Seth Klarman's Big Q2 Bets

by: Cambridge Fund Research

Baupost Group’s Seth Klarman is regarded as one of the best value investors today and boasts an enviable track record. 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).

Because of his long-term view and relatively low-turnover, there is a lot of information in looking at Klarman’s reported positions over time. We present a time-series report of shares and market value of stocks (and bonds) held by Baupost as of Q2 2011:

Shares over time (sorted descending by reported Q2 market value):

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(Reported time series information only shown for current positions – entire report available upon request)

Baupost’s 3 largest positions remained unchanged again this quarter (and as you can see have been static for several quarters). Klarman added 4 new positions, 2 of which are relatively big "starter" positions: Microsoft (NASDAQ:MSFT) & British Petroleum (NYSE:BP). Klarman also added to Allied Nevada Gold Corp (NYSEMKT:ANV) after introducing it into the portfolio last quarter (this stock is also held by Gold-mining specialist Tocqueville Asset Management). Aveo Pharma (NASDAQ:AVEO) was also increased after being introduced into the portfolio 3 quarters ago (Baupost holds about 10% of outstanding shares). Klarman’s position in Syneron Medical (NASDAQ:ELOS) was more than doubled in Q2 after being steady at 1.5M shares since the end of 2009 so Klarman recently got much more bullish on this name. ELOS has sold off rather substantially since the June 30 13F report date:

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Central Pacific Financial (NYSE:CPF) and Idenix Pharma (NASDAQ:IDIX) were also initiated as new positions this quarter and Sycamore Networks (NASDAQ:SCMR) was doubled (although to only about $5M). Baupost holds about 4.3% of outstanding CPF shares along with other noted funds: value-focused Senator Investment Group (3.97%) and distressed shop Anchorage Capital (22%).

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With the recent market volatility, especially in many of these names, it will be interesting to see whether Klarman doubled down on these positions in Q3.

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