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Seth Klarman Dives Into Facebook and Google in Market Plunge

Yesterday, Seth Klarman (Trades, Portfolio)'s Baupost Group filed its 13F report with the SEC for the quarter ended March 31, 2020.

Any U.S. hedge fund with more than $100 million in assets under management is required to report its U.S. stock holdings no later than 45 days after the end of each calendar quarter in the 13F filing. These reports give us a great insight into the stocks that legendary hedge fund managers bought.

However, it should be noted that they only give us a limited picture of transactions. Only equity positions are included on 13Fs. They exclude cash allocations, credit positions and any other assets the hedge fund might own. In addition, the filings only include U.S. equity positions.

Baupost's 13F lists $6.8 billion of total assets invested in equities, although we know from other reports that the hedge fund manages a total of $30 billion for clients. Of this, around 20% was in cash back in March, according to Klarman's investor correspondence.

Klarman's portfolio changes

Klarman made some significant changes to his equity portfolio in the first quarter of 2020. It looks as though he took advantage of the considerable market decline to increase the holdings of his favorite companies. He also reduced some positions and eliminated others.

The most prominent trade was an increase in the size of his holding in online auction house eBay (NASDAQ:EBAY). He increased the position by 61% to 32 million shares, giving it a 14.3% portfolio weight. It is now the most significant position in the portfolio by far.

Klarman also increased the hedge fund's position in Liberty Global Inc. (NASDAQ:LBTYK). Before the first quarter of 2020, this was the largest position in the portfolio. However, it now comes in second behind eBay. He increased the size of the holding by 2.5%, taking it to a 12.5% portfolio weight.

The most interesting deals the legendary value investor completed during the three months were his decisions to buy Google's parent company Alphabet (NASDAQ:GOOG) and social media giant Facebook (FB). He added just under two million shares of Facebook and just over 300,000 shares of Alphabet during the quarter.

These positions together now make up 10% of Baupost's equity portfolio. It is notable that Klarman, who built a reputation on buying deeply undervalued stocks and assets that are often difficult to decipher, has decided to buy some of the most sought-after tech companies in the world.

Other companies added to the portfolio during the quarter included HD Supply Holdings (HDS), Energy Transfer Partners LP (ETP), XPO Logistics (NYSE:XPO) and Liberty SiriusXM Series C (NASDAQ:LSXMK).

A notable sale in the portfolio during the quarter was Synchrony Financial (NYSE:SYF). Klarman has owned this stock since the third quarter of 2016. At one point, it made up as much as 7% of the equity portfolio. He began reducing the holding in the third quarter of 2018. Reported prices suggest that he did not make much of a profit on this position, as he started buying around $28 and sold as high as $36. Shares in Synchrony have come under pressure recently due to concerns about rising unemployment and the impact this might have on the financial service business's bottom line and capital position.

Disclosure: The author owns no share mentioned.

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This article first appeared on GuruFocus.