Seth Klarman (Trades, Portfolio), whose hedge fund Baupost Group last year suffered its third down year in its 33-year history, bought two new stocks and added to nine other holdings in the fourth quarter.
On Friday Klarman reported he had started one new position, in EMC Corp. (EMC, Financial), and significantly increased positions in Orexigen Therapeutics Inc. (OREX, Financial), Sunrun Inc. (RUN, Financial), Sanchez Energy Corp. (SN, Financial) and KLX Inc. (KLXI, Financial).
Klarman favors undervalued companies with strong fundamentals, but in 2016 he ended up “dodging relentlessly falling knives,” a term for impostor value stocks.
“Upon deeper inspection, one superficially tempting investment after another turned out to be worse than they initially appeared,” he wrote in his letter. “We avoided the great majority of these and were nicked by only a handful.”
The long equity positions at Baupost, valued around $5.5 billion, consisted mainly of stocks from the energy sector at 69.3%, technology at 32.3% and healthcare at 8.9% of holdings, as of quarter-end.
New Buys
Klarman purchased 29,248,105 shares of EMC Corp., whose share price averaged $26 for the quarter. The position represented 13.7% of the portfolio.
EMC Corp. is a Massachusetts corporation, incorporated in 1979. EMC Corp. has a market cap of $46.78 billion; its shares were traded at around $24.13 with a P/E ratio of 20.30 and P/S ratio of 1.94. The dividend yield of EMC Corp. stocks is 1.91%. EMC Corp. had an annual average earnings growth of 14.0% over the past 10 years. GuruFocus rated EMC Corp. the business predictability rank of 4.5-star.
Increases
Orexigen Therapeutics Inc. (OREX, Financial)
Klarman increased his position in Orexigen Therapeutics by 176.2% to 2,268,399 shares, or 0.07 of the portfolio. He started the position in the third quarter when the price averaged $3; in the fourth quarter, the price averaged $2 per share.
Orexigen Therapeutics Inc. was incorporated in Delaware in September 2002. Orexigen Therapeutics Inc. has a market cap of $238.53 million; its shares were traded at around $1.64 with and P/S ratio of 4.69.
Klarman increased his position in Sunrun Inc. by 143.2% to 2,848,082 shares, representing 0.61% of the portfolio. He started the position in the third quarter when the price averaged $11 per share; in the fourth quarter, its price averaged $9.
Sunrun Inc. was founded in 2007. It provides clean, solar energy to homeowners. Sunrun Inc. has a market cap of $509.45 million; its shares were traded at around $5.04 with and P/S ratio of 1.5.
Sanchez Energy Corp. (SN, Financial)
Klarman increased his position in Sanchez Energy Corp. by 100% to 2 million shares. He started the position in the second quarter when the price averaged $12; in the fourth quarter, the price averaged $6 per share.
Sanchez Energy Corp., a Delaware corporation formed on Aug. 22, 2011. Sanchez Energy Corp. has a market cap of $177.08 million; its shares were traded at around $2.86 with and P/S ratio of 0.29.
Klarman increase his position in KLX Inc. by 33.3% to 2 million shares, representing 1.1% of the portfolio. He started the position in the first quarter of 2015, when the price averaged $40; in the fourth quarter, it averaged $35 per share.
KLX Inc. has a market cap of $1.42 billion; its shares were traded at around $26.99 with and P/S ratio of 0.86.
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