Seth Klarman practices value investing with his own style.
For starters: Klarman's firm, Baupost gained an average of 17 percent annually in the 10 years ended in December 2009, a period in which the Standard & Poor’s 500 Index fell 1 percent a year. The hedge fund has returned 19 percent a year since it was started, even as it held more than 40 percent of its assets in cash at times.
Today, Seth Klarman is returning money to investors because of lack of investment opportunities, according to a report at businessinsider.com. The report quotes people who read the Klarman’s letter to investors of November 8, 2010, Baupost Group will return 5% of its capital to investors at the end of the year.
This growth has propelled the firm to an enormous $23 billion in assets. Klarman considers this size too large for the current market environment, in which he finds opportunities scarce.
Klarman has been half-hearted towards the equity market for some time now. GuruFocus tracks his long equity positions. Of the $23 billion asset mentioned above, as of June 30, 2010, only $1.33 billion or about 6% are in US listed stocks. In a Businessweek article in June, Klarman was quoted to have predicted that stocks would provide poor returns for the next 10 years:
His bearish view towards stocks makes his 16 long positions in his portfolio interesting ideas.
Jason Zweig (JZ), a famed WSJ reporter, interviewed Klarman (SK) at CFA Institute Annual Conference this year, during which Klarman address the question of when to return money back to the investors:
Taking one step back, and think about what is happening here: first Klarman thinks there are not many opportunities in stocks that worth the while, then he does not see opportunities in the distressed debt arena either. As a matter of fact, he does not see enough of opportunities any where any time soon. Therefore, he is returning money to investors.
At GuruFocus we sort of focus on the stock holdings of Guru Investors. Data is not yet available on what stocks Klarman has bought or sold during 3Q10, but here are the stocks he sold some or all positions during 2Q10. It is a bit outdated, please come back in a couple of days when we have new information on his 3Q10 investment activities.
DIRECTV is a provider of digital multichannel television entertainment in the United States and Latin America. Directv Group Inc. The has a market cap of $36.84 billion; its shares were traded at around $42.5 with a P/E ratio of 19.2 and P/S ratio of 1.7.
Facet Biotech Corporation offers biotechnology research services for drug and pharmaceutical products development. The company was acquired by Abbott on April 21, 2010. Klarman sold all his shares.
Audiovox Corporation generally markets its products under the well-recognized Audiovox brand name. Audiovox Corp. has a market cap of $135 million; its shares were traded at around $6.53 with a P/E ratio of 25.1 and P/S ratio of 0.2.
Check out his complete stock portfolio by clicking on Seth Klarman.
For starters: Klarman's firm, Baupost gained an average of 17 percent annually in the 10 years ended in December 2009, a period in which the Standard & Poor’s 500 Index fell 1 percent a year. The hedge fund has returned 19 percent a year since it was started, even as it held more than 40 percent of its assets in cash at times.
Today, Seth Klarman is returning money to investors because of lack of investment opportunities, according to a report at businessinsider.com. The report quotes people who read the Klarman’s letter to investors of November 8, 2010, Baupost Group will return 5% of its capital to investors at the end of the year.
"Today, Baupost's opportunity set is smaller than it has been in some years," Klarman wrote, "while our cash balances have grown..."While it is unusual for an investment manager who makes fees off the asset under management to return money to investors, Klarman’s stand is hardly a surprise to people who follow him. And, when times are good, Klarman does not mind opening door to new investors. For instance, in February 2008, when Baupost accepted new investors after being closed for eight years. With the money raised, Klarman bought distressed corporate and mortgage debt.His fund lost 12 percent that year, its second annual decline since inception, because it bought some of the debt too early, Klarman said. Then, less than two years later, Baupost has generated a monstrous $6.5 billion in net investment profits from January 1, 2009 to September 2010 ("net" of an estimated $2 billion of performance and management fees).
This growth has propelled the firm to an enormous $23 billion in assets. Klarman considers this size too large for the current market environment, in which he finds opportunities scarce.
Klarman has been half-hearted towards the equity market for some time now. GuruFocus tracks his long equity positions. Of the $23 billion asset mentioned above, as of June 30, 2010, only $1.33 billion or about 6% are in US listed stocks. In a Businessweek article in June, Klarman was quoted to have predicted that stocks would provide poor returns for the next 10 years:
“We are perennially on the bearish side of things. We are not against owning stocks,” Klarman said in the interview. The problem, he said, is that except for a brief time in March 2009, “stocks haven’t been at bargain prices for most of the last two decades.” U.S. stocks reached a 12-year low in March 2009.
His bearish view towards stocks makes his 16 long positions in his portfolio interesting ideas.
Jason Zweig (JZ), a famed WSJ reporter, interviewed Klarman (SK) at CFA Institute Annual Conference this year, during which Klarman address the question of when to return money back to the investors:
JZ: Do you give money back when the market is overvalued?You can read the complete interview here.
SK: The number one thing on my mind at most times. I've said for years size is negative for performance. I said that at $200m in AUM and now at $22B I still think so. However, in Feb 2008 we went to our wait list for the first time in 8 years to raise more capital as we thought opportunities would be plentiful, large, lumpy, and unpredictable. I thought being larger was better at that time. And it was. We got a lot of calls from distressed sellers and couldn't have acted on them without the additional capital. I am prepared to return capital but am worried about a double dip. We're at 30% cash now and I would not raise more cash without returning some to investors.
JZ: What are the top asset classes for the next decade?
SK: Ask Jeremy Grantham! We're opportunistic, we'll buy what's out of favor, what's in financial distress, in litigation, in trouble, whatever.
Taking one step back, and think about what is happening here: first Klarman thinks there are not many opportunities in stocks that worth the while, then he does not see opportunities in the distressed debt arena either. As a matter of fact, he does not see enough of opportunities any where any time soon. Therefore, he is returning money to investors.
At GuruFocus we sort of focus on the stock holdings of Guru Investors. Data is not yet available on what stocks Klarman has bought or sold during 3Q10, but here are the stocks he sold some or all positions during 2Q10. It is a bit outdated, please come back in a couple of days when we have new information on his 3Q10 investment activities.
No. 1: DIRECTV Group Inc. The (DTV, Financial), Sell: -3.34% of the portfolio - Total: 0 Shares
DIRECTV is a provider of digital multichannel television entertainment in the United States and Latin America. Directv Group Inc. The has a market cap of $36.84 billion; its shares were traded at around $42.5 with a P/E ratio of 19.2 and P/S ratio of 1.7.
No. 2: FACET BIOTECH CORPORATION, Sell: -3.3% of the portfolio - Total: 0 Shares
Facet Biotech Corporation offers biotechnology research services for drug and pharmaceutical products development. The company was acquired by Abbott on April 21, 2010. Klarman sold all his shares.
No. 3: Domtar Corp. (UFS, Financial), Reduce: -2.14% of the portfolio - Total: 1,825,000 Shares
Domtar is a major North American manufacturer of pulp and forest products, fine papers and packaging that fosters sustainable development through the rigorous application of its integrated forest management policy. Domtar Corp. has a market cap of $3.41 billion; its shares were traded at around $81.28 with a P/E ratio of 8.2 and P/S ratio of 0.6. The dividend yield of Domtar Corp. stocks is 1.2%. Domtar Corp. had an annual average earning growth of 34.7% over the past 5 years.No. 4: Audiovox Corp. (VOXX, Financial), Reduce: -0.22% of the portfolio - Total: 1,060,576 Shares
Audiovox Corporation generally markets its products under the well-recognized Audiovox brand name. Audiovox Corp. has a market cap of $135 million; its shares were traded at around $6.53 with a P/E ratio of 25.1 and P/S ratio of 0.2.
Check out his complete stock portfolio by clicking on Seth Klarman.
