In this article, we discuss 8 best value stocks to buy according to David Abrams. You can skip our detailed analysis of the performance of Abrams Capital Management, and go directly to read 4 Best Value Stocks to Buy According to David Abrams.
David Abrams is the Chief Executive Officer and portfolio manager of Abrams Capital Management, a Boston-based investment firm. It primarily focuses on value-oriented investing strategies, which Abrams mastered during his tenure at Seth Klarman's Baupost Group before founding his own hedge fund.
Abrams Capital Management typically takes a strategic and persistent perspective with its investments. This horizon allows it to capture the full value potential of its chosen investments. This method has resulted in the fund’s positive performance over the years. According to an article published by Wall Street Journal, the firm’s main funds delivered a 15% return since its inception in 1999 to 2014, outperforming the S&P 500 by a wide margin during this period.
Value investing seeks to identify companies that trade at a discount to their intrinsic value. By following this strategy, value investors aim to capitalize on the market's tendency to eventually recognize and correct the undervaluation. They believe that over time the stock price will reflect the true value of the company, generating returns for patient investors. Historical analysis shows that value stocks delivered superior returns in the long run. In our article titled 12 Cheap Dividend Stocks With High Yields, we mentioned data from a study that showed that value stocks outperformed growth stocks by 4.1% annually from 1927 to 2021.
Though Abrams had focused on value investing and holding stocks for the long haul, he also asserted that there is a 'limit' to being patient. In one of his rare appearances at a New York Conference in 2018, Abrams gave investing advice to attendees, which was also reported by Business Insider. According to him, his firm invests in undervalued securities for three to five years for them to deliver a minimum return of 15% on their first purchase. The timeframe is mainly given to align the investment technique with the firm's risk tolerance.
Abrams Capital Management maintains a concentrated portfolio, which means they typically hold a limited number of positions. This technique allows them to focus their resources and expertise on a select group of companies that they have high conviction in. By taking substantial positions in these companies, they aim to generate significant returns for their investors. As of the end of Q1 2023, the hedge fund’s 13F portfolio had a value of over $3.1 billion, up from $2.8 billion in the previous quarter. The firm had positions in 16 companies belonging to various sectors, including technology, services, healthcare, basic material, finance, and others. Meta Platforms, Inc. (NASDAQ:META), Alphabet Inc. (NASDAQ:GOOG), and Lithia Motors, Inc. (NYSE:LAD) were some of the firm’s major holdings at the end of the quarter. In this article, the best value stocks to buy according to David Abrams.
8 Best Value Stocks to Buy According to David Abrams
David Abrams of Abrams Capital Management
Our Methodology:
To determine the best value stocks, we scanned Abrams Capital Management's 13F portfolio as of the first quarter of 2023. From the portfolio, we selected companies that have price-to-earnings ratios below 23, as of May 22. The hedge fund sentiment around each stock was also measured using Insider Monkey's database of Q4 2022. The stocks are ranked in ascending order of their stake value.
Without any further ado, let's look into 8 Best Value Stocks to Buy According to David Abrams.
Abrams Capital Management's Stake Value: $6.4 million
P/E Ratio: 9.37
USCB Financial Holdings, Inc. (NASDAQ:USCB) is an American bank holding company that provides a wide range of banking services and products to its consumers. In the first quarter of 2023, it reported revenue of $18 million, which showed a 10.7% growth from the same period last year. As of March 2023, the company had over $63.2 million available in cash and cash equivalents, up from over $54 million in the previous quarter.
At the end of Q1 2023, Abrams Capital Management owned 649,085 shares in USCB Financial Holdings, Inc. (NASDAQ:USCB), worth over $6.4 million. The hedge fund did not change its position in the company during the quarter. The company represented up 0.2% of David Abrams' portfolio.
In addition to USCB, Meta Platforms, Inc. (NASDAQ:META), Alphabet Inc. (NASDAQ:GOOG), and Lithia Motors, Inc. (NYSE:LAD) are some other prominent holdings of David Abrams.
In April, Raymond James maintained an Outperform rating on USCB Financial Holdings, Inc. (NASDAQ:USCB) with a $12 price target, expecting the company to show profitability improvement and above-peer growth.
As of the close of Q1 2023, four hedge funds tracked by Insider Monkey reported having stakes in USCB Financial Holdings, Inc. (NASDAQ:USCB), the same as in the previous quarter. These stakes have a collective value of over $8.4 million.
Abrams Capital Management's Stake Value: $106.6 million
P/E Ratio: 11.76
Camping World Holdings, Inc. (NYSE:CWH) is an Illinois-based retail company that specializes in recreational products, including supplies for camping. At the end of Q1 2023, Abrams Capital Management owned over 5.1 million shares in the company, worth over $106.6 million. The company accounted for 3.37% of David Abrams' portfolio.
In the first quarter of 2023, Camping World Holdings, Inc. (NYSE:CWH) generated roughly $1.5 billion in revenues and its used vehicle revenue for the quarter amounted to over $444.7 million. The company had over $72.8 million available in cash and cash equivalents, as of March 2023.
Camping World Holdings, Inc. (NYSE:CWH) currently pays a quarterly dividend of $0.625 per share, which gives its stock a dividend yield of 9.53%.
According to Insider Monkey's database for Q1 2023, 18 hedge funds reported having stakes in Camping World Holdings, Inc. (NYSE:CWH), up from 17 in the previous quarter. These stakes have a collective value of over $151.4 million.
Abrams Capital Management's Stake Value: $142.1 million
P/E Ratio: 16.60
Tempur Sealy International, Inc. (NYSE:TPX) is an American mattress manufacturing company, based in Kentucky. The company also specializes in other bedding products. It started paying dividends in 2020 and has raised its payouts every year since then. The company currently pays a quarterly dividend of $0.11 per share and has a dividend yield of 1.16%, as of May 22.
Tempur Sealy International, Inc. (NYSE:TPX) represented 4.49% of David Abrams' portfolios at the end of Q1 2023. His hedge fund owned 3.6 million shares in the company, worth over $142 million. The firm did not change its position in the company during the quarter.
In the first quarter of 2023, Tempur Sealy International, Inc. (NYSE:TPX) reported revenue of $1.21 billion, which fell in line with analysts' estimates. The company ended the quarter with over $91.4 million in cash and cash equivalents, up from $70 million in the previous quarter.
Wedbush added Tempur Sealy International, Inc. (NYSE:TPX) to its 'Best Ideas List', following the company's strong quarterly earnings. The firm also raised its price target on the stock to $50 with an Outperform rating on the shares.
The number of hedge funds tracked by Insider Monkey owning stakes in Tempur Sealy International, Inc. (NYSE:TPX) stood at 40 in Q1 2023, compared with 41 in the preceding quarter. These stakes have a consolidated value of over $1.65 billion as of the end of March.
4. Willis Towers Watson Public Limited Company (NASDAQ:WTW)
Abrams Capital Management's Stake Value: $187.5 million
P/E Ratio: 22.32
Willis Towers Watson Public Limited Company (NASDAQ:WTW) is a British-American multinational insurance company that provides data-driven solutions to its consumers. Baird maintained an Outperform rating on the stock in May with a $257 price target. The firm appreciated the company's organic revenue growth, free cash flow, and improving margins.
On May 18, Willis Towers Watson Public Limited Company (NASDAQ:WTW) declared a quarterly dividend of $0.84, which was in line with its previous dividend. The company has raised its dividends consistently for the past seven years. The stock has a dividend yield of 1.79%, as of May 22.
Abrams Capital Management started investing in Willis Towers Watson Public Limited Company (NASDAQ:WTW) during the fourth quarter of 2016. At the end of the most recent quarter, the hedge fund owned a WTW stake worth nearly $187.5 million. The company represented 5.93% of David Abrams' portfolio. Meta Platforms, Inc. (NASDAQ:META), Alphabet Inc. (NASDAQ:GOOG), and Lithia Motors, Inc. (NYSE:LAD) were some other prominent holdings of David Abrams as of Q1 2023.
In the first quarter of 2023, Willis Towers Watson Public Limited Company (NASDAQ:WTW) generated revenue of $2.2 billion, up 4% from the same period last year. The company's operating cash flow for the quarter came in at $134 million and its free cash flow for the quarter amounted to $92 million.
As of the close of Q1 2023, 42 hedge funds tracked by Insider Monkey reported having stakes in Willis Towers Watson Public Limited Company (NASDAQ:WTW), up from 36 in the previous quarter. These stakes are collectively valued at over $1.65 billion. Jean-Marie Eveillard, Jeffrey Smith, and John Smith Clark were some of the company's major stakeholders in Q1.
