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This series of articles will be ongoing updates that analyze changes to Baupost’s U.S. stock portfolio from quarter to quarter. Please check-out our "Tracking Seth Klarman’ Baupost Group Holdings" article for an idea on how his holdings have progressed over the years.

Below is a spreadsheet that highlights changes to Baupost’s U.S. stock holdings in the last quarter:


(Click to enlarge)

Baupost Group has around $24B in Assets Under Management (AUM). Typically, the fund is diversified among different asset classes and special situations such as liquidations, bankruptcies, and distressed debt. As of the Q2 2011, the U.S. allocation of his portfolio stood at just 10% ($2.4B). As of Q3 2011, the U.S. portfolio is at just over $3B, making the U.S. Allocation at around 12.5%. That is a significant shift in allocation in one quarter and indicates that Seth Klarman is finding good values in the U.S. stock market. This is especially true as his U.S. allocation has varied between a low of just 2.4% and a high of 15% in the last ten years – the 15% allocation in 2008 was the only time the U.S. allocation was better than the current allocation.

New Stakes:

Hewlett Packard Company (HPQ): HPQ is a very large (15% of the U.S. stock portfolio) position initiated this quarter when the price-per-share varied between $37 and $22. The stock currently trades at ~$28. This is a classic value pick as the stock was decimated this year (32% drop) due to PC segment underperformance. There was a major management shakeup as well with CEO Leo Apothekar replaced by Meg Whitman. Despite these concerns, HPQ can be considered a value play as its other businesses (printers, software, and services) are considered stable.

Genworth Financial (GNW): GNW is a 2% of the U.S. stock portfolio position initiated this quarter when the price-per-share varied between $4.80 and $10.68. The stock currently trades at $6.60 and is very volatile. It has exposure to U.S. mortgages and during the financial crisis the stock traded as low as $1.45. Despite this, the stock can be considered of value as the book value is at around $33 per share and it has been increasing at a 10% clip year-over-year. Liquidity is also not a concern as it has plenty of cash ($3.6B) and their Australian Mortgage Insurance business is doing an IPO which should net another $600M. This is against a long-term debt of $4.7B.

Novagold Resources Inc. (NG): NG is a small 1% of the U.S. stock portfolio position initiated this quarter when the price-per-share varied between $6.45 and $11.22. The stock currently trades at $8.81. Klarman previously took a relatively larger 5% of the U.S. stock portfolio position in Allied Nevada Gold (ANV) in the first quarter of 2011 when the price-per-share varied between $24 and $35. The stock currently trades at $37.38. Klarman holds gold stocks as a hedge against uncontrolled government spending devaluing currencies.

Stake Disposals:

Audiovox Corp. (VOXX): VOXX was a very small position (<0.5% of the U.S. stock portfolio) initiated in 2007 when the price-per-share varied between $10 and $16. The stake was increased significantly (2% of the U.S. stock portfolio) in 2008 when the price-per-share varied between $4 and $11. The share count peaked at ~2 million in 2008 and the stake was slowly trimmed since then.

Capitalsource Inc.. (CSE): CSE was a large position that was initiated in 2008 when the price-per-share varied between $4 and $17. The stake peaked last year when it stood at around 6.5% of the U.S. stock portfolio. since then, the position was trimmed slowly and eliminated this quarter. The price-per-share varied between $5 and $7 during the quarter.

Stake Increases:

BP PLC (BP): BP is a very large stake that was increased by ~150% this quarter. The stake was initiated in the Q2 2011 when the price-per-share varied between $42 and $46. During this quarter, the price-per-share varied between $36 and $47. The stock currently trades at $43.70. BP is trading at a significant discount to valuations among the other oil majors – the oil spill of May 2010 resulted in the price-per-share dropping from around $60 to $27 and the stock has been slowly recovering since then. For investors attempting to follow Klarman, BP is a good option as it is trading within the price-range Klarman could have acquired his stake.

News Corp. (NWSA), Theravance Inc. (THRX) and Viasat Inc. (VSAT): NWSA, THRX, and VSAT are large positions that were increased incrementally this quarter. NWSA and THRX were increased by around 10% while VSAT was increased by around 5%. Klarman is definitely bullish on these stocks but they have recovered well from the lows of September. As such, investors attempting to follow Klarman should wait for a better entry price on these positions.

Aveo Pharmaceuticals (AVEO) and PDL Biopharma Inc. (PDLI): AVEO and PDLI are large positions that were increased significantly this quarter. The AVEO stake was increased by around 10% while the PDLI stake was increased by a whopping 70%. PDLI price-per-share varied between $5.5 and $6.5 this quarter and the stock currently trades at $6.11. AVEO price-per-share varied between $15 and $20 this quarter and the stock currently trades at $16.24. Klarman is bullish on these stocks and they are trading within the price-range Klarman could have bought this quarter. As such, for investors attempting to follow Klarman, these are good options,

Idenix Pharmaceuticals (IDIX) and Sycamore Networds (OTC:SCMR): IDIX and SCMR are small positions that were increased significantly this quarter. Combined, they only represent 0.6% of Baupost’s U.S. stock portfolio. As such, the stakes do not represent a bullish bias.

Allied Nevada Gold (ANV), Multimedia Games Holdings (MGAM) and Syneron Medical Limited (ELOS): These were positions that were increased by insignificant amounts this quarter. As such, the stake increases do not represent a strong bullish bias.

Source: Tracking Seth Klarman's Baupost Group Portfolio: Q3 2011 Update