Seth Klarman's Top 10 Holdings: A Brief Analysis

by: Efsinvestment

Seth Klarman, the famous author of the $1000 book, "Margin of Safety," is a graduate of Cornell. He earned his MBA from Harvard Business School. Klarman leads the Baupost Group, a Boston-based private investment partnership. Since its inception, Baupos Group was able to beat the market with an annual return of 20%. According to latest 13F-HR filings submitted to Edgar Online, Klarman has an unconventional portfolio inclined toward healthcare and technology stocks. Here is a brief analysis of Klarman's top 10 holdings.

Viasat (NASDAQ:VSAT): Viasat, Inc. is a producer and marketer of satellite and other wireless communication, and networking systems. Market cap of Viasat is $1.61 billion. Seth Klarman is extremely bullish on Viasat. He holds 10.5 million shares worth $390 million. With a 4.32% net profit margin, Viasat has a P/E ratio of 46.61, and a forward P/E of 34.24. The company had annual EPS growth of 0.46%, whereas analysts estimate an annualized EPS growth of 9.87% in next five years. However, Viasat experienced a recent beat down, along with some analyst downgrades.

Theravance (THRX): Theravance is a pharmaceutical company that engages in the discovery and commercialization of small molecule medicines. Theravance has market cap of $2.32 billion. The company is not a stable profit maker. However, Theravance’s annual EPS growth estimate is 34.70%. The stock made an upside rush in April. Given its cash-rich competitors in the industry, it could be another takeover target. Probably, that is why Baupost owns 17.43% of the company worth $360 million.

News Corporation (NASDAQ:NWSA): News Corporation is a worldwide media company that operates through cable television systems and direct-broadcast satellite. With a large market cap of $45.88 billion, NWSA has P/E ratio of 14.69, and forward P/E ratio is 13.24. It also serves a dividend yield of 0.86%. The company’s past EPS growth is 6.85%, while analysts expect an EPS growth of 11.35%. News Corporation is a highly profitable company with a net profit margin of 9.82%. If analyst estimates hold true, Klarman's $333 million stake could turn into a very profitable investment for the long term.

CapitalSource (NYSE:CSE): CapitalSource, Inc. is a specialized finance company that provides financial services to businesses. Its market cap is $2.22 billion with a forward P/E ratio of 14.91. CSE had past EPS growth of -37.94%, but this year's EPS growth estimate is 85%. With net profit margin of -31.02%, it serves 0.58% dividend yield. Recently, the stocks experienced a beat down, breaking the $7 resistance, putting Klarman's $110 million investment in jeopardy.

Alere (NYSE:ALR): Alere, Inc. is a manufacturer of consumer and professional medical diagnostic products. Alere did not make any profits last year, but forward P/E ratio is 12.65, and market cap is $3.30 billion. In addition, its past sales growth is 38.57%, and this year's EPS growth estimate is 45.18%. Analysts consistently upgraded Alere with target prices ranging between $44 and $49. Klarman increased his Alere holdings by %100 which was a brilliant decision given Alere's 25% ytd return.

Enzon Pharmaceuticals (NASDAQ:ENZN): Enzon Pharmaceuticals, Inc. is another pharmaceutical company that engages in the discovery and development of medicines for cancer patients. With a market cap of 606.63M, Enzon's EPS growth is expected to be around 100% this year. Klarman owns 16.5% of Enzon.

Breitburn Energy Partners L.P. (BBEP): Breitburn Energy Partners L.P. is an oil and gas explorer in the United States. With a market cap of $1.28 billion, Breitburn has a P/E ratio of 36.02, and a forward P/E ratio of 17.86. This year, earnings are expected to increase by 44%. Breitburn has an eye-catching net profit margin of 9.83%, and dividend yield of 7.64%. It is a nifty stock for dividend lovers.

Alliance One International (NYSE:AOI): Alliance One purchases, stores, and sells leaf tobacco to cigarette manufacturers worldwide. Market cap of AOI is $344.84 million. AOI has a P/E ratio of 8.61, and a forward P/E ratio of 19.80. Additionally, its past EPS growth is 7.33%, and net profit margin is 2.23%. Klarman owns 10% of the company.

PDL BioPharma (NASDAQ:PDLI): PDL BioPharma engages in the management of antibody humanization patents and royalty assets, which involves various types of patents and license agreements. The company has a market cap of $877.19 million. Its P/E ratio is 12.31, and forward P/E ratio is 4.39. BioPharma has past EPS growth of -9.43%, whereas long-term EPS growth estimate is 26%. On top of that, BioPharma is truly striking with net profit margin of 26.63%, and dividend yield of 9.55%. The company looks promising with strong fundamentals and consistent analyst upgrades.

Regeneron Pharmaceuticals (NASDAQ:REGN): Regeneron Pharmaceuticals is a biopharmaceutical company developing and commercializing pharmaceutical products for the treatment of serious medical conditions. Market cap of Regeneron is $4.48 billion, and net profit margin is -22.76%. Recently, insiders increased their holdings by 25%, and several analysts upgraded the stock with a target price of $57. Regeneron was the best investment of Klarman so far with a ytd return of 52.54%.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.