Every quarter, many money managers have to disclose what they've bought and sold, via "13F" 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 assets in cash, when he can't find 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 $3.1 billion in value as of March 31, 2013.
So what does Baupost's latest quarterly 13F filing tell us? Here are a few interesting details:
The biggest new holdings are Elan (UNKNOWN: ELN.DL2 ) , and warrants for Citigroup. Ireland-based biotech company Elan was being pursued by Royalty Pharma, but Elan recently inked a deal with Theravance to collect a portion of its royalty stream from certain lung-related drugs. The deal could prove to be a smart use of cash if the drugs end up selling well, but some see Elan as less attractive as a buyout target now.
Among holdings in which Baupost Group increased its stake were American International Group (NYSE: AIG ) , and BP (NYSE: BP ) . American International Group has seen its stock surge close to 50% over the past year. Some aren't impressed with its various businesses, such as some insurance-focused ones, but others see the stock as attractive, with more room to grow. The company has been raising its prices and enjoying more underwriting profitability.
Oil giant BP has seen its stock start to recover nicely during the past year, but it has experienced some trouble sticking to its budgets, and critics point to poor safety records, potentially troublesome investments in Russia, and continued uncertainty over the ultimate cost to the company of the big Gulf of Mexico oil disaster. The company sports a 5% dividend yield, though, and has been selling assets, such as wind farms, in order to tackle its debt. It's also being investigated for possible price-fixing, along with some peers.
Baupost Group reduced its stake in companies such as Oracle (NYSE: ORCL ) , which took a hit in March after reporting disappointing earnings – though part of the reason for that was the beefing up of its sales force, which could pay off later. Some see its purchase of Acme Packet as promising, too, helping it compete against Cisco Systems. Meanwhile, Oracle is a strong presence in cloud computing, though not without competition there, as well.
Finally, Baupost's biggest closed positions included Genworth Financial (NYSE: GNW ) , and News Corp. Genworth has surged over the past year, but still sports a forward P/E ratio near 7.5, well below its five-year average. It recently reported that quarterly net income more than doubled, and is now selling off its wealth management business. It's also working on raising its rates for its long-term care insurance, as that has become quite costly (causing some rivals to simply exit the business).
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. Therefore, 13-F forms can be great places to find intriguing candidates for our portfolios.