We recently compiled a list of the 99% of Billionaire Abrams’ Portfolio is in These 11 Stocks. In this article, we are going to take a look at where Loar Holdings Inc. (NYSE:LOAR) stands against the other stocks in David Abrams’ portfolio.
Founded in 1999 by David Abrams, Abrams Capital Management is an investment fund that strives to generate value by leveraging opportunistic and value-oriented investment strategies. Likewise, its portfolio is well-skewed to navigate any challenging macro environment, as it mainly focuses on value investments.
In addition, Abrams Capital Management’s portfolio focuses on diversifying its holdings across various asset classes. Stocks, debt, and distressed securities are some of its top asset classes. Diversification and value investments are some of the strategies that have allowed Abrams to perform better than other hedge fund managers, based on an annualized net return of 15% over the past 15 years.
Abrams Capital Management is primarily invested in the Services sector in the equity markets, which accounts for 25% of its holdings, with Technology stocks accounting for about 11,% followed in third by Basic Materials stocks. The strategic distribution affirms the hedge fund’s focus on sectors with higher prospects for value growth that align with long-term investment philosophy.
In the third quarter, Abrams made significant changes, trimming stakes in some holdings while increasing in others. The hedge fund made no new purchases or sales, reduced holdings in 3 stocks, and did not add to any existing positions. The top 10 holdings constitute 97.75% of the portfolio. The investments are concentrated in seven key sectors. The changes reflect the calculated approach in response to changing macroeconomics.
Our Methodology
To compile the list of billionaire Abrams’ portfolio we scanned Abrams Capital Management’s third quarter portfolio, focusing on the biggest holdings based on investment size. Upon analyzing the stocks, focusing on why they stand out, we ranked them in ascending order based on Abrams Capital Management’s equity stake.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A state-of-the-art commercial jetliner taking off, displaying the modernity of the company’s aerospace and defense division.
Loar Holdings Inc. (NYSE:LOAR)
Abrams Capital Management’s Q3 2024 Investment: $2.87 Billion
Percentage of Abrams Capital Management’s Portfolio: 46.03%
Number of Hedge Fund Holders:18
Loar Holdings Inc. (NYSE:LOAR) designs and makes aerospace and defense parts for aircraft. The stock has risen 93.32% year to date because the company has become a major player in the defense sector, focusing on avionics and electronics. It is also a key player in the commercial aircraft aftermarket, benefiting from the aerospace industry’s recovery and growth.
On November 13, Loar Holdings Inc. (NYSE:LOAR) reported record third-quarter 2024 results, with net sales of $103.5 million (up 25% year-over-year), net income of $8.7 million (up $5.8 million), diluted earnings per share of $0.09, and adjusted EBITDA of $38.1 million (up 31.8%). The net income margin improved to 8.4% from 3.4%, and the adjusted EBITDA margin increased to 36.8% from 34.9%, with adjusted earnings per share of $0.15.
Loar Holdings Inc. (NYSE:LOAR) has been expanding through strategic acquisitions. It recently bought Applied Avionics, Inc. for $385 million in August. Applied Avionics makes avionics interface solutions. This purchase is expected to add $40 million in revenue and about $20 million in adjusted EBITDA each year, with high margins of 50%. This should quickly boost Loar’s earnings.
According to the Insider Monkey database, 18 hedge funds held Loar Holdings Inc. (NYSE: LOAR) at the end of the third quarter, down from 24 in the previous quarter.
Here is what Baron Small Cap Fund stated about Loar Holdings Inc. (NYSE:LOAR) in its Q3 2024 investor letter:
“Finally, we sold Loar Holdings Inc. (NYSE:LOAR) following the stocks over 150% appreciation from its IPO price of $28 in April. Trading at 45 times 2024 EBITDA and 35 times 2025 EBITDA, we believe that a material portion of future gains have been pulled forward even with the assumption of a significant amount of M&A and organic growth estimated in coming years.”
Overall LOAR ranks 1st on our list of stocks in David Abrams’ portfolio. While we acknowledge the potential of LOAR as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than LOAR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.