Tracking David Abrams' Abrams Capital Management Portfolio - Q4 2017 Update

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Includes: AABA, ABG, BEN, BNED, CCO, CLNY, ENT, GPI, HCP, KERX, ORLY, OZM, PCG, QCP, SPH, T, TEVA, TWX, UHAL, WFC, WLTW, WU
by: John Vincent

Summary

David Abrams’ 13F portfolio value increased this quarter from $2.56B to $2.97B. The number of positions increased from 18 to 20.

Abrams Capital Management added Time Warner and PG&E during the quarter.

The top three positions are Western Union, Teva Pharmaceutical, and Franklin Resources, and they add up to ~38% of the portfolio.

This article is part of a series that provides an ongoing analysis of the changes made to David Abrams’ 13F portfolio on a quarterly basis. It is based on Abrams’ regulatory 13F Form filed on 02/13/2018. 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 2017.

This quarter, Abrams’ 13F portfolio value increased ~16%, from $2.56B to $2.97B. The number of holdings increased from 18 to 20. The top three stakes are at ~38% of the 13F portfolio, while the top five holdings are at 56%. The largest position is Western Union (NYSE:WU), and it accounts for ~14% of the 13F portfolio.

Stake Disposals

None.

New Stakes

Time Warner Inc. (NYSE:TWX): TWX is large (top-five) ~9% of the portfolio position established this quarter at prices between $87 and $104, and the stock is currently at $94.31.

Note: TWX had a previous round-trip: it was a top-three ~12% portfolio stake established in Q4 2016 at prices between $78.50 and $97 and disposed last quarter at prices between $99 and $103. In October 2016, AT&T (NYSE:T) agreed to acquire Time Warner in a cash-and-stock ($53.75 cash) deal worth $107.50 per share. In November last year, the DOJ sued to block the transaction saying the deal violates antitrust law.

PG&E Corp. (NYSE:PCG): PCG is a ~5% of the portfolio stake established this quarter at prices between $44 and $70, and the stock is now near the low end of that range at $39.83.

Note: PG&E shares dropped sharply in December, as the company halted the dividend citing liability concerns from the October 2017 Northern California wildfires.

Stake Decreases

Teva Pharmaceutical (NYSE:TEVA): TEVA is a top-three 12.60% portfolio position established last quarter at prices between $15.50 and $33.50. The stock currently trades at $18.52. There was a ~9% trimming this quarter.

Wells Fargo (NYSE:WFC): WFC is a fairly large ~6% of the US long portfolio position established in Q4 2013 at prices between $41 and $45.50. The position saw a ~20% increase in Q4 2016 at prices between $43.75 and $57.50. The stock currently trades at $58. There was a ~14% trimming this quarter.

Colony NorthStar Inc. (CLNS): CLNS is a 1.88% 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 $8.52. There was a ~55% selling over the last three quarters at prices between $11.41 and $14.70.

Note: NorthStar Asset Management, NorthStar Realty Finance, and Colony Capital combined to form Colony NorthStar in a transaction that closed in January. NSAM shareholders received a special dividend of $1.16 per share following the close. The prices quoted above are adjusted for this.

Barnes & Noble Education Inc. (NYSE:BNED): BNED is a 1.81% of the portfolio stake. It was established as a result of the spin-off 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. This quarter saw an about-turn: ~25% sold at an average price of ~$8 per share. The stock currently trades at $6.43.

Note: Regulatory filings since the quarter ended show them owning 6.24M shares (13.3% of business). This is compared to 6.54M shares in the 13F report.

Stake Increases

O'Reilly Automotive (NASDAQ:ORLY) and Asbury Automotive (NYSE:ABG): These two positions established last quarter saw minor increases this quarter. The ~7% ORLY stake was purchased at prices between $173 and $220, and it is now well above that range at $245. ABG is a 2.34% position established at prices between $50 and $62, and the stock currently trades at $67.90. The ORLY and ABG stakes were increased by ~3% and ~9% respectively during the quarter.

Quality Care Properties (NYSE:QCP): QCP is a 2.36% portfolio stake established in Q4 2016 at prices between $12.50 and $17. The stock currently trades at $12.55. There was a marginal increase this quarter.

Note 1: Regulatory filings since the quarter ended show them owning ~6M shares of QCP. This is compared to ~5M shares in the 13F. Their ownership stake is at 6.4% of the business.

Note 2: The REIT is a spin-off from HCP Inc. (NYSE:HCP) that started trading in October 2016.

Keryx Pharmaceuticals (NASDAQ:KERX): KERX is a small 1.52% of the portfolio position established in Q3 2015 at prices between $3.38 and $10.50. The stock currently trades at $4.64. There was a ~70% stake increase this quarter at an average price of ~$5 per share.

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

Suburban Propane Partners (NYSE:SPH): SPH is a small 1.23% portfolio stake established in Q2 2017 at prices between $22.75 and $27 and increased by ~75% last quarter at prices between $23.50 and $26. The stock is currently at $25.34. The position was more than doubled this quarter at prices between $23.20 and $26.70.

Kept Steady

Western Union: WU is Abrams’ largest stake at 13.83% 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 $19.75. For investors attempting to follow Abrams, WU is a good option to consider for further research.

Franklin Resources (NYSE:BEN): BEN is a top-three 11.59% 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 $38.84.

Altaba (NASDAQ:AABA) (previously Yahoo): AABA is a top-five 9.21% portfolio stake established in Q2 2017 at prices between $46 and $56, and the stock currently trades well above that range at $71.31.

Willis Towers Watson plc (NASDAQ:WLTW): WLTW is a fairly large 6% position purchased in Q1 2017 at prices between $117 and $133. The stock is now at $155.

AMERCO (NASDAQ:UHAL): UHAL is a ~5% position purchased in Q4 2016 at prices between $314 and $374 and increased by ~160% the following quarter at prices between $367 and $391. There was a ~45% increase in Q2 2017 at prices between $341 and $393. The stock is now at $352. For investors attempting to follow Abrams, UHAL is a good option to consider for further research.

Och-Ziff Capital Management (NYSE:OZM): OZM is a 1.87% portfolio stake established in Q2 2016 at prices between $3.30 and $4.35 and increased by ~11% in the following quarter at prices between $3.35 and $4.49. There was another ~11% increase in Q4 2016 at a cost basis around $3.20. Q1 2017 also saw a ~17% increase at prices between $2.20 and $3.63. The stock is now at $2.37.

Note: Abrams controls ~12% of the business.

Global Eagle Entertainment (NASDAQ:ENT): ENT is a very small 0.54% 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. Q1 2017 saw an ~18% increase at prices between $2.92 and $6.79, and that was followed with another ~19% increase the following quarter at prices between $2.75 and $3.55. The stock currently trades below those ranges at $1.90.

Note: Abrams controls 8.2% of the business.

Group 1 Automotive (NYSE:GPI): GPI is a very small 0.60% stake purchased last quarter at prices between $53 and $72, and the stock is now at $75.21.

Clear Channel Outdoor Holdings (NYSE:CCO): CCO is a very small 0.52% 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 $4.65.

The spreadsheet below highlights changes to Abrams’ US stock holdings in Q4 2017:

David Abrams - Abrams Capital Management - Q4 2017 - 13F Report

Disclosure: I am/we are long BNED, CLNS, 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.