Black Bear Value Partners, an investment management firm, published its third quarter 2023 investor letter, a copy of which can be downloaded here. Black Bear Value Fund returned +7.3% in September and is up +26.4% YTD and the S&P 500 returned -4.8% in September and +13.1% YTD. HFRI Value Index returned +8.8% YTD through August. In addition, please check the fund’s top five holdings to know its best picks in 2023.
Black Bear Value Partners highlighted stocks like Asbury Automotive Group, Inc. (NYSE:ABG) in the third quarter 2023 investor letter. Headquartered in Duluth, Georgia, Asbury Automotive Group, Inc. (NYSE:ABG) is a US-based automotive retailer. On October 6, 2023, Asbury Automotive Group, Inc. (NYSE:ABG) stock closed at $210.88 per share. One-month return of Asbury Automotive Group, Inc. (NYSE:ABG) was -4.60%, and its shares gained 35.85% of their value over the last 52 weeks. Asbury Automotive Group, Inc. (NYSE:ABG) has a market capitalization of $4.339 billion.
Black Bear Value Partners made the following comment about Asbury Automotive Group, Inc. (NYSE:ABG) in its Q3 2023 investor letter:
“Asbury Automotive Group, Inc. (NYSE:ABG) recently agreed to acquire the Jim Koons Automotive Companies in the largest auto retail acquisition since 2021. They will be taking on some leverage to consummate the acquisition. Asbury has successfully integrated past acquisitions and has a good track record of deleveraging the company. Longer term, this is an accretive deal and raises our “normal” free-cash flow per share by $5 to a range of $30-$40. At quarter end pricing this implies a 13-17% annual yield.
Asbury Group operates auto dealerships across the United States. While much attention is paid to the number of cars sold, the strength of the model comes from the back of the house in parts and services where more than 50% of the profits come from. We are exiting a period of high margins on new and used car sales. Shortages of inventory have allowed dealers to make record profits when selling a car. As inventories normalize and interest rates rise, I fully expect the dealers to make less profit (called the GPU) when selling a car. Car prices cannot go up ad-infinitum and at some point, there will be buyer pushback.
Less discussed is while profits per car are at all-time highs, the volumes sold have mirrored prior recessions. My expectation is that dealers will likely make less per car but will mitigate some of that pressure by selling more cars, especially used vehicles, as prices drop.
When an auto dealer sells a car to a consumer, they capture both the trade-in (inventory to sell) and the relationship for parts and services. It is a razor-razorblade model in a highly fragmented industry (many dealerships are owned privately by families). The large dealer groups have transitioned to an omni-channel model where much of the selling/pre-buy activity can be done online reducing the need for headcount and making the transaction smoother for their customers. The lower operating costs of the business are not appreciated by the market. They are appreciated by us and the management teams as most dealers, including ABG, have been buying in lots of stock with their free-cash flow.”
An AutoNation-branded dealership, showcasing the wide variety of new and used vehicles on offer. Editorial photo for a financial news article. 8k. –ar 16:9
Asbury Automotive Group, Inc. (NYSE:ABG) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 27 hedge fund portfolios held Asbury Automotive Group, Inc. (NYSE:ABG) at the end of second quarter which was 27 in the previous quarter.
We discussed Asbury Automotive Group, Inc. (NYSE:ABG) in another article and shared Black Bear Value Partners’ views on the company. In addition, please check out our hedge fund investor letters Q3 2023 page for more investor letters from hedge funds and other leading investors.
Suggested Articles:
- 14 Best Cancer Stocks To Buy Now
- 16 Places to Retire for $1,000 A Month
- 15 Most Innovative Companies in Canada
Disclosure: None. This article is originally published at Insider Monkey.
