Billionaire Value Investor David Abrams’ Top Stocks for 2016

#3 Franklin Resources, Inc. (NYSE:BEN)

– Shares Owned by Abrams Capital Management (as of December 31): 5.28 million

– Value of Holding (as of December 31): $194.25 million

Franklin Resources, Inc. (NYSE:BEN) was another new addition to Abrams Capital Management’s equity portfolio during the fourth quarter. Shares of the investment management company have fallen by over 30% since the second-half of 2015 and are currently trading down by 10.37% year-to-date. On February 3, Franklin Resources, Inc. (NYSE:BEN) reported its fourth quarter earnings, slightly missing analysts’ consensus estimate of EPS of $0.75 on revenue of $1.77 billion as it declared EPS of $0.74 on revenue of $1.76 billion for the quarter. Following the earnings release a number of analysts reduced their price target on the stock, including analysts at Piper Jaffray, who on February 4, lowered their price target on Franklin Resources to $40 from $43, while keeping their rating unchanged at ‘Hold’. John W. Rogers‘ Ariel Investments was among the hedge funds that increased its stake in Franklin Resources, Inc. (NYSE:BEN) during the fourth quarter; it held almost 2.03 million shares of the company as of December 31.

#2 Microsoft Corporation (NASDAQ:MSFT)

– Shares Owned by Abrams Capital Management (as of December 31): 4.98 million

– Value of Holding (as of December 31): $276.29 million

Moving on to Abrams Capital Management’s second-largest equity holding, Microsoft Corporation (NASDAQ:MSFT). While Abrams kept its stake in the company unchanged during the fourth quarter, the fantastic numbers that Microsoft Corporation (NASDAQ:MSFT) reported for the first quarter of fiscal year 2016 during that period caused its shares to rally by over 20% for the quarter. The rise that the stock saw might have made it a bit expensive when compared to its peers, but it still sports an unheard annual dividend yield in the tech space of nearly 3%. Microsoft Corporation’s stock again tried to repeat its fourth quarter performance by jumping after the company reported its fiscal year 2016 second quarter numbers on January 28. However, it has given up all of those gains this month and now trades down by 8.78% year-to-date. Earlier this month the company made its fourth large acquisition in the mobile space in the past 14 months by acquiring third-party keyboard app SwiftKey for an undisclosed sum. Donald Yacktman‘s Yacktman Asset Management reduced its stake in Microsoft Corporation by nearly 25% to around 13 million shares during the fourth quarter.

#1 The Western Union Company (NYSE:WU)

– Shares Owned by Abrams Capital Management (as of December 31): 21.61 million

– Value of Holding (as of December 31): $387 million

Finally, The Western Union Company (NYSE:WU) remained Abrams Capital Management’s top stock pick as of the end of the fourth quarter, with the fund not making any changes to its stake in the company. Shares of The Western Union Company (NYSE:WU) were trading in the red for much of this year, but have swiftly moved upwards since February 11 and now trade flat for 2016. Interestingly, the stock started this rally two days after the company reported its fourth quarter numbers and its upward march wasn’t affected by the company’s press release on February 12, in which it urged its consumers to stay alert for an IRS impersonation phone scam that targets taxpayers. The Western Union Company reported EPS of $0.42 on revenue of $1.38 billion for the fourth quarter, compared to EPS of $0.42 on revenue of $1.41 billion that it reported for the fourth quarter of 2014. Ariel Investments reduced its stake in the company by 14% to 9.05 million shares during the October-to-December period.

Disclosure: None