Home Book trading 3 David Abrams and Seth Actions

3 David Abrams and Seth Actions

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Head of the Baupost group

Seth Klarman (Businesses, Portfolio) and

david abrams (Trades, Portfolio), the head of Abrams Capital Management, both manage their hedge funds from Boston. That’s not all they have in common, however.

Abrams previously worked for Klarman for nearly a decade before starting his own company in 1999, so it’s no surprise that their strategies, not to mention a few of their investments, can sometimes align.

Klarman’s hedge fund seeks value across a wide range of opportunities, including equities, distressed debt, liquidations and foreign securities. With a long-term horizon, the renowned investor typically looks for securities trading well below their estimate of intrinsic value and waits for the price to rise. Baupost manages approximately $31.6 billion in assets.

As for Abrams, the former protege takes a fundamental, value-driven approach to stock selection, investing in a fairly concentrated number of stocks. His firm seeks to identify long-term opportunities across a wide variety of asset types in both foreign and domestic markets. He also prefers companies where the CEO has a large stake or where the executive’s salary is primarily stock-based.

According to the aggregate portfolio of GuruFocus, a premium feature based on 13F repositories, the two gurus both hold positions at Nuvation Bio Inc. (NUVB, Financial), Meta Platforms Inc. (META, Financial) and Willis Towers Watson PLC (W.T.W., financial) at the end of the second quarter.

Investors should be aware that 13F filings do not provide a complete picture of a company’s holdings as the reports only include its positions in US stocks and US certificates of deposit, but they can still provide valuable insight. Additionally, reports only reflect trades and holdings as of the most recent portfolio deposit date, which may or may not be held by the reporting company today or even when this article was published.

Nuvation Organic

During the quarter ended June 30, Klarman reduced its stake in Nuvation Bio (NUVB, Financial) by 0.24%, while Abrams left his position unchanged. They have a combined equity portfolio weighting of 0.83% in the stock.

The San Francisco-based pharmaceutical company, which develops new therapies to treat different types of cancer, has a market capitalization of $437.58 million; its shares were trading around $2 on Friday with a price-to-book ratio of 0.58.

Since going public via a combination with a special purpose acquisition company in March, the stock has fallen nearly 60%.

Due to lack of data, the GF score of 22 out of 100 may not be a good indicator of the company’s performance potential right now.

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GuruFocus rated Nuvation’s financial strength at 8 out of 10, thanks to a comfortable level of interest coverage. The Sloan ratio, however, is indicative of poor earnings quality.

The company’s profitability hasn’t been as good, scoring 1 out of 10 due to negative margins and returns on equity, assets and capital that outperform competitors.

GuruFocus estimates that Klarman lost 61.20% on the investment it established during the first quarter. Similarly, Abrams generated a return of 61.32% over the same period.

Of the gurus invested in Nuvation Bio, Klarman has the largest stake with 4.77% of its shares outstanding. Abrams is second with 1.75%.

steven cohen (Businesses, Portfolio),

Jim Simons (Businesses, Portfolio)’ Renaissance Technologies and

David Einhorn (Trades, Portfolio) also own the stock.

Metaplatforms

Klarman has limited its meta-platforms (META, Financial) holding 28.98% during the quarter, while Abrams left his investment unchanged. Together, they have a combined equity portfolio weighting of 6.87% in the stock.

The social media company formerly known as Facebook, headquartered in Menlo Park, California, has a market capitalization of $371.65 billion; its shares were trading around $140.71 on Friday with a price-to-earnings ratio of 11.73, a price-to-book ratio of 3.03 and a price-to-sales ratio of 3.30.

The GF value line suggests that the stock is currently significantly undervalued based on its historical ratios, past financial performance and analysts’ estimates of future earnings.

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Additionally, the GF score of 92 out of 100 indicates that the company has good potential for outperformance, thanks to high rankings for profitability, growth and financial strength and medium scores for GF value and momentum.

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Meta Platforms’ financial strength has been rated 8 out of 10 by GuruFocus due to adequate interest coverage and a high Altman Z-Score of 7.50 which indicates that it is in good standing. Return on invested capital also dwarfs the weighted average cost of capital, so value creation occurs as the business grows.

The company’s profitability has further improved with a rating of 10 out of 10. Despite recording declining margins, Meta is supported by strong returns that outperform the majority of its industry peers. It also has a moderate Piotroski F-Score of 4 out of 9, indicating conditions are typical of a stable business. The 4.5-star predictability ranking is under scrutiny even though the company has seen consistent profit and revenue growth. According to research by GuruFocus, companies in this ranking have an average return of 10.6% per year over a 10-year period.

Data from GuruFocus shows that Klarman has lost around 2.45% on the investment so far, while Abrams has lost around 6.13% since the fourth quarter of 2018.

With a 0.44% stake, Dodge & Cox is Meta’s largest guru shareholder. Other top investor gurus include

Ken Fisher (Businesses, Portfolio),

Baillie Gifford (Businesses, Portfolio), Simons firm,

First Eagle investment (Businesses, Portfolio),

Steve Mandel (Businesses, Portfolio),

Chase Coleman (Businesses, Portfolio),

Chris Davis (Businesses, Portfolio) and

Andreas Halvorsen (Jobs, Portfolio).

Willis Towers Watson

Klarman reduced its position in Willis Towers Watson (W.T.W., Financial) by 24.70% over the three-month period, while Abrams left his stake unchanged. The stock has a combined weight of 8.38% in their portfolios.

The London-based insurance brokerage has a market capitalization of $22.13 billion; its shares were trading around $202.07 on Friday with a price-to-earnings ratio of 7.14, a price-to-book ratio of 2.15 and a price-to-sales ratio of 2.75.

According to the GF Value Line, the stock is currently slightly undervalued.

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The GF score of 82 indicates that the company has good potential for future performance, having received high ratings for profitability, GF value and momentum and medium ratings for growth and financial strength.

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GuruFocus has rated Willis Towers Watson’s financial strength at 5 out of 10. Although the company has sufficient interest coverage, the low Altman Z-Score of 1.28 warns that it could be at risk of bankruptcy. The company is also struggling to create value since the WACC exceeds the ROIC.

The company’s profitability was rated 7 out of 10, thanks to operating margin expansion and strong returns that outpace the majority of its competitors. Willis Towers Watson also has a moderate Piotroski F-Score of 6 along with a one-star predictability rating. GuruFocus found companies with this rank yield, on average, 1.1% per year.

GuruFocus says Abrams has earned around 60.03% on his investment, which was settled in Q4 2016. As for Klarman, it has returned 0.41% since the holding company opened in Q1 2021 .

First Eagle holds the largest stake with 4.39% of the company’s outstanding shares. Barrow, Hanley, Mewhinney & Strauss and

Bill Nygren (Businesses, Portfolio) also hold significant positions in Willis Towers Watson.

Composition of the portfolio

Klarman’s $6.74 billion equity portfolio, comprised of 52 stocks in the quarter ended June 30, is primarily invested in communications services and technology spaces.

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Abrams’ $3.72 billion equity portfolio, which consisted of 18 stocks at the end of the second quarter, is heavily invested in the consumer discretionary sector.

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