2. Asbury Automotive Group, Inc. (NYSE:ABG)
Abrams Capital Management’s Stake Value: $339,338,000
Percentage of Abrams Capital Management’s 13F Portfolio: 7.92%
Number of Hedge Fund Holders: 29
PE Ratio as of June 17: 4.66
Asbury Automotive Group, Inc. (NYSE:ABG) operates as an automotive retailer in the United States. The company offers a range of automotive products and services, including, new and used vehicles, vehicle repair and maintenance services, replacement parts, and collision repair services. As of April 7, JPMorgan analyst Rajat Gupta has a $200 price target and a Neutral rating on Asbury Automotive Group, Inc. (NYSE:ABG).
As of March 31, Abrams Capital Management owns over 2.11 million shares of Asbury Automotive Group, Inc. (NYSE:ABG) which amounts to a stake of $339.33 million. The investment covers 7.92% of the fund’s 13F portfolio. As of June 17, Asbury Automotive Group, Inc. (NYSE:ABG) has a forward PE ratio of 4.66, which makes it an undervalued stock to buy now according to David Abrams.
Insider Monkey found 29 hedge funds long Asbury Automotive Group, Inc. (NYSE:ABG) at the end of Q1 2022. The total stakes of these funds in the company were valued at $926.11 million, down from $1.04 billion in the prior quarter with 32 positions.
Here is what LRT Capital Management, an investment management firm, had to say about Asbury Automotive Group, Inc. (NYSE:ABG) in its first-quarter 2022 investor letter:
“Asbury Automotive Group is one of the largest automotive retailers in the United States. It operates 90 dealerships consisting of 112 franchises and 25 collision repair centers. The company’s stores offer new and used vehicles, parts, and service, as well as finance and insurance (F&I) products. Franchise agreements controlled by automotive manufactures and state laws create an environment of tightly controlled market entry and restricted competition.
The dealership industry is highly fragmented with 93.5% of dealers having only between 1-5 locations according to data from 2020. In fact, dealers with over 50 locations account for only 0.1% of the industry – a testament to the huge opportunity for consolidation that lies ahead. Industry dynamics, including the rising complexity of automobiles and the need for omnichannel distribution are favoring better capitalized and larger dealer groups. We believe Asbury Automotive Group has several distinct advantages, particularly its highly profitable parts and service business, its overexposure to the luxury vehicle business, which carriers the best margins, and its Clicklane omnichannel strategy. Asbury’s management has also been acting in the best interests of its shareholders by allocating capital towards acquiring dealerships to aggressively expand its business, and occasionally repurchasing stock when attractive acquisitions targets could not be found.
ABG is not a fast-growing SaaS business, but when paying a valuation of ¼ of the overall stock market, one does not need to make heroic assumptions about the future to enjoy strong returns as shareholders. We believe that over the next several years, Asbury will continue to acquire dealerships, occasionally buyback stock and invest to improve its digital shopping experience. We wrote about Asbury in detail in our August 2021 Investor Letter.”
