In this article, we will look at 9 value stocks to buy in 2022 according to David Abrams. If you want to skip reading about David Abrams’ investment philosophy and his hedge fund’s performance, you can go directly to 4 Value Stocks to Buy in 2022 According to David Abrams.
David Abrams started his investment career under the wing of billionaire investing legend Seth Klarman, the hedge fund manager of Baupost Group. After shadowing and learning Klarman’s ways, Mr. Abrams founded his hedge fund Abrams Capital Management in 1999. David Abrams was and still is a staunch value investor and is noted for buying shares in beaten-down, depressed companies and holding on to his positions for months without placing a trade. He has made a fortune for himself and his investors using his team of three investment analysts and a small back-office staff. Mr. Abrams approves all trades personally. The value investing legend has reportedly said:
I guess I would say to this that, a little bit different from Howard [Marks], I’ve actually never seen people be successful over a long period of time without being value investors. To me, it’s sort of like the E equals mc squared of money and investing. That all things equal, the lower the price of something you have both less risk and more return.
Abrams Capital Management’s Past Performance
David Abrams is an introvert and has rarely stepped into the spotlight, but has still managed to become a prominent figure in the hedge fund industry due to his investment strategies and hedge fund returns. Mr. Abrams’ hedge fund generated a median 15% return on an annualized basis from 1999 to 2014, triple that of the S&P 500’s comparable returns, including dividends, over the same period.
Abrams Capital Management: Recent Performance & Latest Portfolio
In the first quarter of 2020, Abrams Capital Management returned 43.78% quarter-on-quarter. These returns sank in the first quarter of 2021 when Mr. Abrams’ fund posted quarter-on-quarter returns of 13.54%. Moving on to the first quarter of 2022, Abrams Capital Management’s returns are down to a negative 10.24%, compared to the fund’s returns in Q1 2021.
As previously mentioned, David Abrams is known for sticking with a static portfolio for months, with little to no movements. In the first quarter of 2022, Abrams Capital Management purchased additional shares in 2 companies and reduced its stakes in one of its holdings. The fund currently holds stakes in 18 companies which include mostly value stocks, but some prominent growth stocks as well such as Alphabet Inc. (NASDAQ:GOOG) and Meta Platforms, Inc. (NASDAQ:FB).
Abrams Capital Management has a top 10 holdings concentration of roughly 80% and has the majority of its investments concentrated in the Consumer Discretionary, Industrials, Information Technology, and Communications segments. Some of David Abrams’ top 10 holdings are Lithia Motors, Inc. (NYSE:LAD), Alphabet Inc. (NASDAQ:GOOG), and Meta Platforms, Inc. (NASDAQ:FB). As of March 31, David Abrams manages more than $4.28 billion in 13F securities through Abrams Capital Management.
David Abrams of Abrams Capital Management
Our Methodology
To determine the 9 value stocks to buy in 2022 according to David Abrams, we reviewed Abrams Capital Management’s 13F portfolio at the close of the first quarter of 2022. We checked each company’s price-to-earnings ratio and narrowed our selection to pure-play value stocks with a forward PE ratio of less than 15. We have ranked these stocks in increasing order of Abrams Capital Management’s stake in them.
Along with each stock we have included the analyst rating and hedge fund sentiment, which we sourced from Insider Monkey’s database which tracks roughly 900 elite hedge funds as of the first quarter of 2022.
Value Stocks to Buy in 2022 According to David Abrams
9. O-I Glass, Inc. (NYSE:OI)
Abrams Capital Management’s Stake Value: $91,392,000
Percentage of Abrams Capital Management’s 13F Portfolio: 2.13
Number of Hedge Fund Holders: 23
PE Ratio as of June 17: 7.02
O-I Glass, Inc. (NYSE:OI) manufactures and sells glass containers to food and beverage manufacturers primarily in the Americas, Europe, and the Asia Pacific. The company produces glass containers for alcoholic beverages, including beer, flavored malt beverages, spirits, and wine. On June 10, Deutsche Bank analyst Kyle White raised his price target on O-I Glass, Inc. (NYSE:OI) to $16 from $14 and reiterated a Hold rating on the shares.
On June 7, O-I Glass, Inc. (NYSE:OI) raised its Q2 adjusted earnings per share guidance to exceed $0.65, up from the prior guidance ranging between $0.55 and $0.60. Wall Street consensus for the company’s Q2 adjusted EPS sits at $0.58.
David Abrams has been holding on to O-I Glass, Inc. (NYSE:OI) since the fourth quarter of 2019 and as of March 31, has a stake of $91.39 million in the company. The investment covers 2.13% of Abrams Capital Management’s 13F portfolio and as of June 17, the stock has a forward PE ratio of 7.02, making it rank among the top value stocks to buy according to David Abrams.
By the end of Q1 2022, 23 hedge funds were long O-I Glass, Inc. (NYSE:OI) with stakes worth $227.42 million. This is compared to 28 positions in the previous quarter with stakes of $178.74 million.
In addition to maintaining his position in O-I Glass, Inc. (NYSE:OI), David Abrams has maintained his positions in Lithia Motors, Inc. (NYSE:LAD), Alphabet Inc. (NASDAQ:GOOG), and Meta Platforms, Inc. (NASDAQ:FB), which are ranked among his hedge fund’s top 10 holdings.
8. Tempur Sealy International Inc. (NYSE:TPX)
Abrams Capital Management’s Stake Value: $100,512,000
Percentage of Abrams Capital Management’s 13F Portfolio: 2.34%
Number of Hedge Fund Holders: 31
PE Ratio as of June 17: 6.62
Tempur Sealy International, Inc. (NYSE:TPX) designs, manufactures, markets, and distributes bedding products in the United States and internationally. In addition to being undervalued, Tempur Sealy International, Inc. (NYSE:TPX) is also a dividend payer. As of June 17, the stock has a forward PE ratio of 6.62 and a trailing twelve-month dividend yield of 1.79%.
This April, Tempur Sealy International, Inc. (NYSE:TPX) released earnings for the fiscal first quarter of 2022. The company reported a revenue of $1.24 billion, up 18.75% year over year, and ahead of expectations by $36.48 million. Moreover, the company registered an EPS of $0.69 and outperformed consensus by $0.09.
On June 1, Piper Sandler analyst Peter Keith downgraded Tempur Sealy International, Inc. (NYSE:TPX) to Neutral from Overweight and also lowered his price target to $28 from $36.
As of March 31, Abrams Capital Management’s stake in Tempur Sealy International, Inc. (NYSE:TPX) sits at $100.51 million. The investment covers 2.34% of David Abrams’ investment portfolio.
At the end of Q1 2022, 31 hedge funds were long Tempur Sealy International, Inc. (NYSE:TPX) with stakes worth $591.96 million. This is compared to 40 positions in the previous quarter with stakes of $1.02 billion.
7. Camping World Holdings, Inc. (NYSE:CWH)
Abrams Capital Management’s Stake Value: $142,791,000
Percentage of Abrams Capital Management’s 13F Portfolio: 3.33%
Number of Hedge Fund Holders: 16
PE Ratio as of June 17: 4.59
Camping World Holdings, Inc. (NYSE:CWH) retails recreational vehicles and related products and services. The company operates through two business segments: Good Sam Services & Plans, and RV & Outdoor Retail. At the close of Q1 2022, 16 hedge funds were bullish on Camping World Holdings, Inc. (NYSE:CWH) with stakes worth $359.94 million. This is compared to 22 hedge funds in the preceding quarter with stakes of $386.56 million.
Camping World Holdings, Inc. (NYSE:CWH) is actively exploring M&A opportunities and working on expanding its operations. On May 23 the company announced plans to acquire Richardson’s RV Centers. Under the terms of the agreement Camping World Holdings, Inc. (NYSE:CWH) will acquire eight locations in California and Indiana which include five dealership locations, one future dealership location, and two parts and service centers. Then, on June 14, Camping World Holdings, Inc. (NYSE:CWH) announced its plans to acquire Anthem RV, an RV dealership located in Phoenix, Arizona.
As of May 5, Baird analyst Craig Kennison has a $35 price target and Outperform rating on Camping World Holdings, Inc. (NYSE:CWH).
On May 19, it was reported in a regulatory filing that Kent Schickli, director at Camping World Holdings, Inc. (NYSE:CWH) bought 10,000 shares of common stock on May 17 in a total transaction valued at $0.284 million.
As of March 31, Abrams Capital Management owns over 5.1 million shares of Camping World Holdings, Inc. (NYSE:CWH), which amounts to a stake of $142.79 million. The investment covers 3.33% of David Abrams’ 13F portfolio and as of June 17, the stock has a forward PE of 4.59, which makes it one of the best value stock picks of legendary value investor David Abrams.
6. Kinder Morgan, Inc. (NYSE:KMI)
Abrams Capital Management’s Stake Value: $235,925,000
Percentage of Abrams Capital Management’s 13F Portfolio: 5.5%
Number of Hedge Fund Holders: 40
PE Ratio as of June 17: 13.99
Kinder Morgan, Inc. (NYSE:KMI) operates as an energy infrastructure company in North America through four business segments: Natural Gas Pipelines, Products Pipelines, Terminals, and CO2. On June 14, Wells Fargo named the Kinder Morgan, Inc. (NYSE:KMI) among the energy stocks that were a part of the bank’s “recession stock portfolio”.
On May 2, Truist analyst Neal Dingmann assumed coverage of Kinder Morgan, Inc. (NYSE:KMI) with a Buy rating and a $22 price target.
As of March 31, Abrams Capital Management’s stake in Kinder Morgan, Inc. (NYSE:KMI) is valued at $235.92 million. The investment covers 5.5% of the fund’s 13F portfolio. Moreover, as of June 17, Kinder Morgan, Inc. (NYSE:KMI) has a forward PE ratio of 13.99 and a dividend yield of 6.92%, which makes it an undervalued dividend stock to buy in 2022 according to value investor David Abrams.
At the end of Q1 2022, 40 hedge funds were bullish on Kinder Morgan, Inc. (NYSE:KMI) with stakes worth $1.34 billion. This is compared to 39 positions in the previous quarter with stakes worth $998.85 million. The hedge fund sentiment for the stock is positive.
5. Energy Transfer L.P. (NYSE:ET)
Abrams Capital Management’s Stake Value: $247,571,000
Percentage of Abrams Capital Management’s 13F Portfolio: 5.77%
Number of Hedge Fund Holders: 31
PE Ratio as of June 17: 6.63
At the close of Q1 2022, 31 hedge funds held stakes in Energy Transfer L.P. (NYSE:ET) worth $699.43 million. This is compared to 36 positions in the preceding quarter with stakes worth $635.60 million.
As of April 26, Morgan Stanley analyst Robert Kad has a $12 price target and an Overweight rating on Energy Transfer L.P. (NYSE:ET). On May 4, Energy Transfer L.P. (NYSE:ET) released earnings for the fiscal first quarter of 2022. The company registered an EPS of $0.37 and beat estimates by $0.05. Moreover, the company’s revenue came in at $20.49 billion, up 20.57% year over year, ahead of expectations by $1.70 billion.
As of March 31, Abrams Capital Management’s stake in Energy Transfer L.P. (NYSE:ET) is valued at $247.57 million. The investment covers 5.77% of David Abram’s 13F portfolio. As of June 17, the stock has a forward PE ratio of 6.63 and a dividend yield of 8.14%, which makes it an undervalued dividend stock to buy according to value investor David Abrams.
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Disclose. None. 9 Value Stocks to Buy in 2022 According to David Abrams is originally published on Insider Monkey.
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