What Does Seth Klarman’s Baupost See In BP plc (ADR) (BP)?

Page 1 of 2

For about a year, oil major BP plc (ADR) (NYSE:BP) has been the largest position in the Baupost Group’s portfolio, according to 13Fs filed with the SEC (we track 13Fs as part of our work developing investment strategies; we have found, for example, that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year). In the first quarter of this year, Baupost- which is managed by Seth Klarman, whose 1991 investing book Margin of Safety has sold for as much as $1,500- increased its holdings of BP plc (ADR) (NYSE:BP) by 57%, to a total of over 17 million shares. See more of Klarman’s stock picks.

BP plc (ADR) (NYSE:BP)’s revenue slipped slightly last quarter compared to the first quarter of 2012, though earnings per share showed substantial improvements and adjusted EPS beat analyst expectations. The company has been selling off some of its assets in order to fortify its balance sheet, though BP plc (ADR) (NYSE:BP) has been increasing its quarterly payments over the last couple years as management has become more confident in its cash flows. Currently investors receive quarterly payments of 54 cents per share, which equates to a dividend yield of 5%. Dividend payments are still well below what they were in early 2010 prior to the Deepwater Horizon disaster, however.

BAUPOST GROUPBP plc (ADR) (NYSE:BP) certainly looks cheap, at a valuation of 7 times forward earnings estimates (we don’t consider the company’s trailing EPS, which are higher than the consensus figures for 2014, that relevant given management’s activity in selling off assets). So there is both a value case for the stock- its earnings multiples are low, and business appears somewhat stable- and a high yield. We’d note that in statistical terms, the stock tends to be highly dependent on the movements of broader market indices given its beta of 2.2, and certainly energy prices would be tied to the macroeconomy. In addition to Baupost’s interest in the company, our database of 13F filings shows that the Bill and Melinda Gates Foundation Trust owned 7.1 million shares as of the end of March (find more stocks the trust owns).

Page 1 of 2

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
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

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

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 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!