Known as the Oracle of Boston, Seth Andrew Klarman is the manager of the Baupost Group hedge fund. The Baupost Group was founded in 1982 by Harvard professors Bill Poorvu and his partners. Seth Klarman had recently graduated from the Harvard Business School when he was requested to manage this fund. The Baupost Group started off with an initial capital of $27 Million and is now among largest hedge funds in the world. A billionaire investor and author, Seth Klarman is also the author of the much-acclaimed book “Margin of Safety” published in 1991.
The coronavirus pandemic caught several old school value investors like Warren Buffett, Stan Druckenmiller, and Seth Klarman flat-footed. Their brains couldn't function in a market environment where high growth tech stocks are flourishing and value stocks languishing as the Federal Reserve inventing new ways of manipulating the equity and bond markets. As a result, during the 2nd quarter, Seth Klarman was a significant seller, completely selling out of Cheniere Energy (LNG), Energy Transfer Equity (ET), XPO Logistics (XPO), Spirit Aerosystems (SPR), and Cars.com (CARS). His 6.7 million share Cheniere Energy (LNG) position would have been worth nearly $350 million today. Klarman's largest brand new purchase was hospital operator HCA Healthcare Inc (HCA), his position valued at less than $100 million at the end of June. It is clear that Seth Klarman was reducing his exposure as the stock market was climbing higher and higher since bottoming on March 23rd.
Seth Klarman of Baupost Group
Insider Monkey told its readers to short the market in February and remove their short positions and go long on March 25th. Clearly our subscribers navigated these turbulent markets much better than Seth Klarman did. As the stock market reached a new all time high, our approach was proven more profitable than Seth Klarman's. Let's take a look at the top 5 stocks Klarman is betting on at the end of June.
The top 5 holdings of the Baupost Group as of June 30th are Ebay Inc (NASDAQ:EBAY), Liberty Global Inc (NASDAQ:LBTY), Fox Corp (NASDAQ:FOX), Viasat Inc (NASDAQ:VSAT), Viacomcbs Inc (NASDAQ:VIAC). The 13F portfolio is heavily invested in these holdings and they account for 57% of the 13F Holdings.
Now let us take a look at each of these holdings.
Ebay Inc (NASDAQ:EBAY)
EBAY is currently the largest 13F position at 21% of the portfolio. Baupost holds 32,086,000 shares at a value of $1.68 billion. There has been no change quarter on quarter in the holdings. The stock currently trades at $57.03 as of Aug 19th, 2020. The stock started the year at $35.62 on Jan 2nd, 2020 and dropping to a low of $26.34 on Mar 23rd, 2020. Thereafter the stock has steadily increased to where it stands today at $57.03. The company reported better than expected 2nd Quarter 2020 results. Revenue was $2.9 billion, up by 18% Y/Y. Looking at its cash flow, the company generated $964 million of operating cash flow from continuing operations and $866 million of free cash flow during the second quarter of 2020.
EBAY was hugely popular among hedge funds in 2015 and hedge fund sentiment bottomed at the end of 2018. Heading into the second quarter, hedge funds were moderately bullish about EBAY (see the detailed chart here). Last month we shared Steel City Capital's bullish EBAY thesis in this article, explaining why EBAY is a compelling investment idea.
Liberty Global Inc (NASDAQ:LBTYA)
LBTYA takes the second largest position at 17% of the portfolio. Baupost holds 54,555,407 at a value of $1.17 Billion. The stock trades at $22.60 as of Aug 19th, 2020. At the end of this quarter, it had increased its position in Liberty Global by 2%. This stock has seen its ups and downs this year, from a low of $15.80 on Apr 3rd to its current price of $22.60. Looking at its Q2 2020 results, we can confer the following. The UK joint venture with Telefonica is proceeding as expected. This Q2 it had the best result in over two years in terms of customer and broadband additions and it repurchased over $750 million of stock by the end of July. In terms of financials, Q2 revenue declined by 4% year-over-year and was impacted by approximately $110 million in generally low margin COVID-19 related impacts.
In Q3 2015, a total of 70 hedge funds had positions in this stock, but by the end of Q1 2020 Insider Monkey tracked a total of 30 hedge funds holding positions in this stock. A 11% change from the previous quarter (see the detailed chart here). Among the funds tracked by Insider Monkey, Warren Buffet's Berkshire Hathaway had the largest position in Liberty Global Inc (NASDAQ:LBTYA) at $318.8 Million. This comprised 0.2% of its total 13F portfolio. At second place Route One Investment Company led a position of $139.6 Miilion, which is 4.6% of its 13F portfolio. Insider Monkey shared an article in June 2020, analyzing the bullishness of the heavyweights with regards to Liberty Global Inc (NASDAQ:LBTYA) and explaining what hedge funds have been doing with Liberty Global Inc (NASDAQ:LBTYA).
Fox Corp (NASDAQ:FOX)
Klarman’s stake in Fox Corp is at 27,322,720 shares, comprising 9.14% of the portfolio. The stock price is currently trading at $25.80 as of Aug 19th, 2020. For its 2nd Quarter 2020, the company reported an increase in its quarterly revenue by 5 % at $3.78 Billion, comparing the $3.58 Billion in the prior quarter. Quarterly net income increased to $314 million from the $24 million in the prior year quarter.
At the end of the seocnd quarter 2020, Insider Monkey tracked a total of 20 hedge funds holding positions in this stock. That is a change of 7 from the fourth quarter of 2019.
Viasat Inc (NASDAQ:VSAT)
Klarman owns 13,732,068 shares at a value of $ 526 Million, positioning at 6.57% of the portfolio. Baupost controls more than 23% of Viasat Inc (NASDAQ:VSAT) outstanding shares and has been a long-time investor in this stock. The shares of Viasat Inc lost nearly a third of their value over the last 5 years. Insider Monkey rightly predicted and advised our readers to not follow Klarman into VSAT two years ago in this article. The shares used to trade at $60.25 as of Aug 21, 2015 and now trade at $41.43 as of today Aug 19th, 2015. Hedge fund sentiment towards ViaSat reached its peak in 2019, but hedge funds have been consistently dumping their holdings since then (see the details).
ViacomCBS Inc (NASDAQ:VIAC)
Baupost holds 18,837,585 shares at a value of $439,292, positioned at 5.48% of the portfolio. The stock currently trades at $27.07. In its Q2 2020 results, the company report a decline in revenue of 12% at $6.275 billion. This can be attributed to the impact caused by Covid-19. VIAC shares started the year at $42.09 and dropped to a low of $11.28 on Mar 23rd and currently settling down at $27.07.
At the end of Q4 of 2019, Insider Monkey tracked a total of 64 hedge funds holding position in this stock. That figure plunged to 45 at the end of June.
Disclosure: None. This article is originally published at Insider Monkey.