Baupost Group leader Seth Klarman (Trades, Portfolio) revealed on Monday he boosted his stake in Viasat Inc. (VSAT, Financial) by 18.62%.
The guru’s Boston-based hedge fund manages about $29 billion in assets as of June 30, 2019. It searches for value among a broad range of opportunities, including stocks, distressed debt, liquidations and foreign securities. With a long-term horizon, the renowned investor typically seeks securities trading well below his estimate of intrinsic value and waits for the price to rise. In March, Bloomberg reported that for the first time since 2011, Klarman was seeking more capital as the coronavirus pandemic revealed more value opportunities.
According to GuruFocus Real-Time Picks, a Premium feature, Klarman invested in 2.56 million shares of the Carlsbad, California-based communications company on July 23. He now holds 16.3 million shares, which, with a weight of 9.31%, is his fourth-largest holding in the equity portfolio. The stock traded for an average price of $39.11 per share at the time of the transaction.
GuruFocus data indicates Klarman’s firm has lost an estimated 2.37% on the investment since the third quarter of 2009.
Viasat, which provides high-speed satellite broadband services and secure networking systems, has a $2.36 billion market cap; its shares were trading around $37.45 on Tuesday with a price-book ratio of 1.16 and a price-sales ratio of 1.02.
The price chart shows the stock is trading below both its median price-book ratio as well as its median price-sales value, suggesting it is undervalued. The GuruFocus valuation rank of 9 out of 10 supports this assessment as well.
Viasat’s financial strength and profitability were both rated 4 out of 10 by GuruFocus. As a result of issuing approximately $737.5 million in new long-term debt over the past three years, the company has poor interest coverage. The low Altman Z-Score of 1.18 also warns it could be at risk of going bankrupt since it has recorded operating losses over the past three years and seen assets building up at a faster rate than revenue is growing. The return on invested capital is also less than the weighted average cost of capital, indicating that the company spends more money than it makes.
The company is also being weighed down by margins and returns that underperform over half of its competitors. Viasat does, however, have a moderate Piotroski F-Score of 4, which implies business conditions are stable. It also has a predictability rank of one out of five stars. According to GuruFocus, companies with this rank return, on average, 1.1% annually over a 10-year period.
With 25.84% of outstanding shares, Klarman is by far the largest guru shareholder of Viasat. Other gurus who are invested in the stock as of the end of the first quarter include Mason Hawkins (Trades, Portfolio), NWQ Managers (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Lee Ainslie (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), John Hussman (Trades, Portfolio) and Pioneer Investments (Trades, Portfolio).
Portfolio composition
Klarman’s $6.75 billion equity portfolio, which was composed of 32 stocks as of March 31, was most heavily invested in the communication services sector at 43.3%. He also had smaller holdings in the technology (16.12%) and consumer cyclical (14.49%) spaces.
The guru’s top 10 holdings for the first three months of 2020 were eBay Inc. (EBAY, Financial), Liberty Global PLC (LBTYK, Financial), Fox Corp. (FOXA, Financial), Viasat, Alphabet Inc. (GOOG, Financial), HP Inc. (HPQ, Financial), Facebook Inc. (FB, Financial), ViacomCBS Inc. (VIAC, Financial), Cheniere Energy Inc. (LNG, Financial) and Qorvo Inc. (QRVO, Financial).
Disclosure: No positions.
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