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.

Comments
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

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

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!