Hedge funds with more than $100 million in assets under management are required to submit a 13-F with the SEC 45 days after the end of each calendar quarter. These reports detail the fund's equity positions and any changes made during the quarter.
However, they exclude cash and debt positions. As we know, Baupost's equity portfolio accounts for around a third of assets under management. This filing provides only limited insight into the mind of Seth Klarman (Trades, Portfolio) and other managers at the hedge fund.
Nonetheless, it can be a great starting point for further research if you are looking for undervalued stocks.
Klarman did quite a bit of selling in his portfolio during the second quarter of 2019. He disposed of positions in Celgene Corp (NASDAQ:CELG), Pioneer Natural Resources (NYSE:PXD) and Walt Disney (NYSE:DIS).
Before he disposed of these stakes, the positions previously accounted for around 5% of Baupost's total equity portfolio.
During the reporting period, Klarman also reduced holdings of Sinclair Broadcast Group (NASDAQ:SBGI) and Synchrony Financial (NYSE:SYF). Synchrony had been one of the most substantial holdings in the portfolio before the disposals.
In total, Baupost dumped 5 million shares in the credit card provider, reducing his position by 35%. It now has a 3% portfolio weight, down from nearly 5% of the end of the first quarter.
Baupost also sold around a fifth of its holdings in eBay (NASDAQ:EBAY), Cheniere Energy (LNG), Allergan (NYSE:AGN) and Qorvo Inc. (ORVO).
Cheniere was once the largest holding in Baupost's portfolio. At the end of the fourth quarter of 2014, Klarman owned just under 14 million shares of the company, and it had a 19.6% portfolio weight. Over the next year, the value investor doubled his position in the liquefied natural gas company, increasing the holding to 30 million shares. But, as a percentage of the overall equity portfolio, Cheniere's weighting declined because the stock price was cut in half over the same period due to the oil price slump.
Since then, Baupost has been gradually reducing its position. It owned just 10.7 million shares at the end of the second quarter.
Ebay seems to be another formally substantial position that Baupost is in the process of unwinding.
Klarman acquired 21 million shares in the online auction site of the end of 2018, boosting the holding by 40% in the first quarter of 2019. Baupost ended March owning 29 million shares. The position accounted for 9.4% of the equity portfolio. But, during the second quarter of the year, the value investor reduced his position by 18% to 24 million shares.
On to the buys. Klarman's biggest addition to his portfolio in the second quarter was Bristol-Myers Squibb (NYSE:BMY). He acquired a total of 9 million shares, boosting his existing position by 225% and raising the pharmaceutical group's weighting in the portfolio to 5.5%.
Liberty Global (NASDAQ:LBTYK) was the most significant position in Baupost's equity portfolio at the end of the first quarter, and it remained so at the end of the second quarter. After boosting its holding by 7.3% during the three months to the end of June, the fund ended the quarter with 42 million shares worth just over $1.1 billion, making up 10.4% of the overall portfolio.
Liberty just completed the sale of the majority of its European assets to Vodafone for $22 billion. Management has stated that the company will return a substantial proportion of this capital to investors through share repurchases and tender offers.
Klarman also added to holdings in Nexstar Media Group (NXST), Translate Bio Inc. (TBIO), CBS Corp. (CBS), Atara Biotherapeutics Inc. (ATRA) and Trilogy Metals Inc. (TMQ) during the three months ended June 30. Baupost acquired a new position in XPO Logistics (XPO).
Disclosure: The author owns no share mentioned.
Read more here:
Warren Buffett's Advice on Investing in a Recession From 2007
Forget Stock Picking: Asset Allocation Is More Important for Investment Success
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
This article first appeared on GuruFocus.