Category Archives: Baupost

Baupost’s portfolio going into 2012…

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Because of Klarman’s status in the value-investing world, as well as Baupost’s ability to uncover deep value in the various corners of the equity markets, we believe analyzing their 13F filings is a worthwhile exercise. In Q3, Klarman’s big bets were on BP (in which he more than doubled his stake), Microsoft (which started as a new position in the top 5) and PDL BioPharma(which increased from 9.2M shares to 15.6M shares putting it in the top 10). Q4 saw some big changes in the portfolio most notably:

  • Shares in Theravance Inc. increasing 42%
  • Shares in NovaGold Increasing 49%
  • Shares in PDL BioPharma decreasing 49%
  • Shares in Idenix Pharma increasing 127%

 Baupost’s shares over time shown below: Reported long positions as % of total reported market value shown below: Theravance has consistently been a top 5 position for Klarman and he took advantage of some fourth quarter weakness to increase his stake—which is the only major change of any position in the top 10 (when you consider both classes of NewsCorp collectively).  This increased bet appears not to have paid off yet but we can bet Baupost (which is the largest institutional shareholder with almost 17%) will stick it out.  (Iridian, Owl Creek, Geode Capital and Hawkeye Capital are also big holders of THRX):   NovaGold (NG) was a new position last quarter and, again, it looks like Klarman took advantage of some temporary weakness to add shares.  This is a popular stock among hedge funds with Paulson & Co. reported as the largest institutional shareholder (8.4% outstanding) followed by Tradewinds Global Investors (a Nuveen subsidiary), Aletheia Research & Management (a CA RIA), BlueRidge, Chilton and finally Baupost (with 2% of shares outstanding): PDL BioPharma (PDLI) was a new position in Q4’10 that  Klarman quickly ramped up, especially between Q2 and Q3 (when we last reported) that he added an impressive 6.4M shares (69% increase).  Well, it appears that Baupost took advantage of strength in this name to harvest some profits bringing Baupost’s institutional ownership significantly down from the 11% as of Q3:   Idenix Pharma (IDIX) was a new position in Q2 and Klarman has doubled the number of shares held by Baupost both quarters since.  Idenix primarily engages in the discovery and development of drugs against viral infections and is already up over 100% this year on takeover speculation over its promising Hep C treatments.   With Pharmasset being bought by Gilead for $11BN and Inhibitex being bought by Bristol for $2.5BN speculation that Idenix is next has run the price up.  It will be interesting to see if Klarman takes some profits off the table like he seemed to do with PDLI

Baupost’s biotech bets paying off…

Last quarter one of Baupost’s big increases that we noted was in a small biotech company that owns and manages various patents and license agreements with various biotechnology and pharmaceutical companies.  Baupost initiated a position in PDL BioPharma (PDLI)  at the end of 2010 and had grown it aggressively (11% of shares outstanding as of Q3) until this most recent Q4 filing:

It appears that as PDLI rallied in Q4, Klarman took the opporunity to harvest some profits:

Another biotech name, Idenix Pharmaceuticals (IDIX) started as a new position in Q2 and Klarman has doubled the number of shares held by Baupost both quarters since.  Idenix primarily engages in the discovery and development of drugs against viral infections and is already up over 100% this year on takeover speculation over its promising Hep C treatments.   With Pharmasset being bought by Gilead for $11BN and Inhibitex being bought by Bristol for $2.5BN speculation that Idenix is next has run the price up.  It will be interesting to see if Klarman takes some profits off the table like he seemed to do with PDLI:

 

For a detailed analysis of Baupost’s holdings over time look at our Quarterly Reports

 

Seth Klarman’s Q3 bets

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The Baupost Group was founded in 1983 by Seth Klarman, who is regarded as one of the best value investors of this generation. Klarman started at Baupost straight out of Harvard Business School, and has been running it for over two decades now. Klarman’s book, Margin of Safety, lays out his investment philosophy and is a “must-have” for any true value investing disciple (although it’s no longer in print and very difficult to find).

If you remember from last quarter, Klarman’s big new bets were Microsoft (MSFT) and British Petroleum (BP). This quarter, he doubled down on BP and left MSFT untouched. Also, of the top 20 positions, 4 new ones were initiated – one of which is a top 5: Hewlett-Packard (HPQ), News Corp (NWS), Genworth Financial (GNW) and NovaGold Resources (NG).

HPQ is clearly Baupost’s biggest new bet, at 15% of total reported long positions. Two positions were dropped from last quarter: Audiovox Corp (VOXX) and Capitalsource (CSE) but each were very small positions (1% and 3%, respectively) that he had been selling off over time.

HPQ was one of Paulson & Co’s big bets last quarter, and it contributed to its poor Q3 performance. It appears, however, that while Paulson did his homework on HPQ, it looks like Klarman waited until the price was right to get in — and he got in big:

One other relatively new position in the Baupost US equity portfolio was increased by approximately 69%, which was PDL BioPharma (PDLI):

Interestingly, PDLI has a 10% dividend yield and is trading at less than 8x earnings. PDLI owns and manages patents that it licenses out to biotech and pharmaceutical companies.  There were some interesting moves in Baupost’s portfolio this quarter, including a big bet on HPQ (at what appears to be the right time) as well as a small (but solid dividend paying) biotech. As always, there’s plenty of good info to be had from following the masters.