In this article, we will discuss 10 Best Stocks to Buy According To Seth Klarman.
Baupost Group, once among the best-performing hedge funds, is facing its biggest test yet. The hedge fund’s performance over the past decade has been found wanting. The value investment-focused firm has averaged 4% a year since 2014, about a fifth of its historic highs. While it has lost money in three of the last ten years, its losses have been less than 5%, outperforming the overall market during deep sell-offs.
Seth Klarman, an adherent of Benjamin Graham’s investment philosophy, has often been likened to Warren Buffett due to his methodical and patient investment strategy, earning him the nickname “The Oracle of Boston.” Klarman had made a name for himself as an aggressive hedge fund manager who sought significant returns in distressed plays. During the hedge fund’s first 26 years, it returned an average annualized return of 20% as assets under management ballooned to $30 billion.
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Nonetheless, with growth stocks and tech companies continuing to dominate the stock market even after a prolonged period of success, value investors such as Klarman have faced challenges during years of subpar performance.
Over the past three years, investors have pulled out $7 billion from Baupost Global, a hedge fund that Seth Klarman founded in 1982. The withdrawals have come on the hedge fund struggling during periods of low interest rates and a soaring stock market.
Nevertheless, it’s not all doom and gloom, as Klarman has sought to refocus the hedge fund on its traditional roots. Part of the strategy has involved the slashing of Baupost Global investing team by 20%. Additionally, the investment focus is now on distressed debt and special situations that promise higher returns. Klarman also pursues private investments while also focusing on providing financing to companies.
“With a somewhat smaller investment team, we have increased the level of energy, focus, accountability, and collaboration,” Klarman wrote in a year-end client letter, which served as a progress report on the firm’s turnaround efforts.
Klarman and his partners began discussing ways to refocus the company in late 2023. They limited the kinds of investments they would make, even though they stressed the importance of concentrating on four areas: debt and real estate, private equity, public credit, and public equity. The change of tact is already paying off, as Baupost Group generated a 10% return in 2024, according to investors. It was the first double-digit gain since 2021.
Additionally, it has reduced its investments in public stocks, where the company has had difficulty turning a profit recently. The firm has been able to support more distressed companies as a result of higher interest rates. Two years ago, Baupost’s credit investments accounted for 5% of its assets; today, they account for nearly 25%.
Seth Klarman of Baupost Group
Our Methodology
To compile the 10 Best Stocks to Buy According to Seth Klarman we scanned Baupost Group’s investment portfolio. We then settled on the hedge fund’s biggest holdings and analyzed why they stand out as solid long-term investment plays. Finally, we ranked the stocks in ascending order based on Baupost Group’s stakes in them, as of Q4 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10 Best Stocks to Buy According to Seth Klarman
10. Dollar General (NYSE:DG)
Baupost Group’s Equity Stake: $156.25 Million
Number of Hedge Fund Holders: 52
Dollar General (NYSE:DG) is a discount retailer that provides merchandise in various categories. It offers affordable consumable products and everyday essentials like food, health and beauty products, and cleaning supplies. While the stock was down by about 49% in 2024, it started 2025 on a high, going by a 9% year-to-date gain.
The slump experienced in 2024 came as the discount retailer felt the full wrath of weak consumer spending and inflationary pressure. It also came under immense competition pressure from Walmart. Amid the underperformance, Dollar General remains one of the best stocks to buy, according to Seth Klarman, owing to a string of competitive advantages.
For starters, Dollar General (NYSE:DG) has a store within five miles, covering 75% of the US population. It also has an edge over independent chains thanks to its economies of scale, making it harder for other cheap chains to enter.
The company has also embarked on a back-to-basics initiative that focuses on enhancing in-stock levels and better inventory management. To reduce labor and inventory, it is also prioritizing maintaining a fully staffed checkout area and getting rid of 1,000 stock-keeping units (SKUs). It did return to same-sales growth at 1.3% in the third quarter.
9. Eagle Materials Inc. (NYSE:EXP)
Baupost Group’s Equity Stake: $157.49 Million
Number of Hedge Fund Holders: 36
Eagle Materials Inc. (NYSE:EXP) is a basic materials company that manufactures and sells heavy construction materials and light building materials. It also engages in limestone mining to manufacture, produce, distribute, and sell Portland cement. The company delivered a solid fiscal third quarter of 2025 results despite adverse weather conditions that affected sales volumes in its Cement, Concrete, and aggregate businesses.
Eagle Materials Inc. (NYSE:EXP) generated $558 million in revenues and net earnings of $119.6 million in fiscal Q3. Eagle Materials is on course to create solid results even as the path to lower interest rates remains uncertain. Lower interest rates are usually a boon to the company’s core business as they make home buying affordable, consequently fuelling demand for its construction materials.
Eagle Materials Inc. (NYSE:EXP) has recently taken steps to improve its chances in the construction materials industry by paying $152.5 million to acquire Bullskin Stone & Lime, LLC. Through the development of its network of cement plants and quarries, the acquisition is expected to broaden the company’s growth strategy. The corporation can also gain from rising building and infrastructure spending in the Pittsburgh region.
8. Clarivate Plc (NYSE:CLVT)
Baupost Group’s Equity Stake: $184.29 Million
Number of Hedge Fund Holders: 20
Clarivate Plc (NYSE:CLVT) is a technology company that operates as an information services provider. It offers scientific and academic research that connects data, solutions, and expertise so research institutions can thrive. Its stock has been under pressure, losing 39% in market value last year, a situation exacerbated by a 15% year-to-date slump.
The underperformance comes on Clarivate facing headwinds in recent quarters, with the company reporting a 3.9% year-over-year revenue decline and a 2.6% contraction in organic revenue. This performance has led to a reevaluation of the company’s market position and growth prospects.
Consequently, Clarivate Plc (NYSE:CLVT) has implemented a Value Creation Plan under the new leadership to streamline its portfolio of solutions and improve its business model. A crucial element of this strategy entails halting and launching a number of products in order to switch from transactional to subscription income models.
Additionally, Clarivate Plc (NYSE:CLVT) has set sights on Latin America, pursuing collaboration across key stakeholders, including regulators, manufacturers, and researchers. The company’s ultimate goal is to unlock new opportunities in the healthcare sector through strategic partnerships and data-driven insights.
7. Restaurant Brands International Inc. (NYSE:QSR)
Baupost Group’s Equity Stake: $189.13 Million
Number of Hedge Fund Holders: 31
Restaurant Brands International Inc. (NYSE:QSR) operates as a quick-service restaurant company. It owns and franchises iconic brands, including Tim Horton’s, Burger King and Popeyes. While the stock was down by about 14% in 2024, it has started showing signs of bottoming out, affirming why it is one of the best stocks to buy.
The bounce back comes amid improving underlying fundamentals attributed to lower interest rates that have bolstered customer’s purchasing power. Restaurant Brands International Inc. (NYSE:QSR) delivered better-than-expected fourth-quarter and full-year 2024 results. It logged earnings per share of $0.81 on revenue of $2.3 billion, better than earnings of $0.50 and revenues of $2.29 that analysts expected.
Net sales increased 26% year-over-year following the acquisition of the largest U.S. Burger King franchisee and Popeyes China. Despite having been in turnaround mode for over two years, the Addams Family menu has helped the burger restaurant regain customers, as seen by its quarterly statistics.
Additionally, Restaurant Brands International Inc. (NYSE:QSR) intends to begin selling off a few of the eateries it purchased when it bought Carrols Restaurant Group. Although Restaurant Brands had not intended to begin franchising until 2027, the agreement was intended to expedite the chain’s restaurant renovations. It anticipates spending $400 million to $450 million on tenant inducements, consolidated capital expenditures, and other incentives in 2025.
6. Ferguson Enterprises Inc. (NYSE:FERG)
Baupost Group’s Equity Stake: $196.48 Million
Number of Hedge Fund Holders: 72
Ferguson Enterprises Inc. (NYSE:FERG) is an industrial company that distributes plumbing and heating products. It provides expertise, solutions, and products, including infrastructure, plumbing, appliances, fire, and fabrication products to residential and non-residential customers.
It is one of the best stocks to buy as its focus is on the execution and delivery of revenue growth despite continued market headwinds and commodity price deflation. The company boasts a strong balance sheet and cash-generative model that allows it to continue investing in organic growth. The company delivered solid fiscal second quarter 2025 results on March 11, which was characterized by a 3% increase in sales to $6.9 billion. Sales volume in the quarter was also up by 5% as it also logged $1.38 earnings per share.
The company is well-positioned to benefit from structural tailwinds in the US housing market, which is underbuilt and aging amid the growing need for specialized professionals in plumbing and HVAC. Ferguson continues balancing investment in key strategic opportunities while leveraging tailwinds in residential and non-residential markets.
5. CRH plc (NYSE:CRH)
Baupost Group’s Equity Stake: $244.38 Million
Number of Hedge Fund Holders: 90
CRH plc (NYSE:CRH) is a basic materials company that provides building materials solutions for the construction and maintenance of public infrastructure and commercial and residential buildings. Through strategic acquisitions and worldwide building trends, the construction materials company has boosted its stock price and financials to previously unheard-of levels.
CRH plc (NYSE:CRH) delivered solid 2024 full-year results driven by our customer-connected solutions strategy and leading positions of scale in attractive, higher-growth markets. CRH delivered another year of double-digit profit growth of 15% to $3.5 billion as revenues increased 2% to $35.6 billion. The company also invested $5 billion in 40 value-accretive acquisitions while returning $3 billion of cash to shareholders through dividends and share buybacks. CRH’s outlook remains positive, underpinned by favorable demand and positive pricing momentum, leaving it well positioned for another year of growth and value creation.
Last year, CRH plc (NYSE:CRH) expanded its materials solutions business with the acquisition of Dutra Materials. Consequently, it remains in a solid position to provide integrated solutions to customers in California while bringing additional strategic aggregate reserves and asphalt production capabilities. CRH remains well-positioned to pursue growth opportunities in the construction market in California, which is one of the largest in the US. It also plans to acquire $300 million worth of shares by May 2025 as part of a broader financial strategy to enhance shareholder value and optimize its capital structure.
4. Wesco International Inc. (NYSE:WCC)
Baupost Group’s Equity Stake: $259.79 Million
Number of Hedge Fund Holders: 62
Wesco International Inc. (NYSE:WCC) is an industrial company that provides business-to-business distribution, logistics services, and supply chain solutions. It offers products and supply chain solutions, including electrical equipment and supplies, automation and connected devices, security, and lighting. Additionally, the company is capitalizing on secular growth trends owing to its significant exposure to data center utility and broadband markets.
Wesco International Inc. (NYSE:WCC) delivered solid fourth-quarter and full-year 2024 results. Net sales in the fourth quarter were up 0.5% year-over-year to $5.49 billion, and organic sales grew 2.4%. Net income attributable to shareholders totaled $151 million, up from $127.6 million as of the fourth quarter of 2023.
The company’s data center business emerged as a stand-out performer, going with 70% growth yearly. The growth came as Wesco International Inc. (NYSE:WCC) increasingly benefits from the growing demand for data center capacity amid the artificial intelligence boom. With more than $2 billion in M&A firepower at its disposal, WESCO has laid out ambitious intentions for mergers and acquisitions. This tactic could hasten development and increase the company’s visibility in the marketplace.
3. Alphabet Inc. (NASDAQ:GOOGL)
Baupost Group’s Equity Stake: $271.57 Million
Number of Hedge Fund Holders: 234
Alphabet Inc. (NASDAQ:GOOGL) is an internet giant with Google as its primary subsidiary. It offers internet-related products and services and other ventures like self-driving cars and life sciences research. It is one of the best stocks to buy for investors eyeing exposure in the multibillion-dollar digital advertising businesses.
Additionally, it offers exposure to the lucrative cloud computing segment and booming artificial intelligence landscape. Its cloud unit, Google Cloud has already teamed up with SLB and Project Innerspace to accelerate the adoption of global geothermal energy and allow companies to develop promising geothermal resources.
Alphabet Inc. (NASDAQ:GOOGL) delivered a mixed fourth quarter of 2024 results as revenue increased 12% to $96.47 billion but missed estimates of $96.67 billion. On the other hand, earnings per share rose to $2.15 from $1.64 a share in the same quarter the previous year. The company’s long-term prospects remain intact, having announced plans to spend $75 billion in 2025 as it eyes opportunities around artificial intelligence.
Alphabet Inc.’s (NASDAQ:GOOGL) digital advertising business is also growing at an impressive rate as revenues surged by 11% in 2024. While advertising revenue represented 76% of the total revenue, it was a drop from 77%, affirming how other segments are increasingly contributing to top-line growth. Cloud computing should remain a key growth driver as its revenue increased by 31% last year while accounting for 12% of the total revenue.
2. Liberty Global Ltd. (NASDAQ:LBTYA)
Baupost Group’s Equity Stake: $518.42 Million
Number of Hedge Fund Holders: 38
Liberty Global Ltd. (NASDAQ:LBTYA) is a communication services company that provides broadband internet, video, fixed-line telephony, and mobile communications services to residential and business customers. It also offers value-added broadband services. The stock was up by 24% in 2024, affirming why it is one of the best stocks to buy.
Nevertheless, the stock has pulled back significantly and is down by about 11% year-to-date. Amid the pullback, analysts believe Liberty Global Ltd. (NASDAQ:LBTYA) is undervalued, considering the conservative European and UK telecom industry benchmarks. Additionally, the company remains in a solid financial position with an impressive 67.5% gross profit margin and a revenue growth of over 3%.
The completion of Liberty Global Ltd.’s (NASDAQ:LBTYA) spin-off of Sunrise, its Swiss business, is expected to generate substantial value for shareholders. With the help of fiber rollout partnerships in the Benelux region and operational advancements with Virgin Media O2 in the UK, the company anticipates roughly $5 billion in total returns for the year.
Following the divestment, Liberty Global’s portfolio consists of a 50% holding in VodafoneZiggo in the Netherlands, a 50% share in Virgin Media O2 in the UK, and Telenet in Belgium, Along with a $3 billion venture capital portfolio. Additionally, Liberty Global has investments in more than 75 other software, infrastructure, and multimedia firms, including Formula E Holdings, Lionsgate, and Univision.
1. Willis Towers Watson Public Limited Company (NASDAQ:WTW)
Baupost Group’s Equity Stake: $575.34 Million
Number of Hedge Fund Holders: 48
Willis Towers Watson Public Limited Company (NASDAQ:WTW) is a financial services provider that operates as an advisory, broking, and solutions company. It provides data-driven solutions in the areas of people, risk, and capital. It is turning out to be one of the best-performing insurance stocks, going by the 7% year-to-date gain, adding to the 22% gain last year.
Willis Towers Watson Public Limited Company (NASDAQ:WTW) delivered mixed fourth quarter and full year 2024 results on February 4. Revenue was up by 4% to $3 billion on a reported basis and 5% up on an organic basis. The company’s margin expanded by 140 basis points, driven by cost savings, leading to a 9% increase in adjusted earnings to $8.13 a share. Analysts expect the insurance broker to deliver a 1.4% year-over-year increase in earnings in 2025, in line with its trend of beating estimates in the past four quarters.
Willis Towers Watson Public Limited Company (NASDAQ:WTW) is well positioned to benefit as global businesses face increasingly complex risks, consequently fueling demand for sophisticated risk management and insurance brokerage services. Additionally, the company has sought to strengthen its growth prospects by expanding to offer its services in Saudi Arabia. It has also rolled out a new insurance brokerage service in Japan, which aids in strengthening its Corporate Risk & Broking business.
While we acknowledge the potential of Willis Towers Watson Public Limited Company (NASDAQ:WTW) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than WTW but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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