Is Asbury Automotive (ABG) a Great Long-Term Buy?


Voss Capital, an investment management firm, published its fourth-quarter 2021 investor letter – a copy of which can be downloaded here. In Q4 2021, the Voss Value Fund, LP and the Voss Value Offshore Fund, Ltd., returned +13.6% and +14.3% to investors net of fees and expenses, respectively, compared to +2.1% total return for the Russell 2000, +3.9% price return for the Russell 2000 Value, and +11.0% total return for the S&P 500. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.

Voss Capital, in its Q4 2021 investor letter, mentioned Asbury Automotive Group, Inc. (NYSE:ABG) and discussed its stance on the firm. Founded in 1995, Asbury Automotive Group, Inc. (NYSE:ABG) is a Duluth, Georgia-based automotive retail company with a $4.3 billion market capitalization, and is currently spearheaded by its CEO, David W. Hult. Asbury Automotive Group, Inc. (NYSE:ABG) delivered an 8.15% return since the beginning of the year, while its 12-month returns are up by 2.99%. The stock closed at $186.80 per share on March 22, 2022.

Here is what Voss Capital has to say about Asbury Automotive Group, Inc. (NYSE:ABG) in its Q4 2021 investor letter:

Asbury Automotive is an auto dealer that we purchased recently at ~5x earnings and free cash flow. We believe the stock’s value has been partly obscured by their recent acquisitions along with auto dealers having derated significantly over the last few months due to perceived fears of “over earning” in 2021 and 2022, as average profit per car has shot up due to supply constraints. We have constructed a framework of “normalized earnings” for 2023 and concluded that ABG trades at ~7x earnings versus a historical range of 7-15x, or around 11x on average. We thus believe the stock can rerate to 11x normalized earnings, or around 40-50% higher from our purchase price of ~$160. Downside should be limited given the company’s very depressed multiples, although we will be watching for an acceleration of rates raising which could whack what is currently pent-up demand for vehicles.”

Car, Automotive, Oil

Car, Automotive, Oil

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Our calculations show that Asbury Automotive Group, Inc. (NYSE:ABG) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. Asbury Automotive Group, Inc. (NYSE:ABG) was in 32 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 22 funds in the previous quarter. Asbury Automotive Group, Inc. (NYSE:ABG) delivered a 14.17% return in the past 3 months.

In March 2022, we also shared another hedge fund’s views on Asbury Automotive Group, Inc. (NYSE:ABG) in another article. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.

Disclosure: None. This article is originally published at Insider Monkey.



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