Sure Dividend

Investors following the company’s 13F filings over the last 3 years (from mid-August 2020 through mid-August 2023) would have generated annualized total returns of -0.02%. For comparison, the S&P 500 ETF (SPY) generated annualized total returns of about 9.3% over the same time period.

Note: 13F filing performance is different than fund performance. See how we calculate 13F filing performance here.

You can download an Excel spreadsheet with metrics that matter of the Baupost Group’s current 13F equity holdings below:

 

Click here to instantly download your free spreadsheet of all Baupost Group / Seth Klarman now, along with important investing metrics.

Keep reading this article to learn more about The Baupost Group.

Table Of Contents

• Introduction & 13F Spreadsheet Download
• Baupost Group’s Fund Manager, Seth Klarman
• Baupost Group’s Investment Philosophy & Strategy
• Baupost Group’s Noteworthy Portfolio Changes
• Baupost Group’s Portfolio & 10 Largest Public Equity Investments
• Final Thoughts

Baupost Group’s Fund Manager, Seth Klarman

Upon founding Baupost, Poorvu asked Klarman and his associates to handle funds he raised from the sale of his stake in a local TV station. The fund started with US$27 million in start-up capital. Among Baupost’s founders, Mr. Klarman was considered relatively inexperienced. Therefore, the fund was taking a big risk with his involvement.

In 2008 Klarman managed to raise $4 billion in crisis-liquidity capital from large foundations and Ivy League endowments. He would allocate $100 million of these funds in stocks and other assets per day, including distressed securities and bonds, resulting in multi-bagger returns post-2008.

Klarman wrote the book Margin Of Safety, which details his risk-averse and value-driven investment philosophy. The book is an investing classic that is out of print. Copies on eBay sell from hundreds to thousands of dollars.

Baupost Group’s Investment Philosophy & Strategy

The Baupost Group’s investment philosophy revolves heavily around Mr. Klarman’s investing principles, which can be summed into the following key points:

• Risk evaluation: While this may sound like a well-known and trivial principle, in reality, sophisticated risk-aversion is far from commonly practiced in the investing world. This is especially true in times of low volatility, such as the current incredible bull market, in which market participants tend to ignore the systemic risks that arise in the underlying economy. Therefore, Mr. Klarman and his team will make sure that their risk is well-mitigated, usually by holding put options against a market index.
• Capitalizing on “Motivated sellers”: A motivated seller is someone who, as Klarman puts it, is letting go of their shares for a non-economic reason. One such reason, for instance, can be the exclusion of stock from a major index. This can cause a stock to trade lower without anything changing in regards to its everyday operations, which can create compelling buying opportunities.
• Capitalizing on “Missing buyers”: One of Warren Buffett’s more famous proverbs is that if you have been in a poker game for 30 minutes and still don’t know who the patsy is, you can be fairly certain it’s you. Mr. Klarman’s version is that he never wants to appear at an auction (i.e., stock buying) to discover that all the other bidders (Mr. Market) are more knowledgeable and have a lower entry cost than he does. Therefore, Baupost is likely to be buying unpopular assets if it sees value in them in an attempt to be ahead of the overall market, despite the “missing buyers.”

The Baupost Group’s Noteworthy Portfolio Changes

During its latest 13F filing, The Baupost Group executed the following notable portfolio adjustments:

Noteworthy new Stakes:

Baupost Group’s Portfolio & 10 Largest Public Equity Investments

Baupost’s public-equity portfolio is not heavily diversified. Instead, its holdings are concentrated, featuring high-conviction ideas. The portfolio numbers only 28 equities, the 10 most significant of which account for 73.8% of its total composition. The fund’s largest holding is Veritiv Corporation (VRTV), occupying around 12.1% of the total portfolio.

Source: 13F filing, Author

Veritiv Corporation functions as a B2B provider of value-added packaging products and services, as well as facility solutions, print, and publishing products and services internationally.

Note that while Veritiv’s shares have performed well over the past few years, the company’s business model suffers from extremely low margins. Net income margins over the past four quarters amount to just 4.8%. Hence the company’s ultra-low valuation multiple of 0.4X from a price/sales perspective.

The company is Baupost’s largest holding, and the position was held stable during the quarter. Baupost holds around 22.1% of the company’s total shares, meaning it has an active influence on the company. The fund has been accumulating shares since Q3-2014.

Alphabet Inc. (GOOGL) (GOOG)

Shares of Alphabet came under severe pressure last year as the macroeconomic turmoil, including reducing advertising spending and a strong dollar, materially impacted the company’s ability to grow. Additionally, due to accelerated hiring and an overall increase in spending, the company’s profitability had been compressed in recent quarters. However, following increased optimism post the company’s most recent results, the stock has rebounded notably.

The company continues to feature one of the healthiest balance sheets in the market, management returns tons of cash to shareholders through stock buybacks, and its overall performance should rebound once market conditions improve. Alphabet is Baupost’s second-largest holding, with the fund trimming its position by a notable 29% during the quarter.

Viasat, Inc. (VSAT)

Media conglomerate Viasat is Baupost’s third largest holding, accounting for roughly 10.8% of its portfolio. In the current landscape, legacy media conglomerates have been in trouble as content creation is becoming increasingly decentralized.

Companies such as Netflix (NFLX), Amazon (AMZN), and even Apple (AAPL) have started producing their own content, while the news outlets have moved mostly online, generating sales through ads or a subscription fee.

In our view, Baupost holds a stake in Viasat as an activist investor due to the fund holding 21.2% of its total outstanding shares. This indicates the possibility that Baupost wants to have an active influence on how the company is run, with a potential aim towards modernizing.

For retail investors, the position could be a risky long-term bet, though an admittedly attractively priced one.

Qorvo, Inc. (QRVO)

Qorvo develops and markets technologies and products for wireless and wired connectivity worldwide. If the forecasts regarding 5G are realized, the semiconductor industry (along with Qorvo) is likely to enjoy massive growth over the next few years.

This growth partially materialized for Qorvo from 2020 through 2022, but growth has slowed since. This illustrates that the company is cyclical in nature.

Baupost trimmed its position by around 43% during the latest quarter. The company is the fund’s sixth-largest holding.

New Oriental Education & Technology Group Inc. (EDU)

New Oriental Education & Technology Group Inc. delivers exclusive educational services in the People’s Republic of China, operating under the renowned New Oriental brand.

Following the Chinese government’s crackdown on private education, the company faced significant impacts and challenges. It experienced adverse effects due to the regulatory changes implemented by the government. The company’s operations and business model were directly affected, leading to a period of uncertainty and adjustment, which resulted in its shares plummeting a couple of years ago. Signs of a gradual recovery are lately noticeable nonetheless.

New Oriental Education & Technology is Baupost’s seventh-largest holding, making up around 4.7% of its portfolio. The fund trimmed its position by 23% during the quarter.

SS&C Technologies Holdings, Inc. (SSNC)

Founded in 1986, SS&C has grown over the years through a combination of organic growth and acquisitions. The company has acquired numerous other financial technology and software firms to expand its product offerings and market reach. This strategy has allowed SS&C to become a prominent player in the financial technology sector.

SS&C serves a diverse client base that includes investment managers, asset owners, insurance companies, banks, hedge funds, and other financial institutions. Their software solutions aim to streamline operations, enhance decision-making, improve efficiency, and enable compliance with industry regulations.

Baupost initially invested in SS&C in Q2-2022. It is the fund’s eighth-largest position, making up around 4.5% of its portfolio.

Garrett Motion Inc. (GTX)

Garrett Motion is known for its expertise in turbocharging technology. Turbochargers are devices that compress air entering an engine, allowing for a higher air-to-fuel ratio and increasing engine power. Garrett Motion’s products play a crucial role in enhancing engine power output and fuel efficiency and reducing emissions.

That said, the $2.1 billion company has struggled to grow in recent years while its profitability remains weak.

Baupost owns about 9.2% of Garret Motion’s total shares. It is the fund’s ninth-largest holding.

The Liberty SiriusXM Group (LSXMA) (LSXMK)

Baupost initiated a position in The Liberty SiriusXM Group in Q1-2020 and has since grown its equity stake steadily. The company specializes in the entertainment business in the U.S. and Canada. It offers music, comedy, talk, news, weather channels, podcast, and infotainment services via its proprietary satellite radio systems, streamed applications for mobile devices, and other consumer electronic products.

While the company has managed to grow its revenues gradually, net income margins have struggled to expand, leading to somewhat weak profitability.

Baupost held both its positions in the Liberty SiriusXM Group rather stable during the quarter. The two classes of stock, A, and K, each account for 4.2% of its portfolio. Separately they make up the fund’s tenth and eleventh holdings. Together they would be the fund’s 4th largest holding.