Baupost Group the $28 billion hedge fund has shown through 13-F filing that it is bullish on biopharmaceutical and pharmaceuticals, and energy companies as well. The firm reported that its equity portfolio has a market value of nearly $5.9 billion for the fourth quarter. Throughout the firms history its has return on average 20% thanks to its president legendary value investor Seth Klarman (Trades, Portfolio). In the Baupost Group end of year letter to investors Seth klarman said that the firm has identified opportunities in the energy after the crashing of crude oil prices.
Klarman wrote to investors, " Baupost wasted no time in redirecting additional investment teams into the energy area to sift through the carnage."
Baupost Group added to its current holdings
During the fourth quarter the firm added to its positions in Cheniere Energy Inc. (LNG, Financial), Antero Resources Corp. (AR, Financial) and other energy companies as well. According to the fourth qurter filing Cheniere Energy became the firms largest position valued at $972 million as of December 31. The firm added 5.1 million to its stake in Antero Resouces bring its stake in the firm to 7.85 milllion, valued at $318.5 million according to its recent SEC filing. Baupost added 2.6 million to its Cheniere and added 2.5 million shares of Kosmos Energy Ltd. (KOS, Financial).
New stocks added
The fourth quarter filing shows that the firm bought new positions in Atara Biotherapeutics (ATRA, Financial), Forward Pharma (FWP, Financial)Ă‚ and Paratek Pharmaceuticals (PRTK, Financial). Baupost acquired 2,495,913 shares of Atara Biotherapeutics and its stakes in the firm has a market value of around $59.13 million. As well the firm acquired 5,367,300 shares of Forward Pharma and its stake as a market value of $111.8 million. The firm went on in the fourth quarter to purchase 1,735,218 shares of Paratek Pharmaceuticals and its stake in the firm is worth around $62.1 million. Baupost stake in Paratek represents 12% of the firms outstanding shares.
Another new stock added
The firm bought 18,103,713 shares of Bellatric Exploration (BXE, Financial) and its stake in the firm is worth about $65.89 million.
Position reduced during the fourth quarter
During the fourth quarter Baupost sold about 32 million shares of Micron Technology (MU, Financial) valued at $1.08 billion. Micron Technology was the firm largest holding, now the firm holds 19.7 million shares worth $689.9 million at the end of the year.
Klarman's thought on the market and the Fed
In the letter to investors Seth Klaraman discuss the the funds underperforming the market with 7% and 8% returns compared to the S&P 500 index of 14%. Durint the year the firms cash grew as profitable sales couldn't not be completely reinvested, since Klarman had a hard time finding bargin in the market.
Klarman wrote, " The broader market climbed relentlessly higher with no significant correction," He added, " Bargains became increasingly scarce as the year progressed."
He went on the tell his investors that the firm was outbidded regularly on loan portfolios, private equity, and real estate the tune of 20% to 30% or even more.
Klarman wrote, " At their winning bids, investors were buying these assets at paltry (sometimes even zero) returns to our base-case assumptions." He went on to write, " This was reminiscent of 2006 and 2007 behavior."
Klarman said in the letter to his investor tha the Federal Reserve's easy money policy of purchasing bonds to keep interest rates low. Which he said has artificialy push up securities lacking strong fundamentals. He went on to criticize the Fed for worsening the nation's wealth equality through its policies
He wrote to investors, " “Today’s feel-good moment is bound to be replaced by an environment that feels much worse. How cynical it is for people like Fed chair Janet Yellen and Boston Fed President Eric Rosengren to decry growing economic inequality when it is their own policies that are exacerbating the gaps.”
