Bonhoeffer Capital Management, an asset management company, released its fourth-quarter 2023 investor letter. A copy of the same can be downloaded here. Bonhoeffer Fund shifted slower-growing companies, throughout 2023 to robust, growing companies in temporary down-turning industries. In the current year, the fund is still looking for chances of this nature. The fund returned 12.9% net of fees in the fourth quarter of 2023 and 17.0% for 2023 overall. The MSCI World ex-US, a broad-based index, returned 9.8%, and the DFA International Small Cap Value Fund, the closest benchmark, returned 9.3% during the same period. The fund’s portfolio holds the highest-quality businesses in the fund’s history. In addition, please check the fund’s top five holdings to know its best picks in 2023.
Bonhoeffer Capital Management featured stocks such as Asbury Automotive Group, Inc. (NYSE:ABG) in its Q4 2023 investor letter. Headquartered in Duluth, Georgia, Asbury Automotive Group, Inc. (NYSE:ABG) is a US-based automotive retailer. On February 14, 2024, Asbury Automotive Group, Inc. (NYSE:ABG) stock closed at $221.01 per share. One-month return of Asbury Automotive Group, Inc. (NYSE:ABG) was 8.66%, and its shares lost 5.35% of their value over the last 52 weeks. Asbury Automotive Group, Inc. (NYSE:ABG) has a market capitalization of $4.548 billion.
Bonhoeffer Capital Management stated the following regarding Asbury Automotive Group, Inc. (NYSE:ABG) in its fourth quarter 2023 investor letter:
“Our broadcast TV franchises, leasing, building products distributors and dealerships, plastic packaging, and roll-on roll-off (“RORO”) shipping fall into this category. One trend we find particularly compelling in these firms is growth creation through acquisitions, which provides synergies and operational leverage associated with vertical and horizontal consolidation. The increased cash flow from acquisitions and subsequent synergies are used to repay the debt and repurchase stock; and the process is repeated. This strategy’s effectiveness is dependent upon a spread between borrowing interest rates and the cash returns from the core business and acquisitions. Over the past 12 months, interest rates have been increasing, which has reduced the economics of this strategy; but a large spread still exists if assets can be purchased at the right price. Increasing interest rates have affected the returns on public LBO firms. Some firms have been reducing debt to reduce the impact of higher rates on earnings.
Asbury Automotive Group, Inc. (NYSE:ABG), a US-based automobile dealer group, a portfolio holding, is an example of a private LBO. Given Asbury’s current valuation of an 18% earnings yield and, more importantly, a five-year forward earnings yield of 38%, buybacks are accretive. Management has developed a long-term plan that includes acquisitions and operational leverage from internet sales and pre-paid service plans. The net income annual growth is expected to be 25% over the next two years based upon management’s plan. Holding the current modest 6 times multiple of earnings constant, the rate of earnings growth implies a 25% total return…” (Click here to read the full text)
A customer smiling delightedly after driving away in their new car from the automotive retail shop.
Asbury Automotive Group, Inc. (NYSE:ABG) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 30 hedge fund portfolios held Asbury Automotive Group, Inc. (NYSE:ABG) at the end of third 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 Q4 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
