We recently compiled a list of the 99% of Billionaire Abrams’ Portfolio is in These 11 Stocks. In this article, we are going to take a look at where Lithia Motors, Inc. (NYSE:LAD) stands against the other stocks in David Abrams’ portfolio.
Founded in 1999 by David Abrams, Abrams Capital Management is an investment fund that strives to generate value by leveraging opportunistic and value-oriented investment strategies. Likewise, its portfolio is well-skewed to navigate any challenging macro environment, as it mainly focuses on value investments.
In addition, Abrams Capital Management’s portfolio focuses on diversifying its holdings across various asset classes. Stocks, debt, and distressed securities are some of its top asset classes. Diversification and value investments are some of the strategies that have allowed Abrams to perform better than other hedge fund managers, based on an annualized net return of 15% over the past 15 years.
Abrams Capital Management is primarily invested in the Services sector in the equity markets, which accounts for 25% of its holdings, with Technology stocks accounting for about 11,% followed in third by Basic Materials stocks. The strategic distribution affirms the hedge fund’s focus on sectors with higher prospects for value growth that align with long-term investment philosophy.
In the third quarter, Abrams made significant changes, trimming stakes in some holdings while increasing in others. The hedge fund made no new purchases or sales, reduced holdings in 3 stocks, and did not add to any existing positions. The top 10 holdings constitute 97.75% of the portfolio. The investments are concentrated in seven key sectors. The changes reflect the calculated approach in response to changing macroeconomics.
Our Methodology
To compile the list of billionaire Abrams’ portfolio we scanned Abrams Capital Management’s third quarter portfolio, focusing on the biggest holdings based on investment size. Upon analyzing the stocks, focusing on why they stand out, we ranked them in ascending order based on Abrams Capital Management’s equity stake.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A customer in a store, examining a new vehicle on the showroom floor.
Lithia Motors, Inc. (NYSE:LAD)
Abrams Capital Management’s Q3 2024 Investment: $759.54 Million
Percentage of Abrams Capital Management’s Portfolio: 12.19%
Number of Hedge Fund Holders: 43
Lithia Motors, Inc. (NYSE:LAD) operates auto and truck dealerships that sell new and used vehicles and parts. It also conducts repair and maintenance services. The automotive dealership company has over 101,000 vehicles at 300 locations in the US, more than 1,000 vehicles at 15 locations in Canada, and over 4,000 vehicles at 151 locations in the UK. With more than 51 brands, it is considered one of the fastest-growing companies in the US.
Up by about 20.35% year to date, it is one of the best-performing stocks in Abrams Capital Management portfolio. Lithia Motors, Inc. (NYSE:LAD) delivered solid third-quarter results on October 23, 2024. In the quarter it leveraged its size and scale to seize new opportunities while focusing on operational efficiencies. Revenues in the quarter were up 11% year over year to $9.2 billion. Adjusted earnings per share totaled $8.21, beating consensus estimates of $7.59 a share.
Lithia Motors, Inc. (NYSE:LAD) has also embarked on an expansion drive with the acquisition of Sunrise Chevrolet Buick GMC and Sunrise Buick GMC. These purchases are expected to add $240 million in yearly revenue. The company’s earnings are also expected to grow by 51% in the next few years, showing its potential for long-term success.
As per the Insider Monkey’s database, 43 hedge fund portfolios held Lithia Motors, Inc. (NYSE:LAD) at the end of the third quarter which was 35 in the previous quarter.
Madison Investments Madison Mid Cap Fund stated the following regarding Lithia Motors, Inc. (NYSE:LAD) in its Q3 2024 investor letter:
“During the quarter we added three new holdings: Graco, Lithia Motors, Inc. (NYSE:LAD), and Asbury Automotive. We purchased shares in Lithia Motors and Asbury Automotive, two of the largest auto franchise dealer groups in the country, owning a diversified portfolio of dealerships ranging from Toyota to Ford to Mercedes. Investors tend to pay a lot of attention to the level of new car sales, but dealers actually earn more in profits from parts and service than they do from selling new cars, and this steady business provides a nice ballast throughout the economic cycle. In addition, we believe these businesses have a long runway to create value via consolidation of this fragmented industry, as the advantages of scale are increasing.”
Overall LAD ranks 2nd on our list of stocks in David Abrams’ portfolio. While we acknowledge the potential of LAD as an investment, our conviction lies in the belief that some 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 more promising than LAD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.