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 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 $3.1 billion in value as of Dec. 31, 2012.
So what does Baupost's latest quarterly 13F filing tell us? Here are a few interesting details:
The biggest new holdings are American International Group (NYSE:AIG) and Microsoft calls. AIG looks appealing to some, with its recent P/E ratio near 3 and a forward one near 10. It has cut a deal with HSBC to sell insurance products in Europe and parts of the Middle East, and is introducing its new CorporateGuard insurance in Europe as well,which is designed to protect directors of companies in these days of extra attention to corporate governance. Share buybacks at recent low levels are also very promising.
Among holdings in which Baupost increased its stake was Indenix Pharmaceuticals (UNKNOWN:IDIX.DL), which is down some 57% over the past year. It has offered some mixed news lately, from a partnership with a Johnson & Johnson subsidiary to develop Hepatitis C treatments to a decision to halt development on several other Hep C drugs that didn't look promising.
Baupost reduced its stake in companies such as Enzon Pharmaceuticals (UNKNOWN:ENZN.DL) and Oracle (NYSE:ORCL). Late last year, Enzon announced that it was looking into selling off parts or all of itself, and that it was also calling off clinical trials of a prostate cancer treatment. Activist investor Carl Icahn has been a major shareholder in the company.
Oracle, meanwhile, has been shifting its focus from hardware to the cloud computing realm. It has been posting double-digit revenue and earnings growth rates over the past few years. Oracle is buying telecom infrastructure specialist Acme Packet, which has some scratching their heads due to a lot of strong competition in its field and others bullish, due to CEO Larry Ellison often making surprising but effective moves. Oracle is also suing Google for alleged patent infringement regarding Java.
Finally, Baupost's biggest closed positions included Hewlett-Packard (NYSE:HPQ) and Microsoft. HP has been one of the worst performers in both the Dow and the S&P 500. Some lament that HP missed the boat on smartphones and tablets, but all might not be lost, as the company seems to be working on an Android tablet. With former eBay CEO Meg Whitman relatively new at the helm, it remains to be seen whether HP will be able to turn itself around.
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. 13-F forms can be great places to find intriguing candidates for our portfolios.