Seth Klarman has made an interesting little investment as detailed below by the Globe and Mail:
Seth Klarman is considered one of the world’s money managing impresarios, a superb value investor whose record of outsized returns has given him cult status on Wall Street.
What interests him now might be a surprise: rocks and spuds in a rural Ontario backwater.
While typical hedge funds flip stocks, commodities, and complex financial derivatives, Mr. Klarman’s Baupost Group has taken a position that is more down to earth, literally. It’s invested in Highland Companies, Ontario’s largest potato grower, which recently proposed developing a mega quarry on part of its sprawling spud lands.
Potatoes and gravel seem like far-out investment ideas, even for a U.S. hedge fund, and Mr. Klarman’s taking a shine to them suggests they may have upside potential currently not appreciated by the market.
The trade is likely to either cement Mr. Klarman’s reputation for acumen, or be a big flop.
On the side of acumen are some intriguing numbers. Baupost was part of a group funding Highland’s purchase of about $50-million worth of potato lands in Dufferin County in Southwestern Ontario, under which, at a relatively shallow depth of about six metres, lie an estimated one billion tonnes of limestone suitable for construction aggregate.
The rock could be worth up to $25-billion, depending on its quality.
To be sure, there is a big element of dice-rolling. To hit pay dirt, the quarry needs to be licensed, which means overcoming the fear and loathing among many in the local area toward the proposed development. It’s a huge, hard-to-quantify risk.
And then there are the spuds. It’s not clear whether hedge fund operators, typically the ultimate city slickers, have much expertise on the starchy tuber, the fallback position on the trade in case the quarry doesn’t go ahead.
Mr. Klarman, who declined through a spokesperson to be interviewed, manages about $23-billion (U.S.) through his Boston-based Baupost.
But in a written statement to The Globe and Mail, Baupost said the investment “is consistent with our long-term, value-oriented strategy. We take our role as a responsible investor seriously, and made this investment because we were confident that Highland would pursue this project in a thoughtful way that respected the local application process, as well as important community and environmental concerns.”
'Highly Unusual'
Mr. Klarman’s ideas are definitely worth tracking, if not emulating. Each $1 placed with Baupost when it opened up shop in the early 1980s has grown to about $165, or a compounded rise of 20 per cent a year, one of the best long-term records among hedge funds.
For remainder of the article:
http://www.theglobeandmail.com/globe-investor/investment-ideas/wall-street-legend-aims-to-strike-pay-dirt-in-ontario/article2093919/page1/
