Seth Klarman (Trades, Portfolio)'s Baupost Group made a number of substantial changes to its equity portfolio in the third quarter of 2019, according to the hedge fund's recently published 13F filing.
It is important to remember that the filing only gives us a snapshot of the portfolio as of Sept. 30, so this is a backward-looking report. It also only includes Baupost's equity positions. The 13Fs do not show cash or debt positions, and only provide a snapshot of the equity portfolio at one point in time.
For example, even though we know that Baupost manages around $30 billion for clients around the world, its equity holdings only make up $8.5 billion of assets under management. Still, while the information contained in this report is limited and backward-looking, it is an interesting place to start looking for undervalued ideas.
Bulking up on Liberty
Klarman continued to add to his holding of Liberty Global Inc. (LBTYK, Financial) in the third quarter, boosting the position by around 5% and making it the largest stake in the equity portfolio. He currently owns just under 44 million shares for a total value of $1.05 billion.
The value investor has been steadily increasing his position in this company since the third quarter of 2018. He first bought the stock in the third quarter of 2018, and has continued to purchase shares at prices averaging between $28 and $20.60 (these figures are based on the numbers reported in Baupost's 13F filing and, as a result, are only rough estimates).
Cheniere Energy
Klarman continued to reduce his position in Cheniere Energy Inc. (LNG, Financial) throughout the third quarter. This position was once the largest holding in Baupost's equity portfolio, but since the first quarter of 2016, the value investor has been offloading shares.
So far this year, the hedge fund has dumped around 2.5 million shares at prices between $68 and $63. Baupost's acquisition price for the stock was as high as $80 according to historical filings, so it's unclear if the firm actually made a profit or not.
EBay
The hedge fund also continued to reduce its position in online auction site eBay Inc. (EBAY, Financial).
Klarman accumulated nearly 30 million shares of the company in the first quarter of 2019 and the fourth quarter of 2018. However, in the second quarter of this year, he started selling. He's nearly halved the position since, which is strange for a value investor that prides himself on having a long-term outlook. It seems to suggest that the Baupest Group's perspective of the company has changed substantially over the past 12 months.
CBS
One of the most significant changes to the large positions in Baupost's equity portfolio was a 20% increase in the hedge fund's CBS Corp. (CBS, Financial) position. After this increase, the hedge fund now owns 12 million shares of the company with a total value of just under $500 million, giving it a 5.7% portfolio weight.
Smaller trades
Moving away from the prominent positions, down at the bottom of the portfolio, Klarman made some interesting smaller trades as well.
He initiated a position in Nuance Communications Inc. (NUAN, Financial), spending around $134 million to acquire 8.2 million shares in the company, giving it a 1.6% equity portfolio weight.
He also initiated a position in Vista Oil & Gas (VIST, Financial). The hedge fund acquired 6.2 million shares in this company. Shares were trading at an average price of $5.17 during the quarter. In total, the transaction was worth $32 million, giving the position a 0.4% portfolio weight in the equity portfolio.
Lastly, Klarman initiated a small position in Cars.com (CARS, Financial). He devoted $27 million of Baupost's equity capital to this investment. He owned 3 million shares at the end of the third quarter, giving the position 0.3% portfolio weight.
Disclosure: The author owns no stocks mentioned.
Read more here:
- Learning From Seth Klarman's Enron Trade
- Seth Klarman and Charlie Munger on How to Research Companies
- Seth Klarman Explains why Investors Need an Edge in Today's Market
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