Baupost Group's Seth Klarman is well regarded as one of the better value investors. His margin of safety selections rarely change, and he has written and stated that he, like Warren Buffett, believes the ideal length of time to hold a good investment is forever. Nonetheless, he does sometimes sell out of positions.
Baupost's last 13F-HR was filed on February 11, 2011, and the information is as of December 31, 2010. Mr. Klarman's fund sold shares in four of his top ten holdings. He also increased his position in one of his top 10 holdings, and instituted a wholly new position to his top 10.
Some of you may find it interesting to learn what Mr. Klarman is adding and/or reducing exposure to, so here is an alphabetical list of the six changes Baupost last reported, and some information on how well, or poorly, those transactions have worked out so far.
- Alere Inc. (NYSE:ALR): INCREASED SHARES
- Business: Maker of medical diagnostic products.
- Market cap: $3.29 Billion
- Baupost's Position Value: $119.75 Million (about 3.6% of the company) up from $113.45 as of 12/31/2010
- Baupost's Last Change: Increase in shares by 1.6 million, from 1.5 million to 3.1 million shares, more than doubling his stake.
- 2011 Performance: range bound between $35 and $40 per share (increased from $30 to this range at the end of 2010).
- Alliance One International (NYSE:AOI): DECREASED SHARES
- Business: Tobacco processing.
- Market cap: $348.34 Million
- Baupost's Position Value: $35.15 Million (about 10% of the company) down from $37.2 Million as of 12/31/2010
- Baupost's Last Change: Decrease in shares by 13,300 to 8,786,700 (virtually no change)
- 2011 Performance: fell from around $4 per share to near $3.50, where it stayed for a while and then spiked back to around $4. AOI was largely above $4 in the last quarter of 2010.
- Breitburn Energy Partners LP (NASDAQ:BBEP): DECREASED SHARES
- Business: Oil & Gas MLP
- Market cap: $1.26 Billion
- Baupost's Position Value: $92.6 Million (about 7.4% of the company) up from $87.6 Million as of 12/31/2010
- Baupost's Last Change: Decrease in shares by 2,810,500 to 4.35 Million (sold approximately 2/5)
- 2011 Performance: range bound between 20 and 22, above its 19-20 range at the end of 2010, and well above its summer range (12-14).
- CapitalSource Inc. (NYSE:CSE): DECREASED SHARES
- Business: A former REIT that is converting itself into a bank.
- Market cap: $2.22 Billion
- Baupost's Position Value: $110.24 Million (about 5% of the company) down from $113.6 Millionas of 12/31/2010
- Baupost's Last Change: Decrease in shares by 4,278,400 to 16 Million (sold approximately 1/5)
- 2011 Performance: started by immediately moving from around $7 to $8, but has since fallen to below $7. This followed a strong move in the last quarter of 2010 where CSE moved up from $5 to $7.
- Enzon Pharmaceuticals Inc. (NASDAQ:ENZN): DECREASED SHARES
- Business: A pharmaceutical developer primarily focusing on oncology (cancer treatments).
- Market cap: $629 Million
- Baupost's Position Value: $100 Million (about 15% of the company) down from $110,232,564 as of 12/31/2010
- Baupost's Last Change: Decrease in shares by 1,317,520 to 9,065,178
- 2011 Performance: started by immediately falling from around $12.50 to near $10, but has since climbed to $11 and stabilized there. This current price is more in line with its 2010 trading range ($10.50 to $11.50), which it broke upwards out of at the end of 2010.
- PDL Biopharma Inc. (NASDAQ:PDLI): NEW POSITION
- Business: A Pharmaceutical intellectual property (patent) holding/royalty company.
- Market cap: $885.5 Million
- Baupost's Position Value: $35.5 Million (about 4% of the company) up but roughly unchanged from $34,909,182 as of 12/31/2010
- Baupost's Last Change: The fund initiated a position with 5,603,400 shares.
- 2011 Performance: PDLI started off 2011 poorly, quickly falling from near $6.5 to around $5, but has since returned above $6 (20% swings back and forth). This range is strangely consistent with its 2010 performance, where it made the trip from near $5 to near $6.5 on a quarterly basis. This range is at least partially due to large dividend this stock pays (currently a 9.6% yield).
Of course, Baupost doesn't have to report what price it paid, making it impossible to determine the precise performance of these transactions. Still, it is always good to know the movements of such a well-respected investor.
It is likely that Seth Klarman believes these holdings are undervalued and provide a margin of safety. Do you agree?
Disclosure: I am long CSE. Ownership by one or many hedge funds, or legendary investors, does not mean that you should also own that equity. Please do some research and consider each equity in relation to your total portfolio.