Seth Klarman is the president of the Boston-based investment firm, Baupost Group. Since its foundation in 1983, the company has been able to keep an annual compound return of 19%.
He is considered one of the leading investors and his words and ideas extremely valuable to investors.
You may be asking yourself which strategy Mr. Klarman has used to become a leading investor. In a nutshell, he is a specialist in making esoteric investments such as in distressed debt, liquidations and securities that may make other investors feel dizzy.
To have a better understanding, I will provide below a briefly description of the 5 components of Mr. Klarman’s investment portfolio and why I think it is worth investing in them.
Let´s start with BreitBurn Energy (BBEP, Financial). It is an oil & gas company in charge of acquiring, exploiting and developing oil and gas properties in the United States to generate cash. Its reserves are primarily located in Antrim shale in Michigan, the Los Angeles Basin, the Wind River and Big Horn Basins in Wyoming, the Sunniland Trend in Florida, and the New Albany Shale in Indiana and Kentucky.
Why would I invest here? The numbers speak for themselves. BBEP shares are profitable. As an investor, you own a unit of a partnership and not stock in a corporation. It has several reserves and shares have been lately at $16.50 or even at a better price. Furthermore, with a pay distribution of 9.3% dividend yield and a P/E ratio of 15x, it makes a good combination between big yield and value stock.
Now let´s move on to PDL BioPharma (PDLI, Financial). PDL BioPharma is a biotech company that is engaged in managing antibody humanization patents and royalty assets.
Is it a good company to invest? Well, PDL has been going through certain legal problems lately and patents are expiring between 2013 and 2014. However, I still think that it is a good company to invest. Why? Investors may have a good return: this year, dividends will amount to $0.50 per share. Besides, they will probably solve one of the legal matters.
What I suggest is that you follow the situation closely. That´s what Klarman has done for a long time. He also repurchased shares, thus appreciating them and ensuring safety to his investment.
Ituran Location and Control Ltd (ITRN, Financial) is the third. It is a company that installs tracking system in stolen vehicles.
What´s relevant about it? There are several advantages I consider worth analyzing. To start with, Ituran has a 90% presence in the Israeli´s vehicle market and it is now expanding to Brazil. This means it still has markets to dominate and regions where to grow.
Although revenues are mostly in Israeli shekels and Brazilian real, thus involving a risk of fluctuations as it has lately happened with the latter, said fluctuations are not severe. Moreover, the company has already predicted them and temporarily places the money in US dollars to hedge said variations.
Least but not last, management is respectful of shareholders capital.
The fourth component: BP P.L.C. (BP, Financial)
It is an energy company engaged in providing fuel for transportation, energy for heat and light, petrochemicals products, among others.
I am enthusiastic about this component because despite the world economic crisis and a reduction in energy demand that have caused stocks in the energy market to drastically drop, B.P. has been able to keep its position.
It has exceeded this year´s expected EPS and its yields currently are at 5%. A change in administration will likely bring better results.
It can claim it has an A rated balance sheet, cash and a small debt despite litigation and payouts related to the oil spill in the Gulf and problems in Russia.
What about the price target? S&P has placed it at $50 per share. Not bad, what do you think?
Finally, Klarman´s portfolio last component: Microsoft (MSFT, Financial).
There is not much to explain about MSFT activities. It is a well known company at world wide level. But why is it a buy?
There are reasons for that: EPS estimates have been met; shares are worth 68 cents; the PC market has increased 2% and the revenue of the entertainment division has grown.
But these are not the only ones.
I would really long for having a stake in them.
Also check out:
He is considered one of the leading investors and his words and ideas extremely valuable to investors.
You may be asking yourself which strategy Mr. Klarman has used to become a leading investor. In a nutshell, he is a specialist in making esoteric investments such as in distressed debt, liquidations and securities that may make other investors feel dizzy.
To have a better understanding, I will provide below a briefly description of the 5 components of Mr. Klarman’s investment portfolio and why I think it is worth investing in them.
Let´s start with BreitBurn Energy (BBEP, Financial). It is an oil & gas company in charge of acquiring, exploiting and developing oil and gas properties in the United States to generate cash. Its reserves are primarily located in Antrim shale in Michigan, the Los Angeles Basin, the Wind River and Big Horn Basins in Wyoming, the Sunniland Trend in Florida, and the New Albany Shale in Indiana and Kentucky.
Why would I invest here? The numbers speak for themselves. BBEP shares are profitable. As an investor, you own a unit of a partnership and not stock in a corporation. It has several reserves and shares have been lately at $16.50 or even at a better price. Furthermore, with a pay distribution of 9.3% dividend yield and a P/E ratio of 15x, it makes a good combination between big yield and value stock.
Now let´s move on to PDL BioPharma (PDLI, Financial). PDL BioPharma is a biotech company that is engaged in managing antibody humanization patents and royalty assets.
Is it a good company to invest? Well, PDL has been going through certain legal problems lately and patents are expiring between 2013 and 2014. However, I still think that it is a good company to invest. Why? Investors may have a good return: this year, dividends will amount to $0.50 per share. Besides, they will probably solve one of the legal matters.
What I suggest is that you follow the situation closely. That´s what Klarman has done for a long time. He also repurchased shares, thus appreciating them and ensuring safety to his investment.
Ituran Location and Control Ltd (ITRN, Financial) is the third. It is a company that installs tracking system in stolen vehicles.
What´s relevant about it? There are several advantages I consider worth analyzing. To start with, Ituran has a 90% presence in the Israeli´s vehicle market and it is now expanding to Brazil. This means it still has markets to dominate and regions where to grow.
Although revenues are mostly in Israeli shekels and Brazilian real, thus involving a risk of fluctuations as it has lately happened with the latter, said fluctuations are not severe. Moreover, the company has already predicted them and temporarily places the money in US dollars to hedge said variations.
Least but not last, management is respectful of shareholders capital.
The fourth component: BP P.L.C. (BP, Financial)
It is an energy company engaged in providing fuel for transportation, energy for heat and light, petrochemicals products, among others.
I am enthusiastic about this component because despite the world economic crisis and a reduction in energy demand that have caused stocks in the energy market to drastically drop, B.P. has been able to keep its position.
It has exceeded this year´s expected EPS and its yields currently are at 5%. A change in administration will likely bring better results.
It can claim it has an A rated balance sheet, cash and a small debt despite litigation and payouts related to the oil spill in the Gulf and problems in Russia.
What about the price target? S&P has placed it at $50 per share. Not bad, what do you think?
Finally, Klarman´s portfolio last component: Microsoft (MSFT, Financial).
There is not much to explain about MSFT activities. It is a well known company at world wide level. But why is it a buy?
There are reasons for that: EPS estimates have been met; shares are worth 68 cents; the PC market has increased 2% and the revenue of the entertainment division has grown.
But these are not the only ones.
- MSFT is giving a try in the smart phone market despite competition.
- It is developing the new Windows 8. Although it will be launched in a year, the development community has given the company their thumbs up and this new version is considered a good upgrade.
- 42% of the gaming market belongs to Xbox in the US. It is turning into an entertainment portal.
- 7 time-sale of this year´s earnings once you withdraw the net cash on the balance sheet. The PEG has been projected for five years.
- It is an AAA-rated company with a 2.9% yield and in the last five years its dividend payout ratio has largely increased.
I would really long for having a stake in them.
Also check out:
