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4 Seth Klarman Stocks Trading Below Peter Lynch Value

Baupost's low price-earnings stocks include several top holdings

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James Li
Sep 13, 2021

Summary

  • Seth Klarman’s Baupost Group applies a value approach to investing.
  • Investors can seek opportunities in stocks trading below Peter Lynch’s earnings line.
  • Klarman’s low price-earnings stocks include top holdings Liberty Global and Intel.
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According to current portfolio statistics, a Premium feature of gurus, four stocks in

Seth Klarman (Trades, Portfolio)’s equity portfolio that are trading below Peter Lynch’s earnings line are Liberty Global PLC (LBTYK, Financial)(LBTYA, Financial), Intel Corp. (INTC, Financial), eBay Inc. (EBAY, Financial) and Nexstar Media Group Inc. (NXST, Financial).

Klarman's Boston-based Baupost Group invests in a wide range of securities, including common stock, preferred stock, distressed debt and liquidations. The guru also warned that investing is not just about producing absolute returns, but also paying attention to the risks involved.

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Klarman applies a value approach to investing. Legendary Fidelity Magellan Fund manager Peter Lynch formulated a simple rule to measure the relative valuation of a stock: Compare the stock price to an earnings line at 15 times earnings per share. According to Lynch, a stock with a price-earnings ratio less than 15 is considered undervalued.

Liberty Global

Klarman owns 53,971,307 Class C shares and 7,657,205 Class A shares of Liberty Global (

LBTYK, Financial)(LBTYA, Financial), giving the positions 11.87% and 1.69% weight in his equity portfolio. According to top 10 holdings statistics, a Premium feature, Class C shares Liberty Global represent’s Baupost’s top holding as of the second quarter.

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Class C shares traded around $28.69; the stock’s price-earnings ratio of 1.55 is near a 10-year low and outperforms more than 98% of global competitors.

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GuruFocus ranks the U.K.-based cable operator’s financial strength 4 out of 10 on the back of a moderately low Altman Z-score of 2.06 and interest coverage and debt ratios that underperform more than 68% of global competitors.

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Other gurus with holdings in Liberty Global include Dodge & Cox and

Jim Simons (Trades, Portfolio)’ Renaissance Technologies. Warren Buffett (Trades, Portfolio)’s Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial) slashed 74.46% of its holding during the second quarter, selling 5,470,446 Class C shares.

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Intel

Klarman owns 21,744,950 shares of Intel (

INTC, Financial), giving the position 9.93% weight in the equity portfolio. The stock represents the guru’s second-largest holding.

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Shares traded around $54.99; the stock’s price-earnings ratio outperforms 86% of global competitors.

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GuruFocus ranks the Santa Clara, California-based semiconductor giant’s profitability 8 out of 10 on several positive investing signs, which include a 3.5-star business predictability rank and an operating margin that has increased approximately 4.70% per year on average over the past five years and is outperforming more than 92% of global competitors.

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Other gurus with holdings in Intel include

PRIMECAP Management (Trades, Portfolio), Ken Fisher (Trades, Portfolio) and Daniel Loeb (Trades, Portfolio).

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EBay

Klarman owns 14,890,623 shares of eBay (

EBAY, Financial), giving the position 8.50% weight in the equity portfolio. The stock is number three on the guru’s top 10 holding list.

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Shares traded around $72.67; the stock’s price-earnings ratio of 3.88 is near a 10-year low and outperforms more than 98% of global competitors.

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GuruFocus ranks the San Jose-based retail company’s profitability 7 out of 10 on several positive investing signs, which include a high Piotroski F-score of 7 and profit margins and returns that outperform more than 95% of global competitors.

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Nexstar Media Group

Klarman owns 2.046 million shares of Nexstar Media Group (

NXST, Financial), giving the position 2.46% equity portfolio weight.

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Shares traded around $145.92; the stock’s price-earnings ratio of 6.96 outperforms more than 88% of global competitors.

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GuruFocus ranks the Irving, Texas-based media company’s profitability 8 out of 10 on several positive investing signs, which include a five-star business predictability rank, a high Piotroski F-score of 8 and an operating margin that is near a 10-year high of 29.82% and outperforms over 94% of global competitors.

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Disclosures

I am/we are Long INTC
The trades and holdings mentioned in this article reflect information as of the second-quarter portfolio filing and do not include any trades or hedges made during July to September.
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