Seth Klarman, a man who is a symbol of risky investments. He is born in 1957 and can be characterized as a billionaire investor, an author, a hedge fund manager, and an American by nationality.
Portfolio Period: Q3 – 13F Filing of 2023
Seth Klarman Portfolio Value: $5.85 Billion
Seth Klarman’s Stock Holdings
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Top 10 Holdings of Seth Klarman
Seth Klarman’s stock portfolio is not diversified. Instead, his stake is concentrated, with highly persuasive ideas. The portfolio has 24 stocks, of which the 10 largest stocks account for 78.4% of the total structure. By far the largest fund holding is eBay (EBAY), which accounts for more than a fifth of the total portfolio.
1.Intel Corp. (INTC):
The INTC holds 11.9% of Seth’s portfolio.
When speaking more of Seth Klarman’s top holdings, Intel ranks as the largest holding company, although the fund started holding its shares as recently as 2021. This semiconductor giant has performed quite well in the last year, generating $77.8 billion in revenue, up to 8.2% YoY.
The firm is highly profitable, with $20.9 billion to hit the bottom line. Despite the rebound in performance, recent investors are concerned about catching up with the competition, especially from AMD, Advanced Mirco Devices. As a result, current stocks are trading at nearly 12 times more than the forward net income. Intel has had 18 consecutive years of annual dividend increases, the most recent one being 4.76%. The stock currently offers a yield of around 2.3%, whereas the dividend is well hedged, as Intel currently has a payout ratio of about 30%.
2. eBay Inc. (EBAY):
Seth keeps his largest share for eBay with more than 9.1% of his portfolio.
It is one of the biggest hits in Seth Klarman’s portfolio due to its high returns. Most of the company’s revenue stayed stagnant for about a decade, bringing about $11 billion in revenue per year. However, the firm has very well excelled in profit maximization with net profit margins steadily increasing over the years. eBay currently has a net profit margin of about 50% and is perhaps a cash cow that can sustain extremely high returns in several economic environments.
For example, in the ongoing pandemic, the company’s finances are still very stable as people return second-hand items, buy used home decor, etc., which helps eBay’s results to stay stable and consistent without any interruptions. Because eBay had difficulty increasing revenue, management returned huge amounts of money to shareholders, mainly in the form of share buybacks. Since 2006, the company has withdrawn half of its outstanding shares, which is astounding.
Those looking forward to initiating a position on eBay may be pleased to know that the stock ended up trading only 13 times its net profit. Since there is a lack of growth, Investors refuse to pay a premium for the stock. However, the company offers a great value proposition, trades at reasonable multiples, and generates huge capital gains. This action is a clear example of Seth Klarman investments for undervalued companies with a great margin of safety. Baupost owns approximately 4.5% of the total outstanding shares of the company.
3. Viasat, Inc. (VSAT), Fox Corporation (FOX), ViacomCBS Inc. (VIAC):
The fund holds 2.4%, 6.5%, and 1.0% respectively of their total outstanding shares.
The three media groups include the 3rd, 5th, and 10th largest stocks of Baupost, representing almost a quarter of his portfolio total investment. In today’s landscape, traditional media companies are struggling as content creation becomes increasingly decentralized. Companies like Netflix (NFLX), Apple (AAPL), and Amazon (AMZN) produce their own content, whereas news channel outlets have mostly gone online, generating revenues through advertising or subscription fees.
This lead to Fox, Viasat, and Viacom’s share prices underperforming the market in recent years, currently trading at undervalued levels. Baupost acquires these three shares as an active investor. Indicating the possibility that Baupost wishes to have a positive influence on the way the company is run, potentially moving towards modernization.
4. Qorvo, Inc. (QRVO)
This is the company’s fourth-largest holding with 6.2%.
Another successful company in Seth Klarman’s current holdings is Qorvo, a firm responsible for the development and marketing of products and technologies wired and wireless connectivity around the world. If the 5G predictions are correct, then Qorvo and the semiconductor industry are expected to experience strong growth in the coming years. At the same time, the current income of the company is quite stable, and recently the company has also started to generate high profits as much as 16 times the firm’s forward net profit.
5. Translate Bio, Inc. (TBIO)
TBIO is Baupost’s sole healthcare holding, representing approximately 5.2% of its portfolio.
Translate Bio is one of the many companies developing RNA-based therapies capable of recreating the entire biosphere. As with most small-cap companies in the bio-industry, the stock has the potential to generate significant returns if their product succeeds or nothing at all if it fails. Investors who are at least not in the industry should probably avoid such actions. The fund holds nearly a quarter of the outstanding shares. This investment reflects another risky bet in Seth Klarman Baupost holdings where a profit could reach billions but a failure would drag them down to zero.
Read More: Micheal Burry Portfolio
6. Micron Technology, Inc. (MU)
MU accounts for about 4.8% of its portfolio holdings.
Shares have skyrocketed in recent years, currently trading eight times greater than their 2016 levels. While this means that Klarman thinks the stock is more likely to trade, with a forward P/E of around 14.6, the stock can be quite expensive due to the cyclical nature of semiconductors, which makes it become a risky bet following the current prices.
7. Marathon Petroleum (MPC)
According to Seth Klarman 13F filing reports, the stock is up significantly from last year’s low, with the stock now back around 4.1%
The energy sector has had a difficult 2020 due to the sudden pandemic, enormous challenges were faced by the transportation and aviation industries. While most of the industry players reduced distribution due to the deteriorating financial situation, Marathon Petroleum maintained its DPS because of its greater exposure to intermediary services that helped keep profits at a cap. The dividend is not insured from a net income point of view but is protected by the cash flow obtained through operations.
8. PG&E Corporation (PCG):
The firm holds the eighth-largest stock from Baupost.
PCG is perhaps a risky business investment. The company failed to dodge bankruptcy getting itself stuck in a $38 billion debt. PCG needs to gradually recover from these challenges and investing in the company is another risky bet seen within Seth Klarman holdings.
9. Facebook (FB):
Probably the biggest social media platform, the Facebook corporation holds 3.05% of Seth’s portfolio.
Facebook has had a time in surviving the social media competition due to TikTok and other applications taking away too much traffic. But still, Facebook prices to be a profitable company to put one’s shares in, which is why Seth put his millions here.
10. Pershing Square Tontine Holdings Ltd (PSTH):
Lastly, PSTH holds 2.4% of the total portfolio.
The Bill Ackman-owned company offers professional financial assistance regarding stocks and investments. Recently seeing a severe depression, there’s no wonder this corporation has seen such a downfall
The Historical return of the company
The Baupost Group was founded in 1982 and is an established hedge fund. Harvard professor William Poorvu found the company with his partners and Seth Klarman was one of those partners. However, the multibillion-dollar fortune achieved by the firm is reflected through Seth Klarman portfolio as the head of the fund during those years, still serving as chief executive officer of Baupost today.
- AUM
The company has more than $30 billion AUM, assets under management, of which $10.8 billion is allotted to the company’s public equity portfolio. Investors who have followed the company’s 13F deposits for the past 3 years from 2018 to 2021 generated a total annual return of 4.3%. In 2008, Klarman raised $4 billion in post-crisis liquidation from Ivy League endowments and big foundations. He devoted $100 million of that money every day into stocks and other assets, including bonds and distressed securities, leading to multiple profits after 2008. Klarman wrote the book ‘Margin Of Safety’ where he shared details of his philosophy regarding risk-oriented investment.
Read More: Stanley Druckenmiller Portfolio
Baupost Group 13F filing
Time to list down some notable adjustments in the Baupost Group holdings 13F filing reports that are acquired recently. These portfolio adjustments show the new stakes and the disposed of stakes for the company.
Seth Klarman Net Worth:
The total net worth of Seth Klarman is $1.5 billion.
Seth Klarman Current profession:
He is the founder and CEO of the Baupost Group, a private investment partnership based in Boston and founded by Seth in 1982.
Seth Klarman source of wealth:
He adheres closely to the investment strategy of Benjamin Graham and buys unpopular assets when they are undervalued, acquiring a safety margin, and making profits from any price increases.
With his fund’s value at $27 million in the year 2008, he achieved a return on investment of 20%. Seth Klarman current portfolio and holdings highlight that he is the manager of assets worth $27 billion. Forbes values his personal fortune at $1.5 billion making him rank at the 15th position amongst highest-earning hedge fund managers of the world.
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New Shares
- Intel Corp. (INTC): The company started taking positions in INTC, quickly becoming a second holding, accounting for 11.8% of the portfolio. The fund purchased shares at $44 to $55, having previously profited from shares that are currently trading at around $60.
- Marathon Petroleum (MPC): The company started taking a position in the MPC, which now represents about 4% of the portfolio. This position looks to have been quite successful, with the stock trading above $57.
Stake disposals
- Applied Materials (AMAT): A 1.48% stake was established by Baupost for between $55 to $68 in the last quarter. It went on sale this quarter for ~$57 to ~$90.
- Howmet Aerospace (HWM): Minimum stake 0.83%, previously established in the last quarter for $14.75 to $18.80 and eliminated in this quarter at $16.50 to $28.50 prices.
- HD Supply Holdings (HDS): Holding about 3% of the Baupost portfolio previously, this position was bought in the first quarter of last year for between $23 to $43. Home Depot (HD) obtained HD Supply Holdings paying $56 a share in cash and the transaction concluded in December, resulting in the disposal of the shares.
- HP Inc. (HPQ): HPQ occupies position of less than 3% of the Baupost portfolio, acquired in Q4-2019 for $16 to $21. The fund eliminated its poison entirely in this quarter with prices ranging from $17.50 to $25.
- McKesson Corp. (MCK): MCK holds a 2.7 % stake built between late 2017 and early 2018 at a price range of $123 to $177. The fund sold its remaining position this quarter, having previously reduced its position, for between $144 and $184.
Baupost Group investments offer some interesting positions for investors to take into account. Based on many calculations and recent reports, the fund’s public equity portfolio is slightly underperforming in the general market. However, with strongmen like Seth Klarman, Baupost Group holdings will surely hit higher returns in the near future.
