After trimming his Camping World Holdings Inc. (CWH, Financial) stake in July, Abrams Capital Management leader David Abrams (Trades, Portfolio) revealed this week he reduced the position by another 8.91%.
The former Seth Klarman (Trades, Portfolio) protégé follows a fundamental, value-oriented approach to stock picking, investing in a fairly concentrated number of stocks. His Boston-based firm looks for long-term opportunities across a wide array of asset types in both foreign and domestic markets. He also prefers companies in which the CEO has a significant stake, or where the CEO’s salary is primarily stock-based.
According to Real-Time Picks, a Premium GuruFocus feature, Abrams sold 500,000 shares of the Lincolnshire, Illinois-based company on Aug. 3, impacting the equity portfolio by -0.79%. The stock traded for an average price of $40.18 per share at the time of the transaction.
The guru now holds 5.1 million shares, which represent 8.14% of the equity portfolio. GuruFocus estimates Abrams has gained 141.04% on the investment since establishing it in the third quarter of 2018.
Camping World, which sells recreational vehicles, parts and camping gear and provides related services, has a $3.64 billion market cap; its shares were trading around $36.43 on Thursday with a forward price-earnings ratio of 48.34 and a price-sales ratio of 0.4, which GuruFocus says is near a two-year high.
GuruFocus estimates the stock has climbed more than 150% year to date.
Camping World reported its second-quarter results on Aug. 5. Boosted by increased demand, the company posted adjusted earnings of $1.62 per share on $1.6 billion in revenue. While results were in line with analysts’ expectations, the stock fell 3% in after-hours trading.
In a statement, Chairman and CEO Marcus Lemonis praised the company’s performance amid “changing business conditions,” which led to success in “engaging new and existing customers” across all business areas.
“In addition, our team has done an amazing job at managing our supply chain and replenishing inventory levels in key products and categories,” he said. “As a result, we are very pleased with our year-to-date and quarterly results, and the prospects for the future.”
GuruFocus rated Camping World’s financial strength 3 out of 10. As a result of issuing approximately $613.11 million in new long-term debt over the past three years, the company has extremely low interest coverage.
The Altman Z-Score of 2.15 also indicates it is under some stress as the company has recorded an operating income loss as well as a decline in revenue per share. The weighted average cost of capital also surpasses the return on invested capital, suggesting it struggles to make a profit.
The company’s profitability fared better, scoring a 6 out of 10 rating even though margins and returns underperform over half of its competitors. Camping World also has a low Piotroski F-Score of 3, implying its operating conditions are in poor shape.
Of the gurus invested in the stock, Abrams still has the largest stake by far with 5.79% of outstanding shares. Chuck Royce (Trades, Portfolio), Hotchkis & Wiley, PRIMECAP Management (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio) are also shareholders.
Portfolio composition
Nearly 24% of the guru’s $2.54 billion equity portfolio, which was composed of 22 stocks as of the end of the first quarter, was invested in the health care sector, followed by smaller positions in the consumer cyclical (15.08%) and financial services (14.79%) spaces.
Other stocks in the vehicles and parts industry that Abrams owned as of the three months ended March 31 were Asbury Automotive Group Inc. (ABG, Financial) and Lithia Motors Inc. (LAD, Financial).
Disclosure: No positions.
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