Black Bear Value Partners, an investment management firm, published its fourth-quarter 2021 investor letter – a copy of which can be downloaded here. The fund had a 35% return for the full year of 2021, compared to its benchmark, the S&P 500, and the HFRI Index which had a 28.7% and 14.8% return for the same period. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
Black Bear Value Partners, in its Q4 2021 investor letter, mentioned AutoNation, Inc. (NYSE:AN) and discussed its stance on the firm. Founded in 1991, AutoNation, Inc. (NYSE:AN) is a Fort Lauderdale, Florida-based car dealership company with a $6.1 billion market capitalization, and is currently spearheaded by its CEO, Michael Manley. AutoNation, Inc. (NYSE:AN) delivered a -14.30% return since the beginning of the year, while its 12-month returns are up by 7.54%. The stock closed at $100.14 per share on April 07, 2022.
Here is what Black Bear Value Partners has to say about AutoNation, Inc. (NYSE:AN) in its Q4 2021 investor letter:
“AutoNation is an example of what can happen when you marry excellent business operations with best-in-class capital allocation. Mike Jackson and his team have been able to reinvest in the business, grow ancillary businesses, and acquire new dealerships all while buying back TONS of stock when the opportunity presents itself (27% of the company over the trailing 12 months ending 9/30). Other companies should take notice and use AutoNation as a case study in compounding value for shareholders while also being great corporate citizens. Auto dealers have been over-earning on car sales due to a lack of inventory from the semiconductor shortage. It seems obvious that when the semiconductor shortage is resolved, more cars will become available and unit profitability will be reduced. In short, their earnings will likely decline in the 12 months following the inventory shortage and then resume their rise. Our longer-term horizon allows us the ability to own the business and not focus on a short-term issue. The semiconductor issue is likely to persist thru 2022 though this is a guess. Ultimately our long-term thesis on the business remains intact. If the business can extend its moat, maintain its pricing power, and remain important to both its customers and suppliers we will do fine. Over the last 12 months ending September 30, 2021, the company has bought back 27% of the shares at a cost of ~$81.50. Given the stock has been trading at $100+ it has been a good investment on a mark-to-market basis. More importantly, we own 27% more of the company without having to layout a single dollar of cash. It has a dramatic impact on my estimates of free-cashflow on a per-share basis. Looking forward the Company should be able to generate $10-$14 per year in free cash flow which means we likely own it somewhere between an 8-12% yield. Additionally, if AutoNation achieves modest levels of success with AutoNation USA (new used-car supercenters) it could add another $6-$12 of per-share value to the business. Note that at current prices, very little in the way of AutoNation USA’s success is priced in.”
Our calculations show that AutoNation, Inc. (NYSE:AN) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. AutoNation, Inc. (NYSE:AN) was in 37 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 29 funds in the previous quarter. AutoNation, Inc. (NYSE:AN) delivered a -11.07% return in the past 3 months.
In October 2021, we also shared another hedge fund’s views on AutoNation, Inc. (NYSE:AN) in another article. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.
Disclosure: None. This article is originally published at Insider Monkey.
