Seth Klarman is an extremely cautious investor. Seth Klarman’s $1500 book, Margin of Safety, reflects his views of investing. Last month Insider Monkey, your source for free insider trading data, analyzed Seth Klarman’s long term stock investments. We believe following Seth Klarman’s stock picks could be very profitable for our portfolio. During the last three months of 2010, Klarman bought two new stocks: Aveo Pharmaceuticals (AVEO) and PDL Biopharma (PDLI).
Klarman added 2 million shares of AVEO, probably at prices between $14 and $15 per share. His last transaction was on December 31st, when the stock closed at $14.62. Currently this stock trades near $13.50. Klarman lost money on his $30 Million investment so far, but we wouldn’t be surprised if this stock doubles in a year or two.
Baupost bought 5.6 Million shares of PDL Biopharma (PDLI) during the fourth quarter. This stock lost nearly 17% since the end of December, giving investors an excellent opportunity to imitate Klarman’s new stock purchases. In addition to these brand new purchases, Klarman also doubled its Alere Inc (ALR) position. This stock gained 30% since the end of September.
Klarman sold his entire Domtar (UFS) position during the fourth quarter. This wasn’t surprising since Klarman was reducing this position in the third quarter. He also completely sold Energy XXI (EXXI). Incidentally, Leon Cooperman’s Omega Advisors has a large EXXI stake. The third stock Klarman sold was Liberty Media Starz (LSTZA). This was a special situations investment; it was also one of the top stocks owned by hedge funds. Klarman was busy selling during the fourth quarter- he also sold Solar Capital Ltd (SLRC). He initially bought this stock in February at $16. The stock was paying a $0.60 quarterly dividend. During the fourt quarter, SLRC was trading north of $21 and closed the quarter at $24.78.
Baupost also reduced its Breitburn Energy Partners (BBEP) position by 39%, Capitalsource Inc (CSE) by 21%, and Enzon (ENZN) by 13%. Value investor Mohnish Pabrai also has a $20 Million CSE position.
Overall Seth Klarman’s 13F stock portfolio has underperformed the SPY by 1.7 percentage points in 2011. Baupost didn’t change its three largest positions: Viasat (VSAT), Theravance (THRX), and News Corp (NWSA).