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 Click to see monthly returns in table format!

Lists

10 Top Reasons For Getting Fired

The 3 Best States to Start an LLC

10 Jobs That Allow You to Travel

7 High-Paying Jobs You Can Do From Home

12 Best Cities to Shop in USA

10 Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

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!