Who's Seth Klarman? He's a value investor who founded the respected Baupost Group hedge fund company back in 1982, and according to a profile in The Economist, as of last year he had only had two negative years since 1982. His book, Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor, is out of print but still in demand, with a copy recently offered on Amazon.com for around $2,500.
Klarman has 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. He's also a very concentrated investor, with his top three holdings making up about 74% of his portfolio's value.
Buys and sells
Baupost's biggest holding by far is Micron Technology (MU -3.95%), representing 32% of its portfolio. The Micron position was increased by 54% over the last quarter, too. That's serving Klarman well, as Micron shares have more than tripled over the past year. Micron has been making some smart moves, such as buying the Japanese company Elpida, which has made it the world's second-largest DRAM maker. The new combined entity nearly doubles Micron's memory capacity, boosts its pricing power, and gives it a bigger relationship with Apple. Micron Technology recently announced a new, higher-performing processor architecture that's likely to compete with Intel offerings. Micron's recently reported fourth quarter was strong, but it received a downgrade from Wells Fargo anyway. With its forward P/E ratio near 10, many still see great value in the stock.
Meanwhile, the Baupost portfolio eliminated a handful of positions, including two gold miners, Yamana Gold (AUY) and Kinross Gold (KGC 4.08%). They were not major holdings, but their sale underlines a lack of confidence in the mineral, which is echoed by many Fools.
Both Yamana Gold and Kinross Gold have seen their shares drop sharply over the past year, as the price of gold, too, has fallen. In its last earnings report, Yamana posted revenue down 25% and earnings down 28%. Kinross recently reported revenue down 21% and earnings down 77% -- though those results were actually better than expected. Yamana has been reducing its production forecasts, while Kinross has upped them.
No one should blindly mimic the moves of any impressive investor, but it can be useful to keep an eye on them. The stocks they buy, sell, or hold can present us with useful ideas.
