Seth Klarman’s Baupost Bought BP plc (ADR) (BP), Micron Technology, Inc. (MU) in Q2

In mid August, the Baupost Group filed its 13F for the second quarter of 2013, disclosing many of its long equity positions as of the end of June. Baupost is managed by Seth Klarman, the value investor and author of Margin of Safety (copies of the book have sold for over $1,000). It is one of the hundreds of hedge funds which we track as part of our work developing investment strategies (for example, we have found that the most popular small cap stocks generate an average excess return of 18 percentage points per year). Learn more about our small cap strategy. Our own portfolio based on these findings outperformed the S&P 500 by 33 percentage points in the last 11 months. We also like to compare a manager’s most recent 13F to the previous one to see what they had been doing in the previous quarter. Here are three things which we noticed from Klarman’s most recent 13F (see the full list of his stock picks over time).

BAUPOST GROUPSemiconductor companies. Baupost initiated positions in two semiconductor related companies: it bought about 42 million shares of data storage device manufacturer Micron Technology, Inc. (NASDAQ:MU) and 2.8 million shares of semiconductor testing company ChipMOS Technologies (Bermuda) Ltd (NASDAQ:IMOS). Micron has more than doubled in price over the last year, and while it has been unprofitable on a trailing basis it did break into the black for the fiscal quarter which ended in May. Wall Street analysts predict that it will do well next year, and so the forward P/E is only 9, but that does seem a bit optimistic given recent results. ChipMOS’s market cap is only about $500 million (though with plenty of dollar volume for most investors) which places its valuation at 12 times trailing earnings, though recent results have been flat at least on the top line. We would note that ChipMOS Technologies (Bermuda) Ltd (NASDAQ:IMOS)’s beta is 2.7, demonstrating that its stock price tends to react strongly to changes in market conditions.

Taking profits on Elan. Pharmaceutical company Elan Corporation, plc (ADR) (NYSE:ELN) had been a new position for Klarman and his team in the first quarter of the year. Elan had been reported to be in buyout talks, and recently drug company Perrigo Company (NASDAQ:PRGO) submitted a bid. The process resulted in Elan gaining over 20% between April and June. Baupost apparently decided to cash out at some point and sold its entire stake in the company by the end of the quarter according to the 13F. Currently, Perrigo Company (NASDAQ:PRGO) has offered $16.50 per share with most of that figure in stock; Elan Corporation, plc (ADR) (NYSE:ELN) currently trades at just above $15.60.

Adding to BP. Klarman had been a big buyer of BP plc (ADR) (NYSE:BP) during Q1, and after adding more shares last quarter he has almost doubled his holdings of the oil company from the end of 2012. In a number of ways, BP looks like a textbook value stock: it trades at the book value of its equity (rare for a large oil and gas company) and at only 8 times expected earnings for 2014. The company has been selling off assets, which may help it focus on its core business. Income investors should also note the whopping 5.2% dividend yield. The Bill and Melinda Gates Foundation Trust had owned 7.1 million shares of BP at the end of March (check out more stocks the trust owns).

We think that BP plc (ADR) (NYSE:BP), even with its potentially continuing legal troubles, is worth considering as a value play given how cheap it is in earnings terms; over time, sentiment on the stock should improve and so its valuation should rise closer to that of its peers. The earnings multiples are also low at the two semiconductor related stocks we’ve discussed here, and investors who are interested in the industry may want to take a look though our initial impression would be concerned regarding Micron Technology, Inc. (NASDAQ:MU)’s recent troubles and ChipMOS’s close to flat sales figures.

Disclosure: I own no shares of any stocks mentioned in this article.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

On the Move: The 10 Fastest Growing Businesses in 2015

Fast Money: The 10 Highest Paying Fast Food Restaurants

Mixing It Up: The 14 Best Music Mashups of 2014

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!