Here's What This Super-Investor Has Been Buying

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Every quarter, fund managers have to disclose what they've bought and sold. 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.

Baupost's stock portfolio totaled $3.3 billion in value as of Dec. 31, 2011, with just 23 holdings. The top three holdings, making up fully 44% of the portfolio's overall value, were BP (NYS: BP) , Viasat, and Hewlett-Packard.

Interesting developments
So what does Baupost's latest quarterly 13F filing tell us? Here are a few interesting details:

The only new holding is the small biotech company Targacept (NAS: TRGT) , which has plunged over the past year, partly on disappointing trial results for an experimental antidepressant. Still, the drug has a few more trials in progress, and in the meantime, the company has plenty of cash and several other prospects, such as Alzheimer's drug AZD3480, and TC-6987, which targets asthma and diabetes.

Baupost upped its stake in NovaGold Resources (ASE: NG) by 49%. NovaGold has been selling off various assets recently in order to focus its operations more. It's also issuing more shares and increasing its share count by about 15%, which has some investors disappointed because of the dilution of existing shares. In our CAPS community, two All-Star members view the stock unfavorably, citing valuation and stock-touting concerns. Some folks are interested in NovaGold because they see it as a possible acquisition target.

Among the stocks that Baupost cut its exposure to were BP and PDL BioPharma (NAS: PDLI) . BP may be trying to put the big Gulf oil spill behind it, but a judge recently decided that BP should share in paying some of the damage claims against its contractors. Also dismaying investors is that BP has been selling off lots of assets, which can ultimately shrink its production capacity. PDL BioPharma, meanwhile, holds valuable patents and makes enough money from royalties that it's offering investors a dividend yield that was recently above 9%. The company recently reported revenue and net income up over year-ago levels, though royalty revenue rose only 2%.

And finally, Baupost sold out of only one stock during the quarter -- BreitBurn Energy Partners L.P. (NAS: BBEP) . The stock has a tantalizing dividend yield above 9% to recommend it, and has been performing well lately, increasing production and completing various acquisitions. Some may not like its involvement in natural gas, as the price has fallen considerably, but BreitBurn has locked in some relatively high prices for it through 2015.

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.

Looking for promising investments? Check out our free special report -- "The Stocks Only the Smartest Investors Are Buying"-- and learn which stocks are appealing to Warren Buffett and other great investors.

At the time this article was published Longtime Fool contributorSelena Maranjian, whom you can follow on Twitter@SelenaMaranjian, owns shares of PDL BioPharma, but she holds no other position in any company mentioned.Click hereto see her holdings and a short bio. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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