David Abrams’ Abrams Capital Management revealed its top five picks at the end of 2014 in its latest 13F filing. According to the information provided to the U.S. Securities and Exchange Commission last week, the investment firm’s largest position is in The Western Union Company (NYSE:WU). Apart from this holding, which accounts for around 20% of its equity portfolio, the fund’s top picks last quarter included Covidien plc (NYSE:COV), American International Group Inc (NYSE:AIG), Microsoft Corporation (NASDAQ:MSFT), and Wells Fargo & Co (NYSE:WFC).
After working at Seth Klarman’s Baupost Group for a decade, in 1999 David Abrams decided to launch Abrams Capital Management. The Boston-based hedge fund follows its manager’s value investment strategy, employing fundamental analysis to pick its stocks. Thanks to his vast experience in public equity markets, the billionaire David Abrams managed to earn around $400 million in 2013. Furthermore, Abrams Capital has grown considerably over the years, registering approximately $8 billion in assets under management and achieving annual returns of 15% since its inception. According to its latest 13F filing, the hedge fund’s equity portfolio is currently valued at $1.93 billion though it is comprised of only 15 stocks.
As mentioned above, Abrams Capital Management’s top pick for the fourth quarter was The Western Union Company (NYSE:WU). The hedge fund disclosed ownership of 21.61 million shares of common stock, leaving its exposure to the company unaltered relative to the previous quarter. The investment firm acquired a new position in Western Union during the first quarter of 2013 and since then, has maintained a bullish stance towards the stock. Although share prices only grew by around 4% last year, the stock has gained more than 33% since the beginning of 2013. Mr. Abrams’ optimism regarding The Western Union Company (NYSE:WU) is not surprising, considering the money transfer giant has a huge competitive advantage thanks to its scale. By generating exceptional margins and basically dominating its market, the company has attracted the attention of numerous funds. Apart from Abrams Capital Management which ranks as Western Union’s largest shareholder among the funds we track, John W. Rogers’ Ariel Investments is also betting on this stock. In fact, the Chicago-based firm’s holding in the company amounts to 13.94 million shares and was one of its top picks last quarter.
Mr. Abrams’ firm’s second-largest position is in Covidien plc (NYSE:COV), with a stake of 2.95 million shares, which account for 15.63% of its equity portfolio. The hedge fund has only held this stock since the third quarter, when it disclosed a holding of 2.62 million shares. However, Covidien plc (NYSE:COV) was recently acquired by Medtronic Inc in a $42.9 billion takeover, which was completed this month. Following this transaction, both firms were combined and the stock is now trading under the name Medtronic PLC (NYSE:MDT).
American International Group Inc (NYSE:AIG) was one of Abrams Capital’s top picks last quarter with a stake of 4.80 million shares. After entering a new position in the company in the second quarter of 2013, the hedge fund only altered its exposure to the stock once, purchasing 56,200 shares last year. Although the stock gained around 9% last year, American International Group Inc (NYSE:AIG) could be facing troubled times, as it recently reported a 67% decline in profits for the fourth quarter. Nevertheless, the company continues to be backed by several institutional investors, including Barry Rosenstein’s Jana Partners and Richard Perry’s Perry Capital.
Abrams Capital’s five largest holdings at the end of last year also included a position of 4.98 million shares of Microsoft Corporation (NASDAQ:MSFT) and a stake of 2.77 million shares in Wells Fargo & Co (NYSE:WFC). Considering Microsoft’s solid performance as of late and the bullish stance taken on it by institutional investors over the past year, it comes as no surprise to see this equity amongst Abrams Capital’s largest holdings. Ray Dalio’s Bridgewater Associates is also betting big on Microsoft Corporation (NASDAQ:MSFT), which was amongst its top picks last quarter. Meanwhile, in its last 13F filing, Warren Buffett’s Berkshire Hathaway disclosed ownership of more than 463 million shares of Wells Fargo & Co (NYSE:WFC) stock, making it the largest position in its $107 billion equity portfolio.
Disclosure: None
