Billionaire David Abrams’ Top 5 Stock Picks

Below are the billionaire David Abrams’ top 5 stock picks. To see a comprehensive list please see Billionaire David Abrams’ Top 10 Stock Picks.

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

Insurance broker Willis Towers Watson Public Limited Company (NASDAQ: WLTW) is among the long-running stock holdings of David Abrams Boston-based hedge fund. The firm initiated a position in Willis Towers in 2016. The insurance broker currently accounts for 7.26% of the overall portfolio.

Shares of Willis Towers underperformed this year due to the pandemic. Despite that, its shares are up 50% in the past five years. In addition, the company returns cash to investors in the form of dividends. It has raised dividends in the past three consecutive years.  Its cost-cutting strategies helped in generating massive earnings and cash flows growth. Its September quarter earnings per share grew 60% year over year while free cash flows jumped 100% from the past year period.

4. PG&E Corporation (NYSE: PCG)

The billionaire David Abrams hedge fund has been holding shares of the electric utility company PG&E Corporation (NYSE: PCG) since the beginning of 2019. It is the fourth largest stock holding of the Boston-based hedge fund, accounting for 7.46% of the 13F portfolio.

The shares of PG&E Corporation recovered strongly in 2020 after experiencing a massive selloff early in 2019. David Abrams mentor Seth Klarman’s Baupost Group has recently commented about few stocks in an investor’s letter and PG&E Corporation is among them. Here is what Baupost Group stated:

“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.”

3. TransDigm Group Incorporated (NYSE:TDG)

Abrams hedge fund took advantage of the drop in TransDigm Group Incorporated (NYSE: TDG) share price early in 2020 by initiating a big position. Aircraft components provider accounts for 8.15% of Abrams 13F portfolio.

It appears that the Boston-based hedge fund benefitted from the TransDigm position because shares of aircraft components provider grew 40% in the last six months. The future fundamentals of TransDigm improved significantly amid the recovery in the airline industry due to coronavirus vaccine discovery.

 2. Facebook Inc. (NASDAQ:FB)

The social media giant Facebook Inc. (NASDAQ: FB) is the second-largest stock holding of Abrams Capital Management 13F portfolio. The firm first initiated a position in the social media company during the fourth quarter of 2018 when Facebook shares were under pressure due to regulatory issues.

Other hedge funds are also bullish on the future fundamentals of Facebook. It was in 230 hedge funds’ portfolios at the end of the third quarter of 2020, up from the previous all-time high of 213.

Wedgewood Partners, who said Facebook was one of the biggest detractors to its performance in Q3 2019, pointed out a few key factors about the social media giant. Here is what Wedgewood Partners stated in an investors letter:

“Facebook reported 32% growth in constant currency ad revenue, along with expectations for 50-55% growth in expenses as the Company continued with their telegraphed plan to accelerate investments in privacy and security across their social platforms. The Federal Trade Commission (FTC) also approved a $5 billion fine for violating a 2012 FTC order by misrepresenting users’ ability to control data privacy. While this removed an overhang dating back to early 2018, continued pressure from politicians and regulators kept Facebook’s earnings multiple in check.”

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

An automotive retailer Lithia Motors, Inc. (NYSE: LAD) is the favorite stock of Billionaire David Abrams hedge fund. It is the largest stock holding of Boston based hedge fund, accounting for 16.13% of the overall portfolio. The firm first initiated a position in automotive retailer during the second quarter of 2018.

Shares of Lithia Motors rallied close to 100% in the last twelve months, thanks to strong financial performance. Its September quarter revenue of $3.62 billion grew 8.7% year over year while net income per diluted share of $6.86 grew 88% from the year-ago quarter. The company also offers dividends to shareholders.

Please also see: 10 Best Dow Stocks To Buy Now , Barry Rosenstein and Jana Partners: Top 10 Stock Picks and 10 Best Value Stocks To Buy Now.

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