According to Baupost's 13F filing with the Securities and Exchange Commission, the first quarter of 2019 was a relatively busy period for Seth Klarman (Trades, Portfolio).
The value investor made some major changes to his portfolio during the first three months of the year. These included boosting his holdings of eBay (EBAY, Financial) by nearly 40% to 29.3 million shares, making it the most crucial position in the portfolio, closely followed by Viasat Inc., which Baupost has owned for some time without any changes.
Keeps buying eBay
What's really interesting about this position is that Klarman built it relatively quickly. He first entered the stock in the second quarter of 2014, building a position that grew to be worth just over 9 million shares in the online auction marketplace. He sold the entire holding at the end of 2015. Then, at the end of 2018, during the last quarter of the year, he acquired 21 million shares in the business, making it 5.3% of Baupost's portfolio.
As noted above, he increased this position by 40% during the first quarter of 2019, taking it up to 9.4% of the overall portfolio. It is important to remember that 13F filings detail only equities owned by hedge funds; they do not include debt and cash positions as well as other more eclectic assets such as insurance claims and real estate -- both of which Klarman is known to own.
eBay was actually the second most substantial portfolio change for Baupost during the first quarter of 2019. The largest was Klarman's decision to reduce his holding in Fox Corp. (FOXA, Financial) by nearly 50%, taking it to just 8.7% of the portfolio from more than 16%. This made it his third-largest holding. Klarman's interest in Fox seemed to be nothing more than a merger arbitrage play. He has written many times about how important it is to have a catalyst when value investing, and the company's merger with Disney seems to be just that.
Value catalyst
Fox isn't the only undervalued media group Klarman appears to like. There's also Liberty Global (LBTYA, Financial). This is another primary position for Baupost. At the end of the first quarter, Klarman and his team owned 39 million shares in the media business, up 31% quarter-on-quarter and accounting for 8.2% of the equity portfolio.
Once again this appears to be a trade based around a value-crystallizing move by the company.
Liberty is currently trying to sell the bulk of its European telecommunications assets to U.K.-based telecoms group Vodafone. If it gets clearance from regulators, then the deal will unlock tens of billions of dollars in value for Liberty, which management is planning to return to investors via buybacks and reinvest in new acquisitions.
It is expected that regulators will announce their views on the deal within the next two months, and Vodafone has been trying to meet competition concerns by offering rivals access to its network across Germany, as well as proposing asset sales in some markets. It seems Klarman is betting that this deal will go ahead.
Klarman's final notable portfolio move was his continued selling of Baupost's holdings in Cheniere Energy (LNG, Financial).
Cheniere has been in the Baupost portfolio since the first quarter of 2014. At the beginning of 2016, following two years of steady buying, Baupost's partners owned nearly 30 million shares of the liquified natural gas business. But the hedge fund's holdings peaked in 2016 and have been declining ever since. During the first quarter of 2019, Baupost reduced its position by a further 11% to 12.6 million shares, and it accounted for just 7.5% of the overall equity portfolio at the end of the first quarter.
Disclosure: The author owns no share mentioned.
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