Seth Klarman (Trades, Portfolio) founded The Baupost Group in 1982 and has suffered only two losing years since then.
The value investor is the author of the famed book “Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor.” Written in 1991, less than 5,000 copies of the book were printed and can sell for almost $2,500 today. Even Warren Buffett (Trades, Portfolio) is said to have a copy of the book on his desk.
According to an article from Bloomberg, Baupost posted an 8% return last year, its sixth consecutive annual gain. During the fourth quarter, Klarman purchased four new holdings, for a total of 27 stocks in the portfolio. The current value of the portfolio is more than $5 billion, and the quarter-over-quarter turnover was 19%.
Three of the new holdings are pharmaceutical companies with recent IPOs while the fourth is an oil and gas company.
Forward Pharma (FWP, Financial)
Klarman purchased 5,367,300 shares of Forward Pharma, which traded at an average price of $20.58 during the quarter.
Forward Pharma is a Danish biopharmaceutical company that is focused on the immunomodulatory compound dimethyl fumarate for the treatment of immune diseases, particularly multiple sclerosis and psoriasis. The company launched its IPO in October, raising $221 million.
Year-to-date, the stock has been up 9% and currently trades at $22.87. Forward Pharma’s only drug in the pipeline is FP187, which is being developed for the treatment of immune disorders.
Bellatrix Exploration (BXE, Financial)
Klarman also purchased 18,103,713 shares of Bellatrix Exploration at an average price of $4.44 per share. He purchased another 18,103,713 shares on Jan. 31.
Bellatrix is a growth-oriented oil and gas company that develops and produces oil and natural gas reserves in Alberta, British Columbia and Saskatchewan.
The stock has been down 60% over the past year and is undervalued, according to the Peter Lynch chart.
Diluted EPS for the trailing 12 months was $0.69. EPS was negative from 2006 to 2011, and began to improve in 2012.
The stock is currently trading at $3.08 with a P/E ratio of 4.6 and P/S ratio of 1.19.
Paratek Pharmaceuticals (PRTK, Financial)
Klarman bought 1,735,218 shares of Paratek for an average price of $24.03 per share.
Paratek is a pharmaceutical company that merged with Transcept Pharmaceuticals in October. The resulting company changed its name to Paratek and began trading under the stock ticker PRTK. The lead product candidate is omadacycline, an antibiotic designed as a first-line monotherapy for bacterial infections where antibiotic resistance is a concern.
The stock has been down 30% over the past year and currently trades at $28.11. The company has not made a profit for the past 10 years. However, the balance sheet is strong, with very low current liabilities and no long-term debt.
Atara Biotherapeutics (ATRA, Financial)
Klarman’s last purchase of the quarter was 2,495,913 shares of Atara Biothereapeutics, which traded at an average price of $24.54.
Atara is a clinical stage biopharmaceutical company with a focus on muscle wasting conditions and oncology. For example, the product PINTA 745 is being tested to reverse protein-energy wasting in dialysis patients.
Atara launched its IPO in October and raised $55 million. Year-to-date, the stock has declined 30% and is currently trading at $18.90.
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