Baupost Group leader Seth Klarman (Trades, Portfolio) disclosed his equity portfolio for the second quarter earlier this month.
The guru’s Boston-based hedge fund searches for value among a broad range of opportunities, including stocks, distressed debt, liquidations and foreign securities. With a long-term horizon, the renowned investor typically seeks securities trading well below his estimate of intrinsic value and waits for the price to rise. Baupost manages about $31.6 billion in assets.
For the three months ended June 30, Klarman’s 13F filing shows he entered four new positions, sold out of six stocks and added to or trimmed a number of other existing investments. Notable trades included a new holding in Amazon.com Inc. (AMZN, Financial), an increased bet on Fidelity National Information Services Inc. (FIS, Financial) and reductions of the Qorvo Inc. (QRVO, Financial) and Alphabet Inc. (GOOG, Financial) positions. As part of a share restructuring, the firm’s investment in Garrett Motion Inc. (GTX, Financial) was also increased while its holding of preferred shares (GTXAP.PFD, Financial) was dissolved.
Investors should be aware 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
Amazon
After selling out in the first quarter, the guru invested in 963,946 shares of Amazon (AMZN, Financial), allocating 2.27% of the equity portfolio to the position. The stock traded for an average price of $114.02 per share during the quarter.
The Seattle-based e-commerce company has a $1.37 trillion market cap; its shares were trading around $132.61 on Thursday with a price-earnings ratio of 104.42, a price-book ratio of 8.11 and a price-sales ratio of 2.56.
The GF Value Line suggests the stock is modestly undervalued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.
At 94 out of 100, the GF Score indicates the company has high outperformance potential on the back of high ratings for profitability, growth, value and momentum. The financial strength rank is more moderate.
Of the gurus invested in Amazon, Baillie Gifford (Trades, Portfolio) has the largest stake with 0.40% of its outstanding shares. Ken Fisher (Trades, Portfolio), Dodge & Cox, Frank Sands (Trades, Portfolio), Al Gore (Trades, Portfolio), Philippe Laffont (Trades, Portfolio), the Harbor Capital Appreciation Fund (Trades, Portfolio) and Warren Buffett (Trades, Portfolio), among others, also have notable holdings.
Fidelity National Information Services
The investor boosted the Fidelity (FIS, Financial) holding by 39.93%, picking up 1.93 million shares. The transaction had an impact of 1.91% on the equity portfolio. Shares traded for an average price of $55.01 each during the quarter.
Klarman now holds 6.77 million shares total, accounting for 6.70% of the equity portfolio as the sixth-largest holding. GuruFocus data shows he has lost 16.50% on the investment so far.
Also known as FIS, the fintech company headquartered in Jacksonville, Florida, which provides payment processing and electronic banking services, has a market cap of $32.67 billion; its shares traded around $55.14 on Thursday with a price-book ratio of 1.61 and a price-sales ratio of 2.27.
According to the GF Value Line, the stock, while undervalued, is a value trap currently. As a result, potential investors should cautiously investigate the situation before making a decision.
The GF Score of 64 implies the company has poor future performance potential. While it received moderate ratings for profitability, financial strength, value and momentum, the growth rank is low.
With a 4.69% stake, Dodge & Cox is Fidelity’s largest guru shareholder. The stock is also being held by Barrow, Hanley, Mewhinney & Strauss, Hotchkis & Wiley, Jana Partners (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Steven Cohen (Trades, Portfolio), the Parnassus Value Equity Fund (Trades, Portfolio) and Mason Hawkins (Trades, Portfolio), among others.
Qorvo
Impacting the equity portfolio by -3.55%, Klarman reduced the Qorvo (QRVO, Financial) stake by 43.7% or 2.03 million shares. During the quarter, the stock traded for an average per-share price of $96.08.
The guru now holds 2.62 million shares, which occupy 4.83% of the equity portfolio. It is also his ninth-largest position. GuruFocus found Klarman has lost around 0.51% on the long-held investment.
The Greensboro, North Carolina-based company, which manufactures semiconductor products for radio frequency filters, power amplifiers and front-end modules in smartphones, has a $9.77 billion market cap; its shares were trading around $99.83 on Thursday with a price-book ratio of 2.57 and a price-sales ratio of 3.23.
Based on the GF Value Line, the stock appears to be fairly valued currently.
The GF Score of 83 means the company has good outperformance potential, driven by high ratings for three of the criteria as well as more moderate financial strength and value ranks.
Klarman is the company’s largest guru shareholder with a 2.67% stake. Other top guru investors include Cohen, Fisher, Charles Brandes (Trades, Portfolio), Steven Scruggs (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio).
Alphabet
The guru curbed the Alphabet (GOOG, Financial) stake by 29.60%, selling 1.73 million Class C shares. The transaction impacted the equity portfolio by -3.10%. The Class C stock traded for an average price of $115.57 per share during the quarter.
Klarman now holds 4.12 million shares, which make up 9.01% of the equity portfolio as the third-largest position. GuruFocus says he has gained about 27.27% on the investment over its lifetime.
The communications services company headquartered in Mountain View, California, which owns the Google search engine, YouTube and a number of other businesses, has a market cap of $1.65 trillion; its Class C shares traded around $131.13 on Thursday with a price-earnings ratio of 27.78, a price-book ratio of 6.16 and a price-sales ratio of 5.94.
The GF Value Line suggests the stock is modestly undervalued currently.
The GF Score of 98 indicates the company has high outperformance potential on the back of solid ratings for four of the criteria as well as a more moderate value rank.
Holding a 0.32% stake, Dodge & Cox has the largest position in Alphabet’s Class C stock. It is also being held by PRIMECAP, Bill Ackman (Trades, Portfolio), Tom Russo (Trades, Portfolio), Baillie Gifford (Trades, Portfolio), First Eagle Investment (Trades, Portfolio), Harbor Capital, Yacktman Asset Management (Trades, Portfolio) and many others.
Garrett Motion
Klarman’s 25.48 million-share investment in Garrett Motion’s preferred stock (GTXA.PFD) was dissolved following its conversion into common stock. At the same time, his position in the company’s common stock (GTX, Financial) increased by 629.25%, or 22.49 million shares. The transactions had respective impacts of -3.89% and 3.08% on the equity portfolio. During the quarter, the common shares traded for an average price of $8.02 each.
As announced on June 13, the conversion was part of a deal with Centerbridge Partners and funds managed by Oaktree Capital Management to simplify its capital structure.
As of the end of the quarter, the investor held 26.07 million common shares, but has since reduced the holding. GuruFocus estimates he gained 10.46% on the preferred shares, but has lost about 4.32% on the common stock investment.
The Swiss company, which manufactures engineered turbocharger and electric-boosting technologies for light and commercial vehicle original equipment manufacturers and aftermarket parts distributors, has a $2.08 billion market cap; its shares were trading around $8.02 on Thursday with a price-sales ratio of 0.15.
The stock has risen nearly 40% since its initial public offering.
The GF Score of 56 indicates the company has poor performance potential. Although it received a high profitability rank, the growth, financial strength and value ratings are more moderate. Further, Garrett Motion did not receive a grade for momentum, so its full potential may not be properly reflected.
Howard Marks (Trades, Portfolio) has the largest stake in Garrett Motion with 17.03% of its outstanding shares. Other major guru investors are Mario Gabelli (Trades, Portfolio) and Chuck Royce (Trades, Portfolio).
Additional trades and portfolio composition
During the quarter, Klarman also entered positions in Dollar General Corp. (DG, Financial) and Union Pacific Corp. (UNP, Financial), trimmed the investments in Liberty Global PLC (LBTYK, Financial) and New Oriental Education & Technology Group Inc. (EDU, Financial) and divested of the Skyworks Solutions Inc. (SWKS, Financial) and Fiserv Inc. (FI, Financial) holdings.
Baupost’s $5.53 billion equity portfolio, which is composed of 28 stocks, was most heavily invested in the communication services and technology sectors.
