Seth Klarman’s investment activities and insights have been followed closely by the value investment community. Regrettable to the retail investors, he seems to rely on investments other than domestic US stocks for gains. Of the tens of billions dollars that his firm Baupost manages, only a fraction of the money is invested in stocks:
Bad news to the stock investors, especially for the passive investors who invest with the index funds, Klarman gave a rather depressing assessment on the expected returns of the stock market in next decade:
We all know that the evidence shows that when you enter at a low price, you will have good returns, and when you enter at a high valuation, you will have poor returns. That is why we have had 10–12 years of zero returns in the market. And given the recent run-up, I am worried that we will have another 10 years of, if not zero, at least very low returns from today’s valuations.
Klarman made these statements at CFA Institute 2010 Annual Conference during an interview with Jason Zweig. The emphasis is mine. To read the complete transcript, click here.
In the same interview, Zweig asked Klarman what are his top investment asset classes for the next decade, and he answered (Page 9):
My answer is that we are highly opportunistic, and I will be buying what other people are selling, what is out of favor, what is loathed and despised, where there is financial distress, litigation—basically, where there is trouble. That is how we direct our search. We don’t have a crystal ball, and so we don’t know what those asset classes will be.So essentially he evaded the question, but in the question that follows, he said that his firm was buying or trying to buy private commercial real estate “because the stresses in that market are creating bargains” – that kind of explains why stocks are so low in his asset allocation chart.
You may think stocks fell completely off Klarman’s radar scope. Perhaps, but however little activities he has in that space, we focus on them.
With the data we have, we have discovered that these are the stocks that Baupost has been buying and selling during the two quarters of first half of 2010:
Stocks that Seth Klarman Keeps Buying
No. 1: ViaSat Inc. (VSAT), Weightings: 24.35% - 9,972,375 Shares
Seth Klarman owns 9,972,375 shares of VSAT, valued as $325 million as of Jun. 30, 2010, which accounts for 24.35% of his equity portfolio. Seth Klarman added his positions in the Mar. 31, 2010 quarter by 77.11%, again in the Jun. 30, 2010 quarter by 14.54%.
ViaSat Inc. designs, produces and markets advanced digital satellitetelecommunications and other networking and signal processing equipment. Viasat Inc. has a market cap of $1.57 billion; its shares were traded at around $38.59 with a P/E ratio of 31.12 and P/S ratio of 2.28. Viasat Inc. had an annual average earning growth of 7.1% over the past 5 years.
No. 2: Enzon Inc. (ENZN), Weightings: 8.13% - 10,175,898 Shares
Seth Klarman owns 10,175,898 shares of ENZN, valued as $108 million as of Jun. 30, 2010, which accounts for 8.13% of his equity portfolio. Seth Klarman added his positions in the Mar. 31, 2010 quarter by 13.87%, again in the Jun. 30, 2010 quarter by 10.57%.
Enzon Pharmaceuticals, Inc. is a biopharmaceutical company dedicated to the development and commercialization of therapeutics to treat patients with cancer and adjacent diseases. Enzon Inc. has a market cap of $639.58 million; its shares were traded at around $10.56 with and P/S ratio of 3.46.
Stocks that Seth Klarman Keeps Selling
No. 1: News Corp. (NWSA), Weightings: 17.09% - 19,050,000 Shares
Seth Klarman owns 19,050,000 shares of NWSA, valued as $228 million as of Jun. 30, 2010, which accounts for 17.09% of his equity portfolio. Seth Klarman reduced his positions in the Mar. 31, 2010 quarter by 5.36%, again in the Jun. 30, 2010 quarter by 17.68%.
No. 2: Domtar Corp. (UFS), Weightings: 6.73% - 1,825,000 Shares
Seth Klarman owns 1,825,000 shares of UFS, valued as $90 million as of Jun. 30, 2010, which accounts for 6.73% of his equity portfolio. Seth Klarman reduced his positions in the Mar. 31, 2010 quarter by 7.69%, again in the Jun. 30, 2010 quarter by 31.82%.
No. 3: Audiovox Corp. (VOXX), Weightings: 0.58% - 1,060,576 Shares
Seth Klarman owns 1,060,576 shares of VOXX, valued as $8 million as of Jun. 30, 2010, which accounts for 0.58% of his equity portfolio. Seth Klarman reduced his positions in the Mar. 31, 2010 quarter by 4.65%, again in the Jun. 30, 2010 quarter by 38.11%.
To check the complete list of stocks that Seth Klarman owns, click: to http://www.gurufocus.com/holdings.php?GuruName=Seth+Klarman
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