Every quarter, many money managers have to disclose what they've bought and sold, via "13-F" filings. Their latest moves can shine a bright light on smart stock picks.
Today let's look at investing giant Seth Klarman, who founded the Baupost Group hedge fund company back in 1982. Klarman is a successful investor with a lot to teach us. He sticks to his value-investing principles so much that at times he has a large chunk of his assets in cash, not finding sufficient bargains.
Why should you look at Baupost's moves? Well, according to the folks at GuruFocus.com, it has averaged gains of close to 20% annually since its inception, far outstripping the S&P 500.
The company's reportable stock portfolio totaled $3.3 billion in value as of Sept. 30, 2012.
So what does Baupost's latest quarterly 13-F filing tell us? For one thing, he's very concentrated, owning only about two dozen holdings. Here are a few other interesting details:
The only new holding is media software developer Rovi (Nasdaq: ROVI ) , whose stock has fallen nearly 50% over the past year. The company has been experiencing solid revenue growth, but net income has been in the red. It has been cutting costs to free up funds with which to invest in new projects, and has been buying back shares, as well. It has also licensed patents for fiber-based TV technology to Google (Nasdaq: GOOG ) and it is involved in some litigation with several companies that could generate income -- if things go its way.
We have significant high-grade reserves, excellent exploration potential and an experienced management team. We have a healthy balance sheet and our assets are all located in secure jurisdictions. This is truly a golden opportunity with the company and is committed to shareholder value that provides superior leverage than the price of gold.
Baupost reduced its stake in several companies, such as Hewlett-Packard (NYSE: HPQ ) , Microsoft (Nasdaq: MSFT ) , BP (NYSE: BP ) , and Oracle (Nasdaq: ORCL ) . Shedding some H-P shares seems smart, as the company just reported taking an $8.8 billion charge, along with disappointing earnings. Microsoft, meanwhile, has left many investors unimpressed lately.
The price that BP will ultimately pay for the Deepwater Horizon debacle is finally clearer, but that doesn't mean it's now an attractive stock. Some do see it as a bargain and like its 5.4% dividend, but others note that it still carries more debt that many peers and seems riskier than some as well. It also has had to shed many assets to raise funds to cover its obligations.
Oracle has been successfully shifting its focus from hardware to the cloud computing realm. Some Wall Street analysts have raised their projections for the company, and several contributors in our blogging network see it as a bargain now, too, relative to its peers.
Finally, Baupost sold out of Hess (NYSE: HES ) entirely. It, too, is widely viewed as undervalued. It has been disappointing analysts in several recent quarters with its earnings, but it holds a lot of potential, particularly in natural gas. Our analysts see a likely spinoff of Hess' refinery and downstream businesses and see recent asset sales and a restructured budget helping it dig out from a lot of debt. Its revenue has been growing at accelerating rates, but income has not followed suit.
We should never blindly copy any investor's moves, no matter how talented the investor. But it can be useful to keep an eye on what smart folks are doing, and 13-F forms can be great places to find intriguing candidates for our portfolios.
It's been a frustrating path for Microsoft investors, who've watched the company fail to capitalize on the incredible growth in mobile over the past decade. However, with the release of its own tablet, along with the widely anticipated Windows 8 operating system, the company is looking to make a splash in this booming market. In this brand-new premium report on Microsoft, our analyst explains that while the opportunity is huge, the challenges are many. He's also providing regular updates as key events occur, so make sure to claim a copy of this report now by clicking here.