Abrams Capital Management, founded by David Abrams, keeps buying shares of Barnes & Noble Education Inc. (NYSE:BNED). In a recently-filed Form 4 with the U.S. Securities and Exchange Commission, the Boston-based hedge fund revealed the purchase of 68,244 shares at a price of $12.86 per share, lifting its stake to 6.30 million shares. Abrams Capital Management has been gradually increasing its stake in the company, as revealed by several Form 4 filings since mid-August, when we discussed the 5.45 million share-ownership stake held by the fund at that time. It’s worth noting that the current stake accounts for approximately 13.07% of the company’s outstanding common stock.
Abrams Capital Management LP is a value-oriented hedge fund founded by David Abrams in 1999. The investment firm holds approximately $8 billion in assets under management across three funds. Abrams Capital generally invests in a small number of beaten-down companies and maintains these investments over a long-term horizon. The firm’s main funds have delivered an average annualized return of roughly 15% since its inception, greatly outperforming both the average for hedge funds and the broader market. David Abrams, who worked at Seth Klarman’s Baupost Group LLC for a decade or so, is known to be extremely patient when it comes to investing; he can sit on a static portfolio without making any moves for months. The fund’s recent 13F filing with the SEC disclosed that Abrams Capital Management oversees a public equity portfolio with a market value of $1.47 billion as of June 30.
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Barnes & Noble Education Inc. (NYSE:BNED) provides bookstore operation services to more than five million college students via its 724 stores on campuses all over the United States. The company recently spun-off from its parent company Barnes & Noble Inc. (NYSE:BKS), which many believe was a good option for both companies, one that will allow Barnes & Noble Education to grow by enhancing its business focus. Nevertheless, it seems that the market does not believe in the growth strategy outlined by Barnes & Noble Education, as its stock has lost nearly 10% since the company started trading on the New York Stock Exchange on August 3.
Seemingly, Barnes & Noble Education is well-positioned to grow in the years ahead based on its current strengths and the existing opportunities in the market. Roughly 53% of the U.S. college and university-affiliated bookstores are managed by their respective institutions, which actually represents a great development opportunity for the company. Even though some institutions may not want to outsource their bookstores, the freshly spun-off company can still increase its market share and expand its store footprint. At the same time, the company is developing its Yuzu digital education platform, which represents a great niche for Barnes & Noble Education considering that both students and faculty are relying more heavily on online and digital platforms when seeking or sharing educational content. It’s also worth mentioning that Barnes & Noble Education operates its stores under management contracts with colleges and universities that are generally for five year terms with renewal options, which diminishes the risk associated with the company’s operations and its revenue streams.
Barnes & Noble Education Inc. (NYSE:BNED) is set to report its fiscal 2016 first quarter earnings results on September 9, before the market opens. Most market participatants might not know what to expect from the soon-to-be released financial report, so we will briefly pinpoint what the recently spun-off education group has been able to generate so far under the wings of its parent company. The sales generated during the fiscal year 2015 by the group amounted to $1.75 billion, lower by $15.3 million from the prior year. New store openings in 2015 boosted sales by $63.2 million, but were somewhat offset by closed stores, which decreased sales by $21.2 million. At the same time, the education group generated a net income of $35.1 million during the 53 weeks of fiscal 2015, compared to $30.2 million reported in the previous year.
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