Seth Klarman‘s Baupost Group has recently revealed its equity positions in a 13F filing with the Securities and Exchange Comission. Analysing this data, we have extracted the fund manager’s favorite long term picks that have been on the top of his portfolio for at least the last four quarters. All of these, including Cheniere Energy, Inc. (NYSEMKT:LNG), Micron Technology, Inc. (NASDAQ:MU) and ViaSat, Inc. (NASDAQ:VSAT) are large cap companies. Our research has shown that if you would have followed the top 50 most popular stocks among hedge funds during 2009 and 2012, which mostly tend to be large cap companies, you would have underperformed the market by 7 basis points per month. However, our small cap strategy which is based on the picks of hedge funds in this particular category has outperformed the market by 76.7 percentage points over the 2.5 year period from August 2012.
Baupost Group is one of the best performing hedge funds of all time. Klarman’s out-of-print book, Margin of Safety, is considered a bible among value investors. The hedge fund doesn’t operate on leverage and hence only has a few short positions. The hege fund manager’s confidence and patience has led him to become an investor with a long-term horizon. This is also apparent from Baupost’s relatively low turnover ratio of 29.63% during the fourth quarter. Moreover, this investment strategy makes it even more interesting to look at Klarman’s long-term holdings, as he stood by them even through tumultuous times. The market value of Baupost’s portfolio stood at $5.09 billion at the end of the fourth quarter. Since top ten holdings constituted nearly 83% of the portfolio value, it can be safely concluded that diversity isn’t exactly Mr. Klarman’s top priority.
Cheniere Energy, Inc. (NYSEMKT:LNG) is Baupost’s largest holding in terms of value. During the fourth quarter 2.61 million shares were added to take the total stake to 13.81 million shares, valued at $972.03 million. Cheniere Energy, Inc. (NYSEMKT:LNG)’s stake constituted 19.09% of Baupost’s portfolio value. The fund initiatated a stake in the company, which is engaged in liquid natural gas LNG-related businesses, during the first quarter of 2014 and initially held 5.66 million shares valued at $313.28 million. Chiniere Energy’s stock gained around 46% since then. The energy company is currently involved in two main projects, namely Corpus Christi gas export plant, for which it got FERC clearance in early January this year and Sabine Pass project. The successful completion of these could bring exciting growth opportunities for the company as it could then capitalise on the attractive export opportunities.
Among the billionaires that we track at Insider Monkey, 10 had investments valuing $3.34 billion in the company at the end of the fourth quarter. Stephen Mandel of Lone Pine Capital was one of them as he held 8.82 million shares valued at $620.85 million.
Moving on to Baupost’s second largest long term holding, ViaSat, Inc. (NASDAQ:VSAT), which has been in Klarman’s portfolio for more than four years. The company’s stake remained unchanged during the fourth quarter at 11.53 million shares valued at $726.93 million, but the stock jumped by 14% during the last three months of 2014. Bob Peck and Andy Raab of Fpr Partners also benefited from this increase in demand of ViaSat, Inc. (NASDAQ:VSAT)’s stock, as their portfolio had some 4.12 million shares valued at $259.43 million at the end of 2014.
Viasat is engaged in the provision of high-speed fixed and mobile broadband services. In its third quarter financial results the company’s EPS of $0.49 beat estimates of $0.21 while revenues of $339.55 million were $14.23 million below the anticipated mark.
Klarman initiated n. The position largely remained unchanged until the fourth quarter of 2014, when
Klarman has radically reduced his stake in Micron Technology, Inc. (NASDAQ:MU) during the fourth quarter by selling around 31.95 million shares, which took the position to 19.71 million shares, valued at $689.91 million. A position in Micron Technology was initiated during the second quarter of 2013 as Baupost purchased some 41.5 million shares valued at $594.7 million. The stock rose by about 176% between the end of June, 2013 and the end of 2014. The holding in Micron Technology, Inc. (NASDAQ:MU) still constitutes about 13.55% of the portfolio value and is Baupost’s third largest holding. Morgan Sze of Azentus Capital Management still thinks there is a lot of juice left in the global provider of semiconductor devices as he increased his fund’s exposure to the company by a staggering 187% during the fourth quarter. The new position comprises of approximately 882,000 shares valued at $30.88 million.
Micron Technology, Inc. (NASDAQ:MU) has suffered a beating of around 14% in the stock market as of late February, when the deal regarding DRAM was announced between Samsung electronics and Apple Inc. (NASDAQ:AAPL). Around 68% of Micron’s revenues come from its DRAM products. As far as the company’s latest financial results are concerned, it delivered an EPS of $0.97 beating estimates by $0.05 and revenues of $4.57 billion which missed estimates by $50 million, in its first fiscal quarter.