Tracking David Abrams' Abrams Capital Management Portfolio - Q1 2019 Update

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Includes: ABG, AKBA, BEN, BMY, BNED, CCO, CELG, CWH, ENT, FB, GOOG, KMI, LAD, ORLY, OZM, PACD, PCG, SPH, TEVA, UHAL, WLTW, WU
by: John Vincent
Summary

David Abrams’ 13F portfolio value increased ~47% this quarter from $2.42B to $3.56B. The number of positions remained steady at 19.

Abrams Capital Management added Celgene and PG&E while dropping Western Union and Global Eagle Entertainment during the quarter.

The top three positions are Celgene Corp, PG&E Corp., and Franklin Resources, 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’ 13F portfolio on a quarterly basis. It is based on Abrams’ regulatory 13F Form filed on 05/10/2019. 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 2018.

This quarter, Abrams’ 13F portfolio value increased ~47% from $2.42B to $3.56B. The number of holdings remained steady at 19. The top three stakes are at ~40% of the 13F portfolio while the top five holdings are at ~56%. The largest position is Celgene Corp. (NASDAQ:CELG) and it accounts for 17.89% of the 13F portfolio.

Stake Disposals:

Western Union (WU): WU was the largest position at ~13% of the 13F portfolio as of Q1 2018. The stake 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. Last quarter saw a ~50% selling at prices between $16.50 and $19 and the disposal this quarter was at prices between $17 and $19. The stock currently trades at $19.40.

Global Eagle Entertainment (ENT): ENT was a very small 0.56% of the 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 a ~20% increase at prices between $2.92 and $6.79 and that was followed by a similar increase in the following quarter at prices between $2.75 and $3.55. The stock currently trades at $0.88. There was a ~15% selling in H2 2018 at prices between $2 and $3 and the elimination this quarter was at prices between $0.64 and $2.71.

New Stakes:

Celgene Corp. and PG&E Corp. (PCG): These are large new stakes established this quarter and are the top two positions currently. The 17.89% of the portfolio CELG stake was established at ~$90 per share and the stock is now at $95.51. It is a merger-arbitrage stake. In early January, Bristol-Myers Squibb (BMY) agreed to acquire Celgene Corp. in a cash-and-stock transaction (one share of BMY and $50 cash along with a CVR that could pay $9 based on achieving regulatory milestones for each share held). PCG is a 12.50% position purchased at ~$7 per share and it currently goes for $18.60. The quick doubling was a result of Abrams along with two other hedge funds buying 45M shares in mid-January. The buying followed a sharp drop in PG&E’s share price as the company announced plans to file for bankruptcy.

Stake Decreases:

Franklin Resources (BEN): BEN is currently the third-largest position at 9.10% of the 13F portfolio. It was established in Q4 2015 at prices between $35 and $42 and increased by ~50% the following quarter at prices between $31.50 and $39. There was another ~25% stake increase in Q3 2018 at prices between $30 and $34.50. The stock currently trades at $34.13. For investors attempting to follow, BEN is a good option to consider for further research. Last two quarters have seen only minor adjustments.

O'Reilly Automotive (ORLY): The large (top five) ~8% ORLY stake was purchased in Q3 2017 at prices between $173 and $220 and it is now at ~$365. Last quarter saw a minor ~3% selling and that was followed by a ~13% trimming this quarter at prices between $335 and $392.

Teva Pharmaceutical (TEVA): TEVA is currently a top-five position at ~8% of the portfolio. It was established in Q3 2017 at prices between $15.50 and $33.50. The stock currently trades at $14.36. There was minor trimming over the last three quarters.

AMERCO (UHAL): UHAL is a 5.86% 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 and that was followed by a similar increase in H1 2018 at prices between $323 and $384. The stock is now at ~$392. Last three quarters have seen only minor adjustments.

Kinder Morgan (KMI): KMI is a 4.79% of the portfolio position purchased in Q1 2018 at prices between $14.75 and $19.75 and the stock is currently at $19.70. Last four quarters have only seen minor adjustments.

Barnes & Noble Education, Inc. (BNED): BNED is a ~0.50% 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. Q4 2017 saw an about-turn: ~25% sold at an average price of ~$8 per share. The stock currently trades at $4.06. There was a ~28% further selling this quarter at ~$7.25 per share.

Stake Increases:

Facebook (FB): FB is a 4.80% portfolio position purchased last quarter at prices between $124 and $163 and the stock currently trades at ~$188. There was a marginal stake increase this quarter.

Camping World Holdings (CWH): CWH is a 1.83% position purchased in Q3 2018 at prices between $19 and $27 and increased by two-thirds last quarter at prices between $11.25 and $22.50. It is now at $11.52.

Note: Regulatory filings since the quarter ended show them owning 4.36M shares of CWH. This is compared to 3.95M shares in the 13F report. The buying happened at an average cost of ~$13 per share. Their ownership stake in Camping World Holdings is at ~5%.

Och-Ziff Capital Management (OZM): OZM is a ~1% portfolio stake established in Q2 2016 at prices between $33 and $43.50 and increased by ~11% in the following quarter at prices between $33.50 and $44.90. There was another ~11% increase in Q4 2016 at a cost-basis around $32. Q1 2017 also saw a ~17% increase at prices between $22 and $36.30. The stock is now at $17.51. There was a marginal increase this quarter.

Note: The prices quoted above are adjusted for the 1 for 10 reverse stock split in January. Abrams controls ~12% of the business.

Kept Steady:

Lithia Motors (LAD): The 5.99% LAD stake was established in Q2 2018 at prices between $95 and $105 and almost doubled next quarter at prices between $81 and $99. The stock is now at $114. For investors attempting to follow Abrams, LAD is a good option to consider for further research. Last quarter also saw a ~15% stake increase.

Note: Their ownership stake in Lithia Motors is at ~10%.

Willis Towers Watson plc (WLTW): WLTW is a fairly large 5.47% position purchased in Q1 2017 at prices between $117 and $133. The stock is now well above that range at ~$177. There was a ~6% trimming last quarter.

Alphabet Inc. (GOOG) (GOOGL): GOOG is a ~4% position purchased in Q2 2018 at prices between $1005 and $1175 and the stock is now at $1164.

Asbury Automotive (ABG): ABG is a 3.71% position established in Q3 2017 at prices between $50 and $62 and increased by ~45% in Q3 2018 at prices between $67 and $77.50. Last quarter saw another 20% stake increase at prices between $59 and $72. The stock currently trades at $80.25.

Note: Their ownership stake in the business is ~10%.

Pacific Drilling SA (PACD): The ~3% PACD stake got established last quarter as the company emerged from Chapter 11 bankruptcy in November. The stock is now at $14.91. Abrams Capital’s ownership stake in Pacific Drilling is ~10%. They had ~$200M in Pacific Drilling debt when the company filed for bankruptcy in November 2017.

Suburban Propane Partners (SPH): SPH is a ~1.90% portfolio stake established in Q2 2017 at prices between $22.75 and $27 and increased by ~75% next quarter at prices between $23.50 and $26. The stock is currently at $23.64. The position was more than doubled in Q4 2017 at prices between $23.20 and $26.70 and that was followed by a ~87% increase over the next two quarters at prices between $22 and $27.

Akebia Therapeutics (AKBA): AKBA was a minutely small 0.26% portfolio stake as of Q3 2018. They merged with Keryx Pharmaceuticals (KERX) in a transaction that closed in December. KERX shareholders received 0.37433 common shares of AKBA for each share held. Abrams had ~9.1M shares of Keryx for which he received 3.4M shares. Abrams also increased the overall position by ~20% during Q4 2018 at prices between $5.40 and $9.15. AKBA currently trades at $5.98. Compared to the size of the portfolio, the stake is still fairly small at 1.30%.

Note: Their ownership stake in Akebia is at ~5%.

Clear Channel Outdoor Holdings (CCO): CCO is a very small 0.50% of the 13F 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 $5.04.

The spreadsheet below highlights changes to Abrams’ 13F stock holdings in Q1 2019:

David Abrams - Abrams Capital Management - Q1 2019 13F Report Quarter-over-Quarter Comparison

Disclosure: I am/we are long AKBA, BNED, KMI. 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.