Seth Klarman’s Baupost Group shed its entire stake in AVEO Pharmaceuticals Inc (NASDAQ:AVEO), selling off more than 3.82 million Common Shares. Due to this recent transaction, the company has lost the backing of its largest institutional shareholder. On the same day, the hedge increased its holdings in Cheniere Energy Inc (NYSEMKT:LNG) by 13.6 million shares, or more than 120%. As disclosed in the 13G filing with the Securities and Exchange Commission, Baupost Group now owns around 24.8 million Common Shares, representing 10% of the company’s outstanding stock.
The employee-owned hedge fund Baupost Group, was founded in 1982 by Seth Klarman, a Harvard Business School graduate, and author of the book Margin of Safety. The fund’s equity portfolio, which is valued at around $5.7 billion, is made up primarily of companies active in the information technology sector, with the energy and healthcare industries ranking second and third respectively. By increasing its exposure to Cheniere Energy Inc (NYSEMKT:LNG) and shedding its position in AVEO Pharmaceuticals Inc (NASDAQ:AVEO), the hedge fund has made its preference for the energy sector quite clear. Due to the recent purchase of 13.6 shares of Cheniere Energy, Micron Technology Inc (NASDAQ:MU) has lost its spot as Baupost Group’s largest holding, despite accounting for 30% of the fund’s equity portfolio. Mr Klarman’s firm has been shifting its focus towards the energy and healthcare sectors for some time now, increasing its stakes in companies like PBF Energy Inc (NYSE:PBF) and Atara Biotherapeutics Inc (NASDAQ:ATRA).
AVEO Pharmaceuticals Inc (NASDAQ:AVEO) is a $45.5 million market cap biopharmaceutical firm, which focuses on discovering, developing, and commercializing targeted cancer therapies. Its AV-380 Program for example, is dedicated to finding ways to alleviate common complications in patients with advanced cancer, such as unintentional weight loss, progressive muscle wasting, and a loss of appetite. The company has a number of strategic partnerships with hospitals and other pharmaceutical companies, yet has been struggling to compete in this tough industry. Due to the sharp drop in shareholder value, AVEO has recently announced a corporate restructuring, which includes cutting its work-force and eliminating the firm’s internal research function. Considering the stocks grim outlook, it comes as little surprise that Mr. Klarman’s Baupost Group decided to eliminate this holding from its equity portfolio.
Shares of Cheniere Energy Inc (NYSEMKT:LNG) on the other hand have experienced a large increase in value over the past year. Furthermore, shareholders are excited regarding future performance, as the company recently landed a 20-year contract to supply Portugal with natural gas. The agreement signed with EDP Energias de Portugal, will allow Cheniere Energy to sell 770,000 tons of liquefied natural gas per year, once deliveries begin in 2019. The $15.3 billion market cap energy firm, which operates in the liquefied natural gas related business, owns and operates terminal projects in Louisiana and Texas. Thanks to its solid performance, the company is currently expanding its operations, developing new liquefaction trains and constructing additional storage tanks and marine berths. Thus, the recent increase in Baupost Group’s exposure to Cheniere Energy, which turned the hedge fund into the company’s largest institutional shareholder, is expected to generate healthy returns.
Naturally, Mr. Klarman’s Baupost Group is not the only fund displaying optimism regarding Cheniere Energy Inc (NYSEMKT:LNG). The energy company has the backing of Michael Lowenstein’s Kensico Capital, a hedge fund boasting a stake of more than 7.85 million shares. Stephen Mandel’s Lone Pine Capital has also taken a bullish stance towards the stock, increasing his position in Cheniere Energy by more than 1100% last quarter, bringing its total holdings to 6.9 million shares.
Despite its poor performance as of late, some institutional shareholders remain bullish regarding AVEO Pharmaceuticals Inc (NASDAQ:AVEO). Alex Denner’s Sarissa Capital Management for example, continues to hold a position amounting to 2.5 million shares. Howard Guberman’s Gruss Asset Management even increased his stake in the company by more than 150% last quarter, bringing his total exposure to AVEO to 1.36 million shares.
Disclosure: Pablo Erbar holds no position in any stocks or funds mentioned.
