David Abrams’ Abrams Capital Management has recently initiated a new position in Moneygram International Inc (NASDAQ:MGI). According to a 13G Form filed with the U.S. Securities and Exchange Commission, the investment firm’s new stake amounts to around 2.89 million Common Shares, representing 5.4% of the company’s outstanding stock.
Abrams Capital Management is an employee-owned hedge fund that was founded in 1999 by David Abrams. Before starting the firm, Mr. Abrams worked at Seth Klarman’s Baupost Group for a decade, where he gained a great deal of experience as a value investor. This value oriented approach is now a core element of Abrams Capital Management’s investment strategy. The fund invests in the U.S. public equity markets, employing fundamental analysis, backed by in-house research, to find the right pick. This method has allowed the Boston-based firm to achieve annual returns of around 20% since its inception. Furthermore, the institutional investor boasts an equity portfolio valued at around $1.7 billion, which is made up primarily of companies belonging to the information technology and finance sectors.
According to Abrams Capital Management last 13F filing, its largest positions are The Western Union Company (NYSE:WU), American International Group Inc (NYSE:AIG), and Microsoft Corporation (NASDAQ:MSFT), accounting for almost 50% of its equity portfolio. The fund seems particularly bullish regarding Microsoft stock, as it increased its stake in the company by 45% during the third quarter. The holdings in Western Union and American International Group on the other hand only experienced a minor increase during the same period, yet they continue to be David Abrams’ top picks.
Following its purchase of 2.8 million shares, Abrams Capital Management is now one of Moneygram International Inc (NASDAQ:MGI)’s largest shareholders. The stake was acquired just a few weeks after the company announced the departure of its Executive Vice President for Europe and Africa. This latest change to management is part of an ongoing global transformation process, which already resulted in numerous organizational shifts. This process, which includes altering its leadership, is expected to make the company leaner and more profitable.
Moneygram International is a $484 million market cap international provider of money transfers and payment services. The firm was founded in 1926 and is headquartered in Dallas, Texas. Apart from offering customers bill payment services, issuing money orders, and processing official checks, the company provides money transfer services on the Internet via its MoneyGram Online service. Moneygram operates in more than 200 countries through a global network of 347,000 agent locations.
Last December, Moneygram International Inc (NASDAQ:MGI) announced the expansion of its operations to India, allowing customers to send money to any bank account in India in less than three hours. According to Grant Lines, the company’s Executive Vice President for Asia Pacific, South Asia, and the Middle East, who was quoted in a statement: “With the addition of India, we now offer bank account deposits through the MoneyGram network into four of the world’s largest remittance receive markets — China, India, Mexico and the Philippines”.
The new position acquired by Abrams Capital Management might come as somewhat of a surprise, considering the company competes directly with Western Union, the fund’s largest holding. The fact that both money remittance service providers will be competing for customers, does not seem to worry Mr. Abrams’ firm.
Western Union might be much larger than Moneygram, boasting a $9.2 billion market cap, yet there are several reasons to consider its much smaller competitor as a savvy investment. In addition to the ongoing transformation process and the expansion of its operations on a global level, Moneygram’s stock is trading at a discount, after dropping around 51% over the past year. Hence, there is reason to believe Abrams Capital Management might view the company as a good value investment. Furthermore, the hedge fund is not the only institutional investor taking a bullish stance towards Moneygram International Inc (NASDAQ:MGI). Clint Carlson’s Carlson Capital for example disclosed a position of 2.8 million shares at the end of the third quarter. Another investment firm betting on the company is Richard Blum’s Blum Capital Partners, which holds 1.9 million shares, amounting to almost 6% of its equity portfolio.
Disclosure: Pablo Erbar holds no position in any stocks or funds mentioned.
