Bonhoeffer Capital Management, an asset management company, released its second-quarter 2024 investor letter. A copy of the letter can be downloaded here. In the second quarter of 2024, the fund returned a loss of 4.2% net of fees compared to 5.7% returns for MSCI World ex-US, a broad-based index, and 1.0% return for the DFA International Small Cap Value Fund. The fund’s stocks have an average EV/EBITDA of 3.8 and a weighted average earnings/free cash flow yield of 14.4% as of June 30, 2024. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2024.
Bonhoeffer Capital Management highlighted stocks like Asbury Automotive Group, Inc. (NYSE:ABG) in its Q2 2024 investor letter. Headquartered in Duluth, Georgia, Asbury Automotive Group, Inc. (NYSE:ABG) is a US-based automotive retailer. The one-month return of Asbury Automotive Group, Inc. (NYSE:ABG) was -3.62%, and its shares lost 1.87% of their value over the last 52 weeks. On September 13, 2024, Asbury Automotive Group, Inc. (NYSE:ABG) stock closed at $212.93 per share with a market capitalization of $4.43 billion.
Bonhoeffer Capital Management stated the following regarding Asbury Automotive Group, Inc. (NYSE:ABG) in its Q2 2024 investor letter:
“Many of our holdings used the acquisition/buyback model described above. Some of these firms have also used modest leverage to magnify the returns of equity to 20% and above over the past five to ten years using the acquisition/buyback model. These firms include: Terravest, Asbury Automotive Group, Inc. (NYSE:ABG), Ashtead, Autohellas, BFS, and Millicom. In addition, many of these firms are buying back stock and the modest current valuations make these buybacks accretive.
In our Q1 2024 letter, we described the growth opportunities in the car dealership business. Below are the valuation and operational KPIs for high RoE automobile dealerships around the world, including Asbury Automotive, one of our car dealership holdings:
We have added the analyst projected 2028 RoE to see how durable the calculated RoE for each automobile dealer is. A steady RoE trend illustrates RoE durability. The US dealers have RoEs from 14% to 33% while those in Europe range from 20% to 23% and those in South Africa range from 18% to 33%. Inventory turns, EBITA margins, and leverage (debt) drive return on equity.
Asbury meets our investment threshold due to a high and consistent RoE and modest P/E which provide an expected growth rate plus earnings yield of 31%, 18.5% RoE plus 12.5% earnings yield.”
A customer smiling delightedly after driving away in their new car from the automotive retail shop.
Asbury Automotive Group, Inc. (NYSE:ABG) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 30 hedge fund portfolios held Asbury Automotive Group, Inc. (NYSE:ABG) at the end of the second quarter which was 31 in the previous quarter. While we acknowledge the potential of Asbury Automotive Group, Inc. (NYSE:ABG) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In another article, we discussed Asbury Automotive Group, Inc. (NYSE:ABG) and shared the list of best car repair stocks to buy. In addition, please check out our hedge fund investor letters Q2 2024 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
