Seth Klarman (Trades, Portfolio), portfolio manager of Baupost Group, disclosed seven new holdings in his first-quarter report this week.
Klarman, who received an economics degree at Cornell University and an MBA at Harvard University, founded the Boston-based hedge fund in 1983. The author of “Margin of Safety” invests in a wide range of securities, from fairly traditional value stocks to more esoteric investments like distressed debt, liquidations, foreign equities and bonds. Despite this, the guru sometimes stays in cash when investing opportunities are scarce.
Klarman manages approximately $31 billion in total assets, of which approximately $11.54 billion is in equities. As of quarter-end, Baupost’s equity portfolio contains 33 stocks, including the following new holdings: Fox Corp. Class A (FOXA, Financial), Celgene Corp. (CELG, Financial), Takeda Pharmaceutical Co. Ltd. (TAK, Financial), Fox Corp. Class C (FOX, Financial), Bristol-Myers Squibb Co. (BMY, Financial), The Walt Disney Co. (DIS, Financial) and Gossamer Bio Inc. (GOSS, Financial).
Three of guru’s new holdings result from Disney-Fox merger
Klarman disclosed positions of 399,151 shares of Walt Disney, 27,322,720 Class A shares and 5,680,307 Class C shares of Fox. The three positions represent 0.38%, 8.69% and 1.77% of Baupost’s equity portfolio. Shares averaged $111.74, $38.89 and $38.11 during the first quarter.
On March 19, Walt Disney and Twenty-First Century Fox Inc. (TFCF)(TFCFA) announced that shareholders of Twenty-First Century Fox can receive either $51.572626 in cash or 0.4517 in shares of Disney. Further, shareholders received one-third of a share of Fox Corp. of the same class for each share of Twenty-First Century Fox.
Disney then said on May 8 that revenues for the quarter ending March 30 increased 3% as strong revenue in the parks, experiences and product segment and the direct-to-consumer and international segment offset the declining revenues in studio entertainment. GuruFocus ranks the Burbank, California-based company’s profitability 8 out of 10 on several strong signs, which include expanding operating margins and a return on equity that outperforms 89.70% of global competitors. Additionally, Disney’s business predictability ranks 4.5 stars out of five on strong and consistent earnings growth over the past 10 years.
Other gurus that gained holdings in Fox Corp. include Yacktman Asset Management (Trades, Portfolio), T Rowe Price Equity Income Fund (Trades, Portfolio), the Yacktman Fund (Trades, Portfolio) and Dodge & Cox.
Celgene
Klarman purchased 4 million shares of Celgene, giving the position 3.27% weight in his equity portfolio. Shares averaged $87.12 during the quarter.
The Summit, New Jersey-based drug manufacturer discovers, develops and markets therapeutics for the treatment of cancer and immunological diseases. GuruFocus ranks Celgene’s profitability 9 out of 10 on several positive signs, which include a strong Piotroski F-score of 7 and profit margins that are outperforming over 87% of global competitors.
Klarman’s protégé David Abrams (Trades, Portfolio) also purchased shares of Celgene during the quarter.
Takeda Pharmaceuticals
Klarman purchased 10,669,021 shares of Takeda Pharmaceuticals, giving the position 1.88% equity portfolio weight. Shares averaged $20.07 during the quarter.
The Osaka, Japan-based drug manufacturer focuses on four therapeutic areas: oncology, gastroenterology, vaccines and neurology. GuruFocus ranks Takeda’s profitability 6 out of 10: Although the company’s operating margin and return on equity outperform over 61% of global competitors, its three-year revenue decline rate of 0.10% underperforms 70% of global drug manufacturers.
Charles Brandes (Trades, Portfolio), Sarah Ketterer (Trades, Portfolio) and Lee Ainslie (Trades, Portfolio) also purchased shares of Takeda during the quarter.
Bristol-Myers Squibb
Klarman purchased 4 million shares of Bristol-Myers Squibb, giving the position 1.65% equity portfolio weight. Shares averaged $49.88 during the quarter.
The New York-based drug manufacturer discovers, develops and markets treatments for various indications, such as cardiovascular, oncology and immune disorders. GuruFocus ranks the company’s profitability 9 out of 10 on several positive signs, which include a Piotroski F-score of 9, a Joel Greenblatt (Trades, Portfolio) return on capital that outperforms 94.85% of global competitors and a three-year revenue growth rate near a 10-year high of 38.20%.
Gossamer
Klarman purchased 1,267,171 shares of Gossamer, giving the position 0.23% equity portfolio space. Shares averaged $20.81 during the quarter.
GuruFocus ranks the San Diego-based biotech company’s financial strength 6 out of 10: Although it has no long-term debt, Gossamer’s Piotroski F-score of 3 suggests weak business operations.
Disclosure: No positions.
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