Abrams Capital 13F: 5 Best Value Stocks To Buy

In this article, we discuss Abrams Capital 13F: 5 best value stocks to buy. You can read our detailed analysis of the performance of Abrams Capital Management, and go directly to read Abrams Capital 13F: 10 Best Value Stocks To Buy.

5. Willis Towers Watson Public Limited Company (NASDAQ:WTW)

Number of Hedge Fund Holders: 32
PE Ratio as of October 10: 21.33

Willis Towers Watson Public Limited Company (NASDAQ:WTW) is a company that provides various services and products related to risk management, insurance brokerage, advisory, and human capital. Willis Towers Watson Public Limited Company (NASDAQ:WTW) is considered a value stock due to its apparent undervaluation.

In Q2 2023, Abrams Capital Management held 806,836 shares of Willis Towers Watson Public Limited Company (NASDAQ:WTW), valued at over $190.01 million. This accounted for 5.46% of its portfolio. Willis Towers Watson Public Limited Company (NASDAQ:WTW) occupies the fifth position on the Abrams Capital 13F list of the 10 best value stocks to buy.

As of the close of Q2 2023, 32 hedge funds tracked by Insider Monkey reported having stakes in Willis Towers Watson Public Limited Company (NASDAQ:WTW), down from 42 in the previous quarter.

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4. Lithia Motors, Inc. (NYSE:LAD)

Number of Hedge Fund Holders: 33
PE Ratio as of October 10: 6.72

Lithia Motors, Inc. (NYSE:LAD) is a company that operates automotive franchises and sells new and used vehicles. It has 345 stores globally. It offers 47 new vehicles and all used car brands in its stores and online. It also provides auto repair and parts services and certified pre-owned vehicles.

Lithia Motors, Inc. (NYSE:LAD) is categorized as a value stock due to its low price-to-earnings ratio (P/E) of 6.72, signaling that it trades at a lower earnings multiple than the consumer cyclical sector’s average P/E ratio of 23.75.

By the end of Q2 2023, 33 hedge funds were long Lithia Motors, Inc. (NYSE:LAD), compared to 37 positions in the previous quarter. Abrams Capital’s 13F: 5 best value stocks to buy has Lithia Motors, Inc. (NYSE:LAD) as the fourth stock on the list. The hedge fund held over 2.35 million shares in the company that sells automobiles, valued at over $714.98 million. This made up 20.55% of David Abrams’ portfolio.

Here is what Right Tail Capital said about Lithia Motors, Inc. (NYSE:LAD) in its Q1 2023 investor letter:

“The original research premise fit right into Right Tail’s wheelhouse: a set of good businesses trading at attractive long-term valuations. Valuations look inexpensive at mid to high single digit multiples of earnings. Historically, these businesses have traded at 10-15x P/E multiples despite having more leverage and holding more inventory than they do today. In some ways, the historical multiples feel appropriate given their delicate relationships with manufacturers and cyclicality; on the other hand, these businesses have produced solid mid-teens returns with attractive reinvestment opportunities suggesting they are better than average companies. Adding another wrinkle to the puzzle, these businesses have over-earned the last few years due to Covid (car shortages, consumers flush with cash, etc.).

As I began the work, the compelling return potential warranted additional research. Lithia Motors (LAD), for example, has laid out a 2025 earnings per share target of $55-60. If the company reaches $55 in earnings and trades at a 12x P/E, we’d have a stock price of $660 – this would be a triple from today’s prices and produce a ~45% IRR over 3 years. The businesses are also producing lots of cash currently (LAD has earned ~$40 per share the last few years) creating additional capital allocation optionality.”

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3. Energy Transfer LP (NYSE:ET)

Number of Hedge Fund Holders: 34
PE Ratio as of October10: 11.41

Energy Transfer LP (NYSE:ET) is a company that operates in the energy sector, providing various services and products related to natural gas, crude oil, and natural gas liquids. Energy Transfer LP (NYSE:ET) boasts a substantial dividend yield of 9.21%, surpassing the energy sector’s average yield of 1.92%. Furthermore, its low price-to-earnings ratio (P/E) of 11.41 indicates it trades at a reduced earnings multiple.

The hedge fund managed by David Abrams owns 17.83 million shares in Energy Transfer LP (NYSE:ET) worth over $226.50 million, representing 6.51% of its portfolio. Energy Transfer LP (NYSE:ET) holds the third position on the Abrams Capital 13F list of the 10 best value stocks to buy.

At the end of Q2 2023, 34 hedge funds were bullish on Energy Transfer LP (NYSE:ET). This is compared to 35 positions in the previous quarter. The stock has a negative hedge fund sentiment.

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2. Kinder Morgan, Inc. (NYSE:KMI)

Number of Hedge Fund Holders: 36
PE Ratio as of October 10: 15.10

Kinder Morgan, Inc. (NYSE:KMI) is a company that operates in the energy sector, providing various services and products related to natural gas, crude oil, and natural gas liquids. The company is categorized as a value stock because it currently trades at a lower price compared to its fundamental metrics, including a dividend yield of 6.95% and a price-to-earnings ratio (P/E) of 15.10.

Kinder Morgan, Inc. (NYSE:KMI) is the second best value stock to buy according to Abrams Capital Management. The hedge fund held a position in Kinder Morgan, Inc. (NYSE:KMI) in Q3 2022, with more than 3.37 million shares worth more than $56.21 million. This represented 1.62% of their portfolio. However, they dumped their shares in the energy company in Q4 2022.

In the second quarter of 2023, 36 hedge funds in the database of Insider Monkey held stakes in Kinder Morgan, Inc. (NYSE:KMI), up from 35 in the preceding quarter.

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1. Tempur Sealy International, Inc. (NYSE:TPX)

Number of Hedge Fund Holders: 39
PE Ratio as of October 10: 17.59

Tempur Sealy International, Inc. (NYSE:TPX) is a company that produces and sells various types of mattresses, pillows, bedding, and other sleep products. The company operates under several brands, such as Tempur-Pedic, Sealy, Stearns & Foster, and Cocoon by Sealy.

Tempur Sealy International, Inc. (NYSE:TPX) is considered a value stock as it trades at a lower price-to-earnings ratio (P/E) of 17.59, and a reduced price-to-book ratio (P/B) of 1.18. These metrics highlight TPX’s undervaluation, signaling growth potential.

David Abrams’ Abrams Capital Management holds 3.60 million shares in Tempur Sealy International, Inc. (NYSE:TPX), worth over $144.25 million. This represents 4.14% of their portfolio. Robert Joseph Caruso’s Select Equity Group is the most significant shareholder of the company, with stakes worth $798.17 million.

According to Insider Monkey’s database for Q2 2023, 39 hedge funds reported having stakes in Tempur Sealy International, Inc. (NYSE:TPX), down from 40 in the previous quarter.

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