Seth Klarman Sells Tech Stocks in the 2nd Quarter

The value investor shed some of his top tech holdings

Author's Avatar
Aug 15, 2022
Summary
  • Seth Klarman opened Baupost to new money to invest in tech in 2022.
  • He is now selling his holdings.
  • Seth Klarman made some interesting changes to his portfolio.
Article's Main Image

According to the 13F report of the Baupost Fund, which value investor Seth Klarman (Trades, Portfolio) has managed for the past couple of decades, it made significant changes to its technology investments during the three months to the end of June. These changes suggest the hedge fund manager has reduced his overall exposure to equities, though we must be careful when interpreting figures.

13F challenges

According to its filing for the second quarter, Baupost's portfolio was worth $6.5 billion, but that is not entirely correct. These reports only detail U.S. equity holdings. They do not show international equity positions, credit positions, real estate holdings, cash or any other asset classes. According to reports, Baupost's assets under management amount to around $30 billion, and cash usually makes up around 30% of the total.

So while it might look as if Klarman has been reducing his equity holdings at first glance, he could have been increasing his international investments or selling equities and buying other assets such as distressed bonds or other distressed asset classes (he has been known in the past to deploy large amounts of capital in distressed real estate).

Still, it is interesting to see the value investor has been reducing some of his large tech holdings this year.

Selling tech investments

Hedge fund followers might recall that in 2020, Baupost opened its door to new money for the first time in many years.

In the first 13F report after the fundraising, the fund revealed it had bought significant stakes in technology giants such as Google parent company Alphabet Inc. (GOOG, Financial). The hedge fund initially acquired 6 million sharesof the tech company in the first quarter of 2020, paying an average price of $58 per share after adjusting for splits.

Over the past three quarters, SEC filings show Baupost has reduced the position to around 3.3 million shares. Selling at prices as high as $144 per share, it looks like the value fund manager made a significant profit on this trade.

1559243577865912320.png

Klarman capitalized on market volatility in the first half of 2020 to take advantage of depressed equity prices, although it does not seem like he was doing the same in the second quarter.

Baupost's investment in Intel Corp. (INTC, Financial), which was once the second-largest position, has been cut from 18 million shares to 8.7 million shares. It now makes up just 5% of the equity portfolio after the position was cut by nearly 50% in the second quarter of 2022.

1559243815234158592.png

What's interesting about this trade is the fact it does not seem as if Baupost made much of a profit on the position. The position was acquired in the high $40 per share region, but seems to have been divested in the same price range. Perhaps Klarman has changed his opinion of the company and decided to cut his losses before the situation deteriorates. This would not be the first time the value investor has made this decision. He has exited positions in the past when they have not worked out, as he would rather take a small profit and move on to another opportunity than ride a loser.

Baupost also reduced its holding in top position Liberty Global PLC (LBTYK, Financial) by 10%. Once again, it does not seem as if the fund made much of a profit on this holding.

1559244151319543808.png

Against all this selling, the fund only added three new holdings: Warner Bros. Discovery Inc. (WBD, Financial) (following the merger of an existing holding), New Oriental Education & Technology Group Inc. (EDU, Financial) and Amazon.com Inc. (AMZN, Financial).

While we do not know where Klarman has been investing the rest of his cash, it is notable that this highly regarded value investor was selling U.S. equities in the second quarter.

Disclosures

I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours. Click for the complete disclosure