Below are the 5 best cheap stocks to buy now according to billionaire Abrams. For a comprehensive list please see 10 Best Cheap Stocks To Buy Now According To Billionaire Abrams.
5. PG&E Corporation (NYSE: PCG)
David Abrams strategy of initiating a stake in PG&E Corporation (NYSE: PCG) hasn’t worked in favor of his hedge fund yet. Shares of PCG fell 29% in the last twelve months and extended the underperformance into 2021. It is the fifth-largest stock holding David Abrams 13F portfolio, according to the latest filings.
In a Q2 investor letter, Baupost Group commented on few stocks including PG&E Corporation. Here’s what Baupost Group said:
“Fortunately, our investment in the subrogation claims and equity of Pacific Gas and Electric, the firm’s largest position, was not impacted by the COVID-19 fallout. As we expected, PG&E’s bankruptcy plan was confirmed by the judge overseeing the case, and the company emerged from bankruptcy on July 1st. Importantly, upon emergence, cash was placed in a trust for the benefit of the subrogation creditors. A substantial initial distribution from this trust, estimated to be roughly 80% of anticipated recoveries, is expected to be paid later this month.”
4. Asbury Automotive Group Inc (NYSE: ABG)
Seth Klarman’s protege’s stock-picking strategy also worked in the case of Asbury Automotive Group Inc (NYSE: ABG) because shares of the automotive retailer jumped 15% year to date, enlarging twelve months gains to 78%. The hedge fund first initiated a position in Asbury during the third quarter of 2017. It is among the 10 cheap stocks to buy according to billionaire Abrams.
In a Q1 investor’s letter, Diamond Hill Capital commented on few stocks including Asbury Automotive Group. Here is what Diamond Hill Capital said:
“Car dealer Asbury Automotive Group, Inc. recently agreed to purchase a dealership in Dallas, Texas, to improve its poor new vehicle mix and geographic exposure; however, the deal fell through because the business needs cash to survive the impact of the coronavirus. We believe the core Asbury business is weak (although well run) and that the slowdown in sales from the coronavirus will have a long-term impact on the business.”
3. Facebook Inc (NASDAQ: FB)
Billionaire Abrams is bullish over the future fundamentals of the social media giant Facebook Inc (NASDAQ: FB) amid its strong growth prospects. The firm held FB shares worth million $329 at the end of the fourth quarter, representing the third-largest stock holding of the 13F portfolio.
Kinsman Oak Capital Partners Inc., an independent Toronto-based boutique investment firm, highlighted few stocks including Facebook in an investor letter. Here’s what Kinsman Oak Capital Partners stated:
“Our view on Facebook (FB) may be somewhat controversial. The bear case for FB boils down to antitrust risk and valuation. Facebook, although to a lesser degree, is a relative value bargain as well. We believe the company possesses an element of platform risk that Alphabet does not but, compared to the rest of the market, the stock still seems undervalued. We compared Facebook to the Russell 2000, an index full of cyclical businesses that are considered no-brainers at the beginning of a recovery and popular re-opening stocks that are poised to go higher after the vaccine is distributed (Appendix E). Facebook is significantly cheaper, growing faster, has a larger economic moat, superior margin profile, and requires less capex.
In short, we believe the obfuscated earnings power makes Facebook appear more expensive than it really is.”
2. Transdigm Group Inc (NYSE: TDG)
Although shares of Transdigm Group Inc (NYSE: TDG) are still struggling to trade in green in the last twelve months, Billionaire Abrams strategy of buying Transdigm shares at dip during the first quarter of 2020 benefited his hedge fund. Abrams Capital Management initiated a stake in Transdigm at an estimated price of $320 a share in Q1, down significantly from the current $570 level.
In a Q2 investor’s letter, Vulcan Value Partners stated that Transdigm Group is a good stock to buy. Here is what Vulcan Value Partners said:
“TransDigm Group Inc. is an aerospace manufacturing firm that provides highly engineered, niche components for use on commercial and military aircraft. The vast majority of the company’s profits come from aftermarket sales. Most of its products are small volume, low cost items that are sole sourced from TransDigm. It is economically unlikely for a new company to compete on any particular product because volumes on individual components are not large enough to justify the investment in manufacturing facilities and regulatory approval. The company produces high levels of free cash flow, has long equity duration, a strong business model, and an effective, shareholder-oriented management team who are good capital allocators.”
1. Lithia Motors, Inc. (NYSE: LAD)
David Abrams is also bullish over the future fundamentals of automotive retailer Lithia Motors, Inc. (NYSE: LAD) as his hedge fund has increased the stake by 7% to 19.57% of the overall portfolio during the fourth quarter. It is one of the best cheap stock picks according to the billionaire Abrams.
In the Q3 investor’s letter, Cartenna Capital highlighted few stocks including Lithia Motors. Here is what Cartenna Capital said:
“Another key winner during Q3 for the Fund was our long position in Lithia Motors Inc. (“LAD” or “Lithia”). LAD represented a compelling opportunity to own a best-in-class auto dealer at a significant discount and whose fundamental drivers including vehicle miles driven, new/used unit volumes and used pricing, were rapidly accelerating off April’s trough levels. Our thesis centered on three idiosyncratic advantages of Lithia over other auto dealers. First, Lithia’s geographic breakdown offered meaningful exposure to highly dense urban areas like the Tri-State Region (NYC) and coastal California cities, where we believed public transportation and ride sharing would lose share to private automobile transportation. Second, LAD’s rapidly growing used-car business (13.7% same-store sales in 2019) was positioned to disproportionately benefit the Company as 75% of Lithia’s used car inventory is 4+ years old. Used cars of this age are typically less commoditized, more recession resistant and generate higher margins. The third, and most compelling, idiosyncratic opportunity emerged as Lithia’s management revealed a new digital retail strategy. With this new Driveway.com platform, we immediately deemed Lithia to be the best positioned to address the entire vehicle ownership lifecycle in a digital world, take market share, and expand its multiple as new investors appreciated the omnichannel story. Further, Lithia’s new “50 and 50 Plan” outlines a path to achieve $50b1n of revenue and $50 of earnings per share by 2025 (2019: $12.9b1n revenue, $11.76 EPS). Even after a run to $227 per share in late September, LAD continues to offer a tremendous risk-reward profile.”
Please also see Billionaire Seth Klarman’s Top 10 Stock Picks for 2021 and 10 Best Junior Gold Mining Stocks To Buy Now
Disclosure: None.
