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Seth Klarman Sold Out Horizon Lines Inc. and Sold Down Facet Biotech Corporation

September 10, 2009 | About:
(GuruFocus, September 10, 2009) Investment Guru Seth Klarman sold shares in Facet Biotech Corporation (FACT) and Horizon Lines Inc.(HRZ) in his hedge funds. GuruFocus Real Time Data shows that Klarman sold out his position in HRZ on August 31, 2009 at prices of around $5.42 per share. He also reduced shares in FACT by 24.7% on September 4, 2009 at prices around $15.43 per share. After the sale, Klarman held 3.5 million shares.

Facet Biotech Corporation (FACT)

Facet Biotech Corporation offers biotechnology research services for drug and pharmaceutical products development. It is dedicated to advancing its pipeline of four clinical-stage products and leveraging its research and development capabilities to identify and develop new drugs. The ultimate goal of the company is of developing therapeutics that will improve people's lives. The company is based in Redwood City California. Facet Biotech Corporation has a market cap of $391.7 million; its shares were traded at around $15.95 with and P/S ratio of 21.4.

Klarman initiated a position of 2.8 million shares in 4Q08. He increased his position to 4.4 million shares in 1Q09.

FACT is being acquired by Biogen Idec Inc. (BIIB).On September 4, 2009, BIIB reiterated its proposal to acquired FACT shares for $14.50 per share in cash. The offer represented a premium of approximately 64% over the $8.82 closing price of Facet’s common stock on September 3, 2009.

Klarman’s sale of shares is prompted by the cash offer. Investors have pushed the stock price over the offered $14.50 per share, apparently expecting BIIB or someone else will off a higher price.

Horizon Lines Inc.(HRZ)

Horizon Lines Inc. is a container shipping and integrated logistics company. It accounts for total U.S. marine container shipments from the continental U.S. to the three non- contiguous Jones Act markets Alaska Hawaii and Puerto Rico and to Guam. Horizon Lines Inc. has a market cap of $204.3 million; its shares were traded at around $6.76 with a P/E ratio of 11.1 and P/S ratio of 0.1. The dividend yield of Horizon Lines Inc. stocks is 6.5%.

Klarman initiated a small position of 380,300 shares in 4Q05 and gradually increased to a peak holding of 7.1 million shares as of 2Q08. He has been selling since then, and in 2Q09 he reduced from 3.6 million shares to 3.0 million shares. The recent sell-out represents his complete exit from the investment in which he lost good money.

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Rating: 3.1/5 (12 votes)


David Pinsen
David Pinsen - 8 years ago    Report SPAM
I'm still holding ELOS. Looks like Klarman is too. I've been considering dumping it though.
David Pinsen
David Pinsen - 8 years ago    Report SPAM
Three one-star votes. Zero insight.

Anyone have an opinion to offer on ELOS? I'm starting to wonder what the value of these forums is. Only a tiny handful of companies (e.g., USG, BRK) seem to generate any vigorous discussion.
Batbeer2 premium member - 8 years ago

I don't mind loking into ELOS. At first glance it seems worthy of a discussion. IMO the article is about Klarman and not about ELOS. I am not one to dish out one star votes but I don't feel like discussing Seth Klarman either.

Given that you own ELOS yourself, what is your thesis ?
David Pinsen
David Pinsen - 8 years ago    Report SPAM
I bought it initially because it was on the Magic Formula list, it had plenty of cash and little debt, it looked like it was growing international sales, it had some deal in the works with P&G, and Klarman owned it. I hadn't been following it too closely recently, and I had been considering selling it as part of my recent portfolio culling (I'm freeing up cash in stocks I'm not enthusiastic about). It's gone up with news of its recent acquisition of a competitor.
Yhlbb - 8 years ago    Report SPAM
Off topic warning:

The star ranking system here is meaningless most of the time since so few people click it to vote (one exception is Buffett related topics, which seems to get more votes than others).

My suggestion is to change it to a "recommend it counter" (people who like it can click the "I like it" icon; similar to fool.com). A popular post will get more "I like it" count than not so popular ones.

Another suggestion is to implement a "Followers" counter (similar to seekingalpha.com) for writers; higher follower count means more popular writer.

Gurufocus premium member - 8 years ago
Thank you for the suggestions, the "follow" feature is in the plan but it will take some time to implement.

Batbeer2 premium member - 8 years ago
My thoughts on ELOS.....

The balance sheet is great. Some downside protection there. IMO they could pay out a 200m dividend tomorrow without affecting the basic business. That is a big dividend for a company with a 320m market cap. Another way to put it is that they could buy back 2/3 of their shares.

The bad news....

Gross, operating and net margin are all going downhill. The business does not generate a lot of recurring revenue so I see no clear lower limit to that trend. It coud be due to the crisis, but given that management says:

To increase our revenues, we must:

— convince our target customers that our products or product upgrades would be an attractive revenue-generating addition to their practices;

— sell our products to customers which have traditionally not engaged in aesthetics procedures, including primary care physicians, obstetricians, ear, nose and throat specialists, other specialists and non-medical professionals;

— develop or acquire new products that either add to or significantly improve our current products;

— identify new markets and emerging technological trends in our target markets and react effectively to technological changes; and

— maintain effective sales and marketing strategies.

It seems to me this is a case of market saturation. Of note is that they are focussed on more revenue; not greater profit ! All of these options are really hard except for the acquisition of new products. This is the one option I can see evidence of. That one is easy if you have enough cash. I don't see how the acquisition of Candela is going to help. Candela is not clearly a better business. The other acquisitions may be, but if they really were, why buy Candela ?

Long story short.....

The good news is, they have a lot of cash to play with. The bad news is, it seems that is exactly what they are doing.
Batbeer2 premium member - 8 years ago
Oh.... one last thing.

Issuing shares to buy a 75m company while there is 200m of excess capital on the balance sheet ....

If I were to own all of ELOS I would not do it that way. So I would not be happy owning part of that business if it is run that way.
David Pinsen
David Pinsen - 8 years ago    Report SPAM
Thanks for your thoughts, Batbeer.

Please leave your comment:

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