Abrams Capital Management leader David Abrams (Trades, Portfolio) revealed earlier this week he reduced his stake in TransMedics Group Inc. (TMDX, Financial) by 25.01%.
The former protégé of Seth Klarman (Trades, Portfolio) 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 GuruFocus Real-Time Picks, a Premium feature, Abrams sold 875,147 shares of the medical technology company headquartered in Boston, impacting the equity portfolio by -0.9%. The stock traded for an average price of $32.60 per share on the day of the transaction.
The guru now holds 2.6 million shares total, accounting for 2.73% of the equity portfolio. GuruFocus estimates he has gained 22.42% on the investment since establishing it in the second quarter of 2019. This is the first time he has made any changes to the position.
TransMedics, which manufactures an organ care device used to more efficiently and effectively transplant lungs, hearts and livers among patients, has an $869.15 million market cap; its shares were trading around $32 on Thursday with a price-book ratio of 7.93 and a price-sales ratio of 30.56.
The price chart shows the stock is trading above its median price-book and price-sales ratios, suggesting it may be overvalued.
GuruFocus rated TransMedics' financial strength 6 out of 10 on the back of a high cash-to-debt ratio of 3.84 and robust Altman Z-Score of 7.02. The Sloan ratio, however, indicates the company has poor earnings quality. Additionally, revenue per share has declined over the past 12 months.
The company is also being weighed down by negative margins and returns that underperform a majority of competitors.
With a 9.66% stake, Abrams is TransMedics' largest guru shareholder. Steven Cohen (Trades, Portfolio) also has a position in the stock.
Portfolio composition
Nearly 30% of the guru's $3.16 billion equity portfolio, which was composed of 19 stocks as of the end of the third quarter of 2020, was invested in the consumer cyclical sector, followed by smaller positions in the communication services (16.87%) and industrials (14.42%) spaces.
Other health care stocks Abrams owned as of the three months ended Sept. 30 were Teva Pharmaceutical Industries Ltd. (TEVA, Financial) and Akebia Therapeutics Inc. (AKBA, Financial).
Disclosure: No positions.
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