Tracking Abrams Capital Management's Portfolio - Q4 2019 Update

Summary

• David Abrams’ 13F portfolio value decreased this quarter from $3.57B to $3.22B. The number of positions increased from 20 to 21.
• Abrams Capital Management added Allergan and Bristol Myers Squibb during the quarter.
• The top three positions are Lithia Motors, PG&E Corp, and Franklin Resources, and they add up to ~27% 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 02/14/2020. 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 2019.

This quarter, Abrams’ 13F portfolio value decreased ~10% from $3.57B to $3.22B. The number of holdings increased from 20 to 21. The top three stakes are at ~27% of the 13F portfolio while the top five holdings are at ~41%. The largest position is Lithia Motors and it accounts for ~10% of the 13F portfolio.

Stake Disposals:

Celgene Corp (CELG): The ~19% of the portfolio CELG position was established in Q1 2019 at ~$90 per share. It was a merger-arbitrage stake. 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) announced last January. The deal closed in November.

Altaba Inc. (AABA): A large (top five) ~7% AABA stake was purchased last quarter. Altaba made a pre-dissolution distribution of $51.50 per share in September and the stock is no longer traded.

New Stakes:

Allergan plc (AGN), Bristol Myers Squibb (BMY) Rights, and O-I Glass (OI) previously Owens-Illinois: These three are the new positions this quarter. The large 7.35% AGN position is a merger-arbitrage stake. AbbVie (ABBV) is acquiring Allergan in a cash-and-stock ($120 cash and 1 share of ABBV for each AGN held) deal expected to close this quarter. BMY Rights (BMY.RT) is a 2.17% position that came about as a result of the acquisition of Celgene. Terms called for CELG shareholders to receive $50 cash, 1 share of BMY, and a tradeable Contingent Value Right that could pay out $9 cash in 2021 based on achieving milestones. Abrams held 6.75M shares of CELG for which they received the same number of BMY shares and the Rights. The BMY position was sold and the Rights were increased substantially during the quarter. OI is a 1.8% of the portfolio stake established this quarter at prices between $8.50 and $12 and the stock currently trades at $11.41.

Stake Decreases:

Lithia Motors (LAD): LAD is currently the largest position at ~10% of the portfolio. It 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 ~$121. Q4 2018 also saw a ~15% stake increase. This quarter saw a ~3% trimming.

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

Franklin Resources (BEN): BEN is currently the third-largest position at ~8% 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 well below the low end of those ranges at $22.64. For investors attempting to follow, BEN is a good option to consider for further research. There was marginal trimming this quarter.

O Reilly Automotive (ORLY): The large ~7% ORLY stake was purchased in Q3 2017 at prices between $173 and $220. The stock currently trades at ~$370. Q4 2018 saw a minor ~3% selling and that was followed with a ~13% trimming next quarter at prices between $335 and $392. Q2 2019 saw another ~30% selling at prices between $353 and $409. Abrams is harvesting gains. This quarter saw a ~3% trimming.

Willis Towers Watson plc (WLTW): WLTW is a large ~7% position purchased in Q1 2017 at prices between $117 and $133. The stock is now well above that range at ~$195. There was a ~6% trimming in Q4 2018 and that was followed with marginal trimming this quarter.

Facebook (FB): FB is a 6.50% portfolio position purchased in Q4 2018 at prices between $124 and $163 and the stock currently trades well above that at ~$190. This quarter saw marginal trimming.

Alphabet Inc. (GOOG): GOOG is a ~5% position purchased in Q2 2018 at prices between $1005 and $1175 and the stock is now well above that range at $1318.

Sculptor Capital (SCU) previously Och-Ziff Capital Management (OZM): SCU is a 1.41% portfolio stake established in Q2 2016 at prices between $33 and $43.50 and increased by ~11% in the following quarter at around the same price range. 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 ~$23. This quarter saw a ~7% trimming.

Note: The prices quoted above are adjusted for the 1 for 10 reverse stock-split in January. Abrams has a ~10% stake in the business.

Stake Increases:

Camping World Holdings (CWH): CWH is a 2.80% position purchased in Q3 2018 at prices between $19 and $27 and increased by two-thirds next quarter at prices between $11.25 and $22.50. Q2 2019 saw a ~30% stake increase at prices between $11 and $13 per share. This quarter saw a ~12% stake increase at ~$7.90 per share. The stock is now at $13.70. Abrams controls ~16% of the business.

Kept Steady:

PG&E Corp (PCG): PCG is a large (top three) 8.44% position purchased at ~$7 per share and it currently goes for $16.33. PG&E share price dropped sharply in mid-January as they announced plans to file for bankruptcy. Abrams along with two other hedge funds stepped in and bought 45M shares near the lows.

Teva Pharmaceutical (TEVA): TEVA is currently a 7.32% of the portfolio stake. It was established in Q3 2017 at prices between $15.50 and $33.50. The stock currently trades at $12.21. Last quarter saw a one-third stake increase at prices between $6 and $9.60.

Asbury Automotive (ABG): ABG is a 6.61% 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. Next quarter saw another 20% stake increase at prices between $59 and $72. The stock currently trades at ~$90.

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

AMERCO (UHAL): UHAL is a 6.55% 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 with a similar increase in H1 2018 at prices between $323 and $384. The stock is now at ~$300.

Kinder Morgan (KMI): KMI is a 5.61% of the portfolio position purchased in Q1 2018 at prices between $14.75 and $19.75 and the stock is currently at $19.52.

TransMedics Group (TMDX): TMDX is a ~2% of the 13F portfolio stake that came about as a result of its IPO in May. Abrams was an early investor who led funding rounds going back to 2012. The stock started trading at ~$25 and currently goes for $16.14. Abrams has a ~17% ownership stake in the business.

Suburban Propane Partners (SPH): SPH is a ~2% 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 position was more than doubled in Q4 2017 at prices between $23.20 and $26.70 and that was followed with a ~87% increase over the next two quarters at prices between $22 and $27. The stock is currently at $19.59.

Akebia Therapeutics (AKBA): AKBA was a minutely small 0.74% 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 $8.30.

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

Pacific Drilling SA (PACD): The 0.81% PACD stake got established in Q4 2018 as the company emerged from Chapter 11 bankruptcy last November. The stock is now at $1.25. 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.

Clear Channel Outdoor Holdings (CCO): CCO is a very small 0.30% 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 $2.14.

The spreadsheet below highlights changes to Abrams’ 13F stock holdings in Q4 2019:

Analyst’s Disclosure: I am/we are long ABBV, AGN, AKBA, GOOGL, 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.

Comments

[EliasMouawad]

Quite patient with CWH...