Seth Klarman

Seth Klarman

Last Update: 10-10-2017

Number of Stocks: 39
Number of New Stocks: 3

Total Value: $8,697 Mil
Q/Q Turnover: 12%

Countries: USA
Details: Top Buys | Top Sales | Top Holdings  Embed:

Seth Klarman Watch

  • Thoughts on the Margin of Safety

    The margin of safety is an essential principle of value investing.

    Rather than trying to explain the principle myself, I am going to borrow a quote from Seth Klarman (Trades, Portfolio), one of today's best value investors:


  • Time to Consider a Barbell Portfolio?


    Bоnd іnvеѕtоrѕ originally came up with the idea of the bаrbеll роrtfоlіо. Thіѕ tесhnіԛuе іnvоlvеѕ combining “rіѕk-frее” ѕhоrt-tеrm bоnds аnd hіgh-rіѕk long maturity bоndѕ оn орроѕіtе ends оf thе barbell. Author Nassim Taleb widely рорulаrіzеd thе іdеа tо a vаѕt target audience with his global bestseller "The Black Swan" as wеll as tаkіng іt оut оf the bond mаrkеt реrѕресtіvе. Below an example of how allocations in a barbell bond portfolio could look:


  • Is It Time to Follow Seth Klarman and Cash Out?

    "It wouldn’t be overstating the case to say that investors face a crisis of low returns: less than they want or expect and less than many of them need. Investors must choose between two alternatives. One is to hold stocks and bonds at the historically high prices that prevail in today’s markets, locking in what would traditionally have been subpar returns.


  • Is There Hidden Value in These Klarman-Backed SPACs?

    Seth Klarman (Trades, Portfolio)’s investment portfolio is full of exciting ideas.

    One interesting theme that’s appeared in his portfolio recently is the acquisition of SPACs. For example, at the end of the second quarter, Klarman owned shares in SPAC Silver Run Acquisition Corp. (NASDAQ:SRUN), Conyers Park Acquisition Corp. (CPAA) and Saban Capital Acquisition Corp. (NASDAQ:SCAC). He also owned warrants in these three firms.


  • -3.9% Annualized Return for the Next 7 Years: Any Takers?

    fish, fish market, price

    Recently I came across a superb quarterly letter by Grey Owl Capital. The firm is run by Eric Brugel and Jeffery S. Erber and in the latest letter they review the macro environment and GMO’s seven-year asset class forecasts:


  • You Won't Guess Seth Klarman's Biggest Position

    Baupost Group's largest U.S. equity positions are Cheniere Energy (LNG), Synchrony Financial (NYSE:SYF) and Viasat (NASDAQ:VSAT). Seth Klarman (Trades, Portfolio) allocated 11.6%, 10.04% and 10.02% of his portfolio to just these three names. Cheniere is a liquefied natural gas exporter whose revenue is based on 20-year-long contracts with big oil companies. Synchrony Financial is a credit card processing company. Viasat is a sattelite company with subscribers like the government, the military and airlines. You could say these appear to be fairly defensive positions with locked-in revenue streams. His largest position, however, cash, makes up 42% of the entire portfolio. If we ignore for a moment Baupost may have global positions and private real estate investments, more than 70% of the portfolio is invested extremely defensively. I have identified three reasons why.

    Not enough ideas


  • The Best Value Investing Quotes

    There have been many value investors who have earned a good reputation for themselves over the years. From Warren Buffett (Trades, Portfolio) to Walter Schloss and Peter Cundill all of these investors had their own styles but followed the main principles of value investing as laid out by Benjamin Graham.

    Over the years, these investors have put out some informative and revealing quotes on the topic of value investing, all of which give some insight into their process and the temperament required to follow the value discipline.


  • Some Thoughts on Diversification and Concentration

    Position sizing is one of the most contentious topics in investing. Trying to decide how to weight the positions in your portfolio is not an easy process and, like all investing, there is no correct answer.

    Investors have two choices when deciding on portfolio concentration; either a highly concentrated portfolio or a well diversified portfolio.


  • Meet GURUG, GURUF’s New Cousin

    We are proud to introduce GURUF’s new cousin, GURUG.

    While GURUF allows you to retrieve company financial information, GURUG allows you to pull specific data about a guru’s portfolio.


  • Could Buffett and Klarman Be Wrong on Synchrony?

    Last month, Warren Buffett (Trades, Portfolio)’s Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) reported a small (small by Berkshire standards) $512 million holding in credit company Synchrony Financial (NYSE:SYF) following highly acclaimed value investor Seth Klarman (Trades, Portfolio) into the stock.

    When the Berkshire position was revealed, I took a look at Synchrony and concluded that the company – with a Common Equity Tier 1 ratio under Basel III rules of 17.4% and total liquidity of $22 billion, or 24% of assets at the end of the fiscal second quarter, and a return on tangible common equity of 15.9% for the first half of the year – looked to be a “premium business” trading at a discount valuation.


  • Why You Can’t Trust EBITDA

    The earnings before interest tax depreciation and amortization metric, or EBITDA, splits opinions. On one hand, there are those analysts and investors who hate using EBITDA because it provides a misrepresentation of the company's finances. On the contrary, for businesses with high capital spending requirements and interest costs, some analysts will claim this metric is a more appropriate representation of its growth. EBITDA has also been proven to be a strong determining factor of value when combined with enterprise value. The metric is commonly used to judge a company's level of gearing, giving a simple and easy to understand picture of leverage.

    Two of the world's most prominent value investors, Seth Klarman (Trades, Portfolio) and Warren Buffett (Trades, Portfolio), both dislike this metric. Over the years, they have commented on several occasions why they prefer not to use EBITDA. In all cases, it comes back to the same argument: it is just not possible to trust the numbers.


  • What Long-Term Investing Is All About

    Most investors will claim to be long-term, buy-and-hold investors, as that is what they are told they should be. Buying and holding for the long term, through the market's peaks and troughs, is not as easy as it appears however. Indeed, one of the reasons why Warren Buffett (TradesPortfoliois so successful is because of his ability to buy and hold stocks for an ultra-long term. You only need to look at a long-term chart of the S&P 500 to realize the benefits of this strategy. Even though the market has its ups and downs, over the long run stocks have climbed steadily higher. If you assume the index will perform over the next hundred years as it has over the previous century, the chances of you losing money in equities over the long term are slim.

    That being said, most investors struggle to hold for the long term as they are influenced by short-term market moves, which lead them to make silly mistakes that are detrimental to long-term wealth creation. Ensuring you do not make the same mistakes is critical if you want to become a great investor. Below are some of the world's best investors' thoughts on long-term investing and why holding for the long term is an essential part of investing.


  • What Do Buffett and Klarman See in Synchrony?

    I recently wrote about Seth Klarman (Trades, Portfolio)’s interest in Synchrony Financial (NYSE:SYF), the financial services company that has seen its share price suffer this year thanks to higher reported loan impairments.

    Klarman initiated his position at the end of 2016, but then reduced the holding by 14.5% during the first quarter. Surprisingly, he then increased his holding by 66% during the second quarter according to the firm’s 13F. The additional buying means Synchrony is now Baupost’s second-largest holding after Cheniere Energy (LNG).


  • Seth Klarman Bulks Up on Synchrony Despite Problems

    Seth Klarman (Trades, Portfolio), who is arguably one of the best value investors alive today, had a busy second quarter. The billionaire owner of hedge fund Baupost Group made several large position changes during the period, some of which are surprising.

    The most significant position change – regarding dollars spent—was an increase in Baupost’s ownership of Synchrony Financial (NYSE:SYF).


  • Investing Giant Seth Klarman Reveals Latest Stock Buys

    Seth Klarman (Trades, Portfolio), a much-followed value investor, said Friday evening that he had purchased three positions in the latest second quarter, according to a filing.

    Klarman runs Boston-based Baupost Group where he oversees $30 billion and looks for underpriced companies. As one of his primary tenets of investing and the name of his book, margin of safety must be inherent in each stock.


  • Wells Fargo: Hedge Funds' Most Loved Stock

    Following a guru investor into a position without doing your own research is never a good idea. Wsing guru holdings as a starting point for further research can be extremely helpful, however, especially considering these investors have significantly more resources than you do.

    Studying guru holdings is an excellent way to find stocks flying under the radar and is also a good way to observe market sentiment. Sometimes, companies that have a high percentage of hedge fund owners do not end up performing as expected and, therefore, should be avoided. That being said, there is no set formula for finding those companies you should investigate further and avoid, it all comes down to research and your understanding of the business in question.


  • An Under-the-Radar Tech Play

    Qualcomm (NASDAQ:QCOM) is widely held by gurus. Recent converts include Seth Klarman (Trades, Portfolio), Daniel Loeb, Caxton Associates (Trades, Portfolio) and Julian Robertson (Trades, Portfolio).

    The company is perhaps best known for its Snapdragon processor that dominated mobile devices for a while until OEM came up with competitive gear. Today about 75% of the company’s revenue is purely derived through licensing. Every device out there utilizing 3G or 4G technology needs to pay Qualcomm a fee.


  • Some Thoughts on Holding Cash

    The S&P 500 continued climbing in the first half of 2017, with a total return of 9.3% (according to Morningstar). Over the past five years, the compounded return for the index has been nearly 15% per annum (enough to double your money). It’s been a wonderful time to be long U.S. equities.

    As a corollary, it’s been a tough time if you’re holding dry powder. Instead of double-digit annualized returns, cash and equivalents have earned a pittance. As I’ve communicated previously, I’m holding a significant amount of cash and short-term bonds (just to clarify, I don’t own any long-term bonds). The combination of rising stock prices (which brought certain positions closer to fair value), a lack of enough new ideas at valuations that justified large initial purchases and continued contributions to my investment accounts has pushed the balance even higher. In the short term, the opportunity cost of holding a large – and growing – pile of cash has been sizable.


  • Diversification Is Becoming More Important Than Ever

    ”Wide diversification is only required when investors do not understand what they are doing.“ – Warren Buffett (Trades, Portfolio)


  • Quotes From 2 of the World's Greatest Value Investors

    To continue from my earlier piece on Benjamin Graham, I have picked out some nuggets of wisdom from "The Intelligent Investor" as well as tips from Seth Klarman (Trades, Portfolio)'s book, "Margin of Safety."

    Klarman is widely considered to be one of the best value investors alive today and his investment style is similar to Graham's. His investment letters, interviews and other commentaries are always full of highly informative insight.


  • The Magic of Compounding

    Once described as the eighth wonder of the world, the miracle of compounding is one of the most important concepts in investing. If you don't understand how compounding works and how it can accelerate your investment returns, I highly recommend you spend some time researching the topic right away; you won't regret it.

    Compounding is the workhorse of the investment landscape. Over time, compounding does the heavy lifting for your investment portfolio so all you have to do is find the best ideas, and over time, as long as you don't suffer a permanent capital impairment, the magic of compounding will accelerate your wealth creation. For example, when Warren Buffett (Trades, Portfolio) was 50, he was only worth around $200 million almost nothing compared to his $75 billion fortune today. This growth has been partly due to his stock-picking acumen, but mostly the growth has been thanks to the magic of compounding. Below are some quotes from well-known investors which sum up how compounding can work for you:


  • The Art & Science of Successful Investing

    As I described in my book, "How I Managed $20,000,000,000.00 by Age 32," I believe successful investing is achieved by integrating aspects of both art and science. The science aspect of investing is fairly straightforward – most of the accounting and valuation math involved could be solved by a 7th grader. The more challenging aspect to successful investing is controlling the vacillating emotions of fear and greed when searching for attractive investments.

    When people ask me about my investment philosophy, I do not like to be pigeon-holed into one style box because normally my portfolios hold investments that outsiders would deem both value and growth oriented. Since I am an absolute return investor, I am more concerned about how I can maximize upside returns while minimizing downside risk for my investors.


  • Mr. Market: Who Is He and What Is He Doing Here?

    The parable of Mr. Market was first introduced in Benjamin Graham’s "The Intelligent Investor," and this idea that the market is an irrational businessman has been used to describe investor psychology and market movements ever since.

    Mr. Market and his irrationality is a key part of value investing because it teaches that prices are just arbitrary numbers. What’s more, this parable helps describe the margin of safety principle; investors should only buy a stake in the business where Mr. Market offers a wide enough margin of safety to intrinsic value.


  • Risk Reward With Twenty-First Century Fox

    May has been an eventful month at Twenty-First Century Fox (FOXA).

    Fresh from the tale of the Bill O’Reilly sexual harassment suit, Wendy Walsh called on Britain to block Fox founder Rupert Murdoch from taking full control of Britain's pay-TV group Sky. The deal was cleared by the European Commission last month, but a similar takeover attempt in 2011 was derailed by a phone-hacking scandal at one of Murdoch's British newspapers, revealing close ties between politicians, police and the media. According to Bloomberg, Fox is willing to negotiate changes to corporate governance, but it doesn’t expect to be asked for major alterations.


  • How to Tell if Your Investment Is Actually Speculative

    Everyone wants to be an investor, but few understand the difference between investing and speculation. Even though investors like Warren Buffett (Trades, Portfolio), Seth Klarman (Trades, Portfolio) and the godfather of value investing, Benjamin Graham, have all tried to extol the differences between investment and speculation, even today most investors are unaware of the difference between the two.

    This is a big mistake. Without realizing the difference between investment and speculation, you put yourself on a dangerous path, one that could end up costing you a significant part of your wealth.


  • Position Sizing With the Kelly Criterion

    Position sizing is an interesting topic because it affects all investors. Yet, I would be willing to bet very few investors spend a significant amount of time on the subject.

    Even the most prominent investors are split on how they should manage their portfolio and weight allocation toward the best ideas. Warren Buffett (Trades, Portfolio) is clearly not afraid to run a highly concentrated portfolio with 57% of Berkshire Hathaway’s (NYSE:BRK.A) (NYSE:BRK.B) equity portfolio devoted to just four positions -- Apple (NASDAQ:AAPL), Coca-Cola (NYSE:KO), Wells Fargo (NYSE:WFC) and Kraft Heinz (NASDAQ:KHC). Meanwhile, Seth Klarman (Trades, Portfolio)'s top seven positions account for 57% of his equity portfolio, and David Tepper (Trades, Portfolio) has 10 positions accounting for 57% of his equity portfolio.


  • Why Value Investors Are Different

    From time to time, it pays to read the writings of value investor Seth Klarman (Trades, Portfolio). Over the years, Klarman has written thousands of pages of advice for investors on the topic of value investing and the psychology of investing, which provides some great insight for investors of all experiences.

    Klarman on value investors


  • Seth Klarman Adds Some Interesting New Positions

    It is that time of the year again. The largest hedge funds have just filed their 13Fs for the first quarter and, as usual, there are some interesting conversations about position changes.

    Seth Klarman (Trades, Portfolio) is always one of the most watched fund managers when it comes to 13Fs. The value fund manager has a reputation for buying the market’s cheapest stocks and holding on for an extended period, so changes are scrutinized to try and establish the reasoning behind his trades.


  • Seth Klarman Expands Portfolio in 1st Quarter

    Seth Klarman (Trades, Portfolio), portfolio manager of the Baupost Group, seeks good returns by cautiously investing in an eclectic variety of securities. During the first-quarter, the investor added positions in Qorvo Inc. (NASDAQ:QRVO), Qualcomm Inc. (NASDAQ:QCOM) and Express Scripts Holding Co. (NASDAQ:ESRX).

    Qorvo and Qualcomm


  • Seth Klarman Sells Innoviva Days After Activist Stakeholder Defeat

    Investor Seth Klarman (Trades, Portfolio) sold 93% of his stake in Innoviva (NASDAQ:INVA) April 30, days after the company’s shareholders rejected an activist investor’s slate of board nominees that wanted to overhaul employee compensation.

    Sarissa Capital, a Greenwich, Connecticut-based hedge fund focused on health care companies, purchased a 2.72% activist stake in Innoviva over the latter half of 2016. The fund’s leader, Alexander Denner, sharpened his activist skills at Carl Icahn (Trades, Portfolio)’s Icahn Capital, and worked before that for Andreas Halvorsen (Trades, Portfolio)’s Viking Global.


  • The Most Important Stock Investment Lesson I Ever Learned

    My investing career officially started in 1970, but for several years prior to that time I was an avid and interested student of common stock investing. My initial lessons were taught by studying the behavior and practices of the most renowned stock investors.

    Although these academic pursuits taught me a great deal, nothing taught me more than the school of hard knocks. Consequently, the most important lessons I learned were unmercifully taught through real-life experiences. Some of these lessons were hard and even cruel at times, but the hardest lessons learned are often learned best.


  • 8 Stocks Van Den Berg Continues to Buy

    Arnold Van Den Berg (Trades, Portfolio), a value investor, founded Century Management in 1974. In both first-quarter 2017 and fourth-quarter 2016 the guru bought shares in the following stocks.

    Liberty Braves Group (BATRK)


  • Has Seth Klarman Sold Cheniere Energy Entirely?

    Seth Klarman (Trades, Portfolio) is one of the world’s most followed investors and is also one of the world’s most respected value investors. Whenever he makes an investment, you can be sure that hours of research have gone into the opportunity, and at the time of acquisition, the stock will be trading at a deep discount to its estimated intrinsic value as calculated by Klarman and his team at Baupost.

    With this being the case when it became clear that Baupost had built a significant position in Cheniere (LNG) several years ago, it came as a surprise to many Klarman followers. Indeed, at the beginning of 2015, nearly a year after the investment became public, value blog value and opportunity proclaimed:


  • How to Manage Your Portfolio

    Buying a stock is easy. Anyone can do it, with or without research. But when it comes to selling stock or managing your portfolio to achieve the best returns, the process is a bit more complicated.

    Value investing legend Seth Klarman (Trades, Portfolio) shares some tips on how to manage your portfolio to produce the best long-term returns in his book "Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor."


  • Wall Street Is Your Worst Enemy

    The information below is based on Seth Klarman (Trades, Portfolio)’s out-of-print book, "Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor."

    Wall Street is plagued by conflicts of interest and short-term bias, which does nothing to improve the performance of the average investor according to Klarman.


  • 5 Lessons From the Top 10 Gurus

    In recent weeks I have profiled the eight gurus with the best average annual returns over the past 10 years, as shown on the GuruFocus Scoreboard. The investing philosophy of another other guru, Seth Klarman, had been provided recently by GuruFocus writer Rupert Hargreaves, while I had profiled Donald Yacktman in late 2016.

    As the process unfolded, some themes started to appear, although not always immediately obvious. This article explores those themes, following brief overviews of each of the gurus. I am not prepared to say these explorations are definitive, but would hope they stimulate further thought and discussion.


  • Is Cardinal Health a Better Bargain Than Ever?

    (Published on April 18 by Nicholas McCullum)

    The Standard & Poor's 500 is trading at a historically expensive valuation, propped up by low interest rates, quantitative easing and positive investor sentiment. This has made it difficult to find bargains in today’s stock market.


  • The Benefits of a Concentrated Portfolio

    Many of the world’s best investors got where they are today by using a concentrated portfolio approach. Warren Buffett (Trades, Portfolio) and Charlie Munger (Trades, Portfolio) are primary examples.

    But while these investors have been able to make billions of dollars using such an approach, it is not suitable for all investors. Indeed, everyone has heard of Buffett and Munger, but how many other thousands of investors are there out there who tried to use such an approach but failed?


  • Seth Klarman on Looking for Bargains

    Seth Klarman (Trades, Portfolio) is one of the world’s most respected value investors, and he is an investor I have done a substantial amount of work on in the past. Klarman’s style of investing is simple; he is on the lookout for companies trading at a deep discount to intrinsic value. This is not as simple as it seems however. Klarman’s particular style of value investing is not just limited to estimating how a particular company will grow over the next few years. Instead, Klarman is on the lookout for businesses trading at a deep discount to their current asset value. More often than not, trying to find these companies requires plenty of work, which puts investors off.

    Looking through Klarman’s portfolio, it is clear even the rest of the world’s most renowned value investors are afraid to follow his lead on several positions. Take Viasat Inc. (NASDAQ:VSAT) for example. Of the many great value investor portfolios tracked by GuruFoucs, Klarman is one of four investors to hold a stake in the satellite provider. PBF Energy Inc. (NYSE:PBF) is another position Klarman likes but the rest of Wall Street appears to hate.


  • Behind the Bill Ackman Controversies

    "The 55% of our capital in activist investments has produced more than 90% of our returns." Bill Ackman (Trades, Portfolio), as quoted by Advisor Perspectives


  • Don’t Fall Into the Value Investing Trap

    The term "value investing" seems to have become one of the world's most misused descriptive statements. As plenty of research has shown that value stocks generally outperform the market over the long term, investors have flocked to the style over the years, and now any mention of a particular value stock is enough to attract the attention of investors all over the world.

    This means that "value stock" is now thrown around for any equity that appears cheap, which just isn’t what value investing is based on.


  • 9 Questions With Value Investor Joseph Calandro Jr.

    1. What is the best investment advice you have ever been given?

    “Investment is most intelligent when it is most businesslike” – Benjamin Graham


  • Learning From the Best: Keep Emotion Out of It

    As an investor keeping emotions under control is probably one of the most important skills required to be successful over the long term. Famous investors such as Warren Buffett (Trades, Portfolio) and Seth Klarman (Trades, Portfolio) have mastered this skill, which is why they can buy when others are fearful and make billions from volatile markets.

    If it weren’t for the tens of thousands of highly emotional investors who cause market volatility, which throws up the opportunities for these value investors to take advantage of, their returns wouldn’t be as outstanding as they are.


  • Lessons From the Best: How to Pick the Bottom

    Value investing is all about buying cheap stocks. Unfortunately, finding cheap stocks is easier said than done. Distinguishing between price and value is the first step in this process. Just because a particular company’s shares look cheap compared to previous price action does not mean they offer value.

    If the shares were trading at $100 two years ago and are now trading at $10, and over the same period profits have fallen by 90%, and so has shareholder equity, then it’s fair to say that shares are fairly valued at the new lower price of $10.


  • Seth Klarman Dividend Stocks in Focus: ChipMOS Technologies

    (Published by Bob Ciura on March 20)

    Value and income investors should get to know Seth Klarman (Trades, Portfolio).


  • Seth Klarman Dividend Stocks in Focus: Colony NorthStar

    (Published by Bob Ciura on March 21)

    Extremely high dividend yields are tantalizing, but also come with significant risks. While they certainly look appealing, it is important to assess whether the dividend is sustainable.


  • 22 Questions With the Founder of Sure Dividend

    1. How and why did you get started investing? What is your background?

    When I went to college I chose a finance degree over a psychology degree, narrowly. There was one specific class I took in college about market inefficiencies – it covered how small cap stocks have historically outperformed, how value stocks have historically outperformed and so on. The idea of market inefficiencies really hooked me, and I’ve been deeply interested in finance ever since.


  • Why Cash Is King

    Cash is probably the one word that can describe my investing strategy. A focus on cash dominates every investment and piece of investment analysis I conduct as it is the single most important factor to consider when assessing a business’ survivability.

    Unlike profits, cash flows cannot be manipulated at the stroke of a pen, and even if they are questions will be asked when the company’s balance sheet does not match up. What’s more, unlike profits, cash flow goes straight to the bottom line.


  • Searching Seth Klarman’s Letters for Investment Tips

    Seth Klarman (Trades, Portfolio) is considered to be one of the world’s best value investors. Klarman’s Boston-based hedge fund Baupost has achieved an average annual return of 20% for investors since inception despite the fact the fund usually holds around 20% of assets in cash.

    These impressive returns despite the fund’s high cash weighting have earned Klarman a reputation as one of the market’s most astute investors, and his thoughts, published within Baupost’s quarterly and full-year letters, are always hot topics among investors of all disciplines.


  • Seth Klarman’s Top 5 High Dividend Stocks

    (Published by Nicholas McCullum on March 19)

    Investing is unique in that anyone has the ability to learn from the best in the business.


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