Seth Klarman (Trades, Portfolio) recently released the 13F portfolio updates for The Baupost Group’s third quarter of 2021, which ended on Sept. 30.
The Baupost Group is a hedge fund company founded by Harvard Professor William Poorvu in 1982. Based in Boston, Massachusetts, the long-only fund invests in a wide range of securities, from common stock to liquidations and distressed debt. Klarman is the portfolio manager and believes that a solid investing strategy should never ignore risks in the pursuit of absolute returns, which is one of the three pillars of his investing philosophy. The other two are to analyze losses before gains and to forget about macro conditions, focusing only on the investment idea.
Based on these criteria, Baupost’s biggest sells of the quarter were for eBay Inc. (EBAY, Financial) and Translate Bio Inc. (TBIO, Financial), while its most notable buys were for Dropbox Inc. (DBX, Financial) and Liberty SiriusXM Group (LSXMK, Financial).
eBay Inc.
Baupost cut its stake in eBay Inc. (EBAY, Financial) by more than half, selling 8,907,956 shares for a remaining position of 5,982,667 shares. Shares traded around $71.72 apiece during the quarter, and the reduction had a -5.08% impact on the equity portfolio.
Based in San Jose, California, eBay is an e-commerce company that facilitates consumer-to-consumer and business-to-consumer sales through its website. Once famous for its auction listings, this type of selling is now all but gone from the platform, except in the case of rare items.
On Nov. 15, shares of eBay traded around $74.11 for a market cap of $46.46 billion. According to the GuruFocus Value chart, the stock is fairly valued.
The company has a financial strength rating of 5 out of 10. The cash-debt ratio of 1.57 and Piotroski F-Score of 7 out of 9 show a strong balance sheet. Its profitability rating is 8 out of 10 on operating and net margins that surpass 95% of other retailers.
Translate Bio Inc.
The firm reported that it no longer had its 18,044,239-share stake in Translate Bio Inc., but this could have been due to the company's acqusition during the quarter rather than a direct sale. Translate Bio, which formerly traded under the “TBIO” ticker, was acquired by Sanofi SA (SNY, Financial) for $38 per share in cash. The stock previously had a 4.01% weight in the equity portfolio, and shares traded for an average price of $34.42 during the quarter.
On Nov. 15, shares of Sanofi, which Translate Bio is now a part of, traded around $51.10 for a market cap of $128.28 billion. The GuruFocus Value chart shows the stock as fairly valued.
The company has a financial strength rating of 5 out of 10. While the Altman Z-Score is in the grey zone at 2.2, the interest coverage ratio of 19.81 shows the company should have no problems making its debt payments. Its profitability rating is 7 out of 10 with a three-year revenue per share growth rate of 1.2% and a three-year Ebitda per share growth rate of 23.2%.
Dropbox Inc.
The firm established a new holding of 9,287,500 shares in Dropbox Inc. (DBX, Financial), giving it a 2.50% weight in the equity portfolio. Shares traded for an average price of $31.07 during the quarter.
Dropbox is a widely used file-hosting service founded in 2007. It is known for facilitating the world’s first “smart workspace,” which includes cloud storage, file synchronization, personal cloud and client software. It is headquartered in San Francisco, California.
On Nov. 15, shares of Dropbox traded around $26.62 for a market cap of $10.20 billion. The GuruFocus Value chart estimates the stock is trading near its fair valued.
The company has a financial strength rating of 4 out of 10, driven by a distressed Altman Z-Score of 1.48 and a stable Piotroski F-Score of 5 out of 9. Its profitability rating is 3 out of 10. While the top line has shown consistent growth, earnings per share have been erratic.
Liberty SiriusXM Group
Baupost added 2,600,000 shares to its investment in Liberty SiriusXM Group (LSXMK, Financial) for a total of holding of 9,084,867 shares. The trade had a 1.14% impact on the equity portfolio, and shares traded around $47.39 during the quarter.
Headquartered in Englewood, California, Liberty SiriusXM is a satellite radio company that delivers commercial-free music, sports, entertainment, comedy, talk, news, traffic and weather. Structurally, it consists of Liberty Media Corp’s interests in SiriusXM and Live Nation Entertainment.
On Nov. 15, shares of Liberty SiriusXM traded around $55.51 for a market cap of $20.55 billion. According to the GuruFocus Value chart, the stock is fairly valued.
The company has a financial strength rating of 3 out of 10, with an Altman Z-Score of 0.87 and a current ratio of 0.38 showing the potential for bankruptcy. Its profitability rating is 7 out of 10. The return on invested capital (ROIC) is catching up with the weighted average cost of capital (WACC), so it seems the company is improving its profitability.
Portfolio overview
When the quarter ended, Baupost’s common stock equity portfolio consisted of shares in 56 stocks valued at a total of $10.86 billion based on the 13F. The turnover for the quarter was 6%.
The top holdings were Liberty Global PLC (LBTYK, Financial) with 14.64% of the equity portfolio, Intel Corp. (INTC, Financial) with 9.69% and Viasat Inc. (VSAT, Financial) with 8.26%.
By portfolio weight, the firm was most invested in technology and communication services, followed distantly by financial services, consumer cyclical and industrial.
