between $78.50 and $97, and the stock is now at $96.58.

Note: In October last year, AT&T (NYSE:T) agreed to acquire Time Warner in a cash-and-stock ($53.75 cash) deal worth $107.50 per share.

Willis Towers Watson plc (NASDAQ:WLTW): WLTW is a fairly large 5.31% position purchased this quarter at prices between $117 and $133. The stock is now at $124. For investors attempting to follow Abrams, WLTW is a good option to consider for further research.

Quality Care Properties (NYSE:QCP): QCP is a medium-size 2.54% portfolio stake established this quarter at a cost-basis of around $16 per share. The stock currently trades above that range at $18.02.

Note: Abrams controls ~5% of QCP. The REIT is a spinoff from HCP, Inc. (NYSE:HCP) that started trading last October.

Amerco (NASDAQ:UHAL): UHAL is a small 1.40% position purchased this quarter at prices between $314 and $374, and the stock is now at the top end of that range at $374.

Syngenta AG (NYSE:SYT): SYT is a very small 0.91% stake established this quarter at prices between $75.50 and $88, and the stock currently trades at $86.25.

Stake Decreases:

None.

Stake Increases:

Wells Fargo (NYSE:WFC): WFC is a large 6.76% of the US long portfolio position established in Q4 2013 at prices between $41 and $45.50. The position saw a ~20% increase this quarter at prices between $43.75 and $57.50. The stock currently trades at $56.86.

Och-Ziff Capital Management (NYSE:OZM): OZM is a 2.30% portfolio stake established in Q2 2016 at prices between $3.30 and $4.35 and increased by ~11% last quarter at prices between $3.35 and $4.49. There was another ~11% increase this quarter at a cost-basis around $3.20. The stock is now at $3.61. For investors attempting to follow Abrams, OZM is a good option to consider for further research.

Note: Abrams controls 10.43% of the business.

Kept Steady:

Western Union (NYSE:WU): WU is Abrams' largest stake at 17.23% of the US long portfolio (~4.2% of the business). The position was first purchased in Q4 2013 at prices between $16 and $19.50 and increased by ~23% in Q2 2014 at prices between $15.25 and $17.25. The stock currently trades at $19.74.

Franklin Resources (NYSE:BEN): BEN is a large (top-three) 11.54% of the 13F portfolio position established in Q4 2015 at prices between $35 and $42 and increased by ~50% the following quarter at prices between $31.50 and $39. The stock currently trades at $40.88.

Microsoft Corporation (NASDAQ:MSFT): MSFT is the third-largest stake at 11.36% of the US long portfolio. It was established in Q1 2014 at prices between $36 and $40.50 and increased by ~45% in Q3 2014 at prices between $42.50 and $47.50. The stock currently trades well above those ranges at $64.

Manitowoc Foodservice Inc. (NYSE:MFS): The large (top-five) ~8% MFS stake was acquired as a result of the spinoff of Manitowoc Foodservice from Manitowoc Company in February 2016. Abrams held MTW shares for which they received MFS shares in the ratio 1:1. MFS started trading at ~$12 and currently goes for $19.25. It has returned over 50% in twelve months.

Colony NorthStar Inc. (NYSE:CLNS) previously Northstar Asset Management (NSAM): CLNS is a large ~6% of the 13F portfolio stake established in Q1 2016 at prices between $9.31 and $12.14 and increased by ~38% the following quarter at ~$10.60. The stock currently trades at $14.50. Abrams controls ~5.8% of NSAM.

Note: Northstar Asset Management, Northstar Realty Finance, and Colony Capital (CLNY) combined to form Colony NorthStar in a transaction that closed last month. NSAM shareholders received a special dividend of $1.16 per share following the close.

Barnes & Noble, Inc. (NYSE:BKS): BKS is a fairly large 4.26% 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. The four quarters through Q1 2016 saw a combined ~150% increase at prices between $7.33 and $12.50. 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 $10.85.

Barnes & Noble Education, Inc. (NYSE:BNED): BNED is a 3.69% 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. The position was more than doubled since at prices between $8.50 and $15.50. The stock currently trades at $10.22.

VimpelCom Ltd. (NYSE:VIP): VIP is a 2.65% of the US long portfolio position established in Q1 2015 at prices between $3.40 and $5.50 and increased by ~70% the following quarter at prices between $5 and $6.50. Q3 2015 saw a stake doubling at prices between $4 and $6 and that was followed with a ~75% increase the following quarter at prices between $3 and $4.30. The stock currently trades at $4.24.

MoneyGram International, Inc. (NYSE:MGI): MGI is a 2.22% of the US long portfolio position established in Q4 2014 at prices between $8 and $13. It was increased by ~90% in Q1 2015 at prices between $8 and $9.50 and another ~17% the following quarter at prices between $7.50 and $10.50. The stock currently trades at $12.74. Abrams controls ~10% of the business.

Note: Last month, Alibaba's (NYSE:BABA) Ant Financial agreed to acquire MGI for $13.25 per share cash.

Keryx Pharmaceuticals (NASDAQ:KERX): KERX is a small 1.23% of the portfolio position established in Q3 2015 at prices between $3.38 and $10.50. The stock currently trades at $5.45. Q4 2015 saw a ~10% increase while the following quarter saw another ~4% increase.

Note: Seth Klarman (Baupost Group) has a huge ~43% ownership stake (assumes the dilution implied by convertible notes held) in KERX.

Global Eagle Entertainment (NASDAQ:ENT): ENT is a 1.19% of the US long portfolio position first purchased in Q4 2013 at prices between $9 and $15.50 and increased by two-thirds in Q3 2014 at prices between $9.50 and $14. The stock currently trades below the low end of his purchase price ranges at $6.01. Abrams controls ~6.5% of the business.

Clear Channel Outdoor Holdings (NYSE:CCO): CCO is a very small ~0.62% 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 $4.90.

The spreadsheet below highlights changes to Abrams' US stock holdings in Q4 2016:

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.