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BP plc (ADR) (BP), Oracle Corporation (ORCL): Value Investor Seth Klarman’s Shakeups

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Seth Klarman’s Baupost Group, led by the famed value investor and author of Margin of Safety, recently revealed its public equity portfolio in its quarterly filing with the SEC. Klarman founded Baupost in 1983, and now has assets under management of nearly $30 billion. Outlined below are five takeaways from Baupost’s portfolio, which include some interesting additions (check out Klarman’s cheap stock picks).

BP plc (ADR) (NYSE:BP)Baupost kept BP plc (ADR) (NYSE:BP) as its top stock holding after a 56% increase in shares owned. The oil and gas supermajor now makes up 23.3% of Baupost’s 13F portfolio. BP plc (ADR) (NYSE:BP) reported below-consensus EPS for the first quarter, which has kept the stock in check year to date, up only 2.8% compared to the S&P 500’s 15.6% upward move for the same time period.

Part of the company’s initiatives includes offloading non-core upstream properties, having already sold off its refinery in Carson, Calif. and Texas City, Tex. refineries, which hold half of its U.S. capacity. These divestures will help the company pursue other initiatives in Russia. The other appealing thing about BP plc (ADR) (NYSE:BP) is its 5% dividend, which is well above most of the other oil and gas Supermajors.

Another key pick for Baupost was American International Group Inc (NYSE:AIG), which is the hedge fund’s third-largest holding, following a 69% increase in shares owned. American International Group Inc (NYSE:AIG) now makes up 14.8% of Baupost’s13F portfolio. In addition, American International Group Inc (NYSE:AIG)’s key segment, property & casualty (making up 70% of revenues), saw operating income up 76.3% during 1Q from the year-ago quarter. The stock also continues to trade at a steep discount to book value, with a P/B of only 0.6. Meanwhile, another hedge fund manager, Bruce Berkowitz of Fairholme, has serious conviction in the stock, with 43% of Fairholme’s portfolio invested in the stock going into 2013 (see what else Berkowitz is up to).

One of Baupost’s selloffs was Oracle Corporation (NASDAQ:ORCL), which at the end of 2012 was the fund’s third-largest holding. After a 67% selloff of shares owned during the first quarter, Oracle Corporation (NASDAQ:ORCL) is now its seventh-largest holding. Part of the selloff could be a result of Oracle Corporation (NASDAQ:ORCL)’s slowing growth and high debt load. After having grown at an annualized 17% over the last the five years, analysts expect the tech company to grow at 10% over the next five.

Oracle Corporation (NASDAQ:ORCL) is expected to have to pay some $1.25 billion in debt repayment for fiscal 2013. It faces competition in most of its markets from IBM, Microsoft, Sybase, SAP and Teradata, and in its hardware segment, from the likes of IBM and Hewlett-Packard. Oracle Corporation (NASDAQ:ORCL) also recently lost its patent infringement claims against Google Inc (NASDAQ:GOOG) for using Sun Java code to build Android. The headwinds remain afoot for this tech giant.

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