Value Investor David Abrams is Holding Onto These 5 Stocks in 2022

1. Lithia Motors Inc.(NYSE:LAD)

Abrams Capital Management’s Stake Value: $646.1M

Percentage of Abrams Capital Management’s 13F Portfolio: 17.36%

Number of Hedge Fund Holdings: 40

Based in Medford, Oregon, Lithia Motors Inc. (NYSE:LAD) is an American nationwide automotive dealership group, which operates over 267 stores in 24 U.S. states, and 14 stores in Canada.

On July 14, Morgan Stanley analyst Adam Jonas lowered the firm’s price target on Lithia Motors Inc. (NYSE:LAD) to $220 from $260, conferring an Underweight rating on the shares. The analyst, in a research note, shared mobility coverage particularly for FY23, to reflect slowing growth and credit headwinds. He noted that his top line and EBITDA estimate cuts leave his forecasts 5%-10% or more below consensus expectations.

This is what Oakmark Funds, an investment management firm, had to say about Lithia Motors Inc. (NYSE:LAD) in their Q1 2022 investor letter, a copy of which can be obtained here:

“As is typical during periods of significant volatility, we added a new name to the portfolio. Lithia Motors (NYSE:LAD) is the largest franchised auto dealer group in the United States. The company has a long history of creating shareholder value through best-in-class operations and consistent acquisitions of smaller dealers at attractive returns. There is a long runway for management to continue creating value through such acquisitions. Management believes this will drive earnings per share to more than $50 by 2025, even as car prices return to pre-pandemic levels. Meanwhile, Lithia has a significant opportunity to further accelerate growth through Driveway, its online auto retailing platform. We believe Lithia’s existing nationwide infrastructure provides Driveway with significant competitive advantages in e-commerce, which smaller dealers will struggle to replicate. Driveway is not generating any earnings today, but it could become a major contributor over the next five to seven years. With the stock priced at less than 7x management’s 2025 EPS target and with substantial future growth potential from Driveway, we believe Lithia shares are a bargain today.”

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