5 Stocks Added to Seth Klarman’s Portfolio Last Quarter

Seth Klarman’s Baupost Group is one of the largest hedge funds in the world, with roughly $27 billion in assets under management. While 2015 was not a great year for Baupost (or many other funds), our calculations suggest that the firm’s stock picks performed well in the first quarter of this year. The fund’s 18 long positions in companies with a market capitalization of at least $1 billion delivered weighted average returns of 2.9% during the quarter, based on the size of those positions at the beginning of the period. To put things in perspective, the S&P 500 Index gained less than 1% over the same timespan.

While definitive figures for the second quarter are not in yet, the firm’s latest 13F filing provides a look into some of the fund’s largest moves in the equity market made between April and June. Let’s dig into five new positions that Mr. Klarman’s firm opened during the second quarter, and see how they’ve been performing this year and what may have attracted the billionaire investor to them.

At Insider Monkey, we track around 765 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details).

#5. Silver Run Acquisition Corporation (NASDAQ:SRAQ)

– Shares Owned by Baupost Group (as of June 30): 3.75 Million

– Value of Baupost Group’s Holding (as of June 30): $36.75 Million

First up in Baupost’s list of new positions is Silver Run Acquisition Corporation (NASDAQ:SRAQ), a company that went public in late-April to fund the acquisition of energy companies, taking advantage of the depressed oil market. The firm, run by energy industry veteran Mark Papa, announced last month that it had acquired a controlling stake in Centennial Resource Production, with plans to develop the latter’s Texas shale acreage. It’s important to note that Silver Run’s lock-up period will expire on August 22. Shares of Silver Run have surged by more than 22% since they started trading on the Nasdaq exchange, and by almost 25% since the end of the second quarter. Six other hedge funds in our database opened positions in Silver Run Acquisition Corporation (NASDAQ:SRAQ) during the second quarter, including Michael Lowenstein‘s Kensico Capital, which holds 2.00 million shares of the stock as of June 30.

#4. Liberty Braves Group (NASDAQ:BATRK)

– Shares Owned by Baupost Group (as of June 30): 2.99 Million

– Value of Baupost Group’s Holding (as of June 30): $43.89 Million

Next up is Liberty Braves Group (NASDAQ:BATRK), a tracking stock that represents an economic interest in certain businesses of Liberty Interactive Corp (NASDAQ:QVCA), namely its subsidiary Braves Holdings, LLC. Opposite to its peer above, shares of the stock have dropped by almost 15% since going public in late-April. However, since the second quarter ended, the shares have rebounded by more than 16% despite a tumble after Liberty Media Group (NASDAQ:LMCA) beat second quarter revenue expectations. Interestingly, that earnings report pointed out that Liberty Braves Group (NASDAQ:BATRK) had seen a marked $28 million rise in revenue to $131 million, in addition to a $3 million surge in operating income. The company attributed the strong performance to higher ticket sales and broadcast revenue, as the Atlanta Braves played nine more home games during the second quarter than they did during the same quarter of last year. Trailing Baupost, which is the largest institutional investor of record in the company, is Kenneth Mario Garschina‘s Mason Capital Management, which disclosed ownership of 2.86 million shares of the stock as of June 30.

We’ll check out three more stocks that the billionaire investor grew bullish on during the second quarter on the next page.

#3. Avis Budget Group Inc. (NASDAQ:CAR)

– Shares Owned by Baupost Group (as of June 30): 1.78 Million

– Value of Baupost Group’s Holding (as of June 30): $57.6 Million

Avis Budget Group Inc. (NASDAQ:CAR)’s stock had a great second quarter, starting out poorly, but ultimately gaining 22.4% over the period, largely driven by signs of easing pressure over car rental prices. Earlier this month, Avis posted second quarter EPS of $0.63, missing the Street’s consensus target by $0.06, even though revenue of $2.24 billion beat estimates by $30 million. For the full-year, management said that it expects EPS of between $2.90 and $3.90, and revenue in the range of $8.75 billion-to-$8.90 billion. Last week, analysts at Barclays boosted their price target on the stock to $33 from $31, citing a marked recovery in domestic pricing. However, the firm maintains an ‘Equal Weight’ rating on the stock. Even after a 6% reduction to its position, Karthik Sarma’s SRS Investment Management remained the largest shareholder of Avis Budget Group Inc. (NASDAQ:CAR) in our database, owning 9.00 million shares of the company at the end of June.

#2. Liberty Ventures (NASDAQ:LVNTA)

– Shares Owned by Baupost Group (as of June 30): 2.46 Million

– Value of Baupost Group’s Holding (as of June 30): $91.5 Million

Liberty Ventures (NASDAQ:LVNTA)’s case is very similar to Liberty Braves Group’s, although it started trading publicly much earlier. The stock represents economic interests in certain Liberty Interactive Corp (NASDAQ:QVCA) business segments, and lost 4.6% over the second quarter. It’s performed much better in the third quarter, gaining more than 7.6% despite also slipping after Liberty Media Group (NASDAQ:LMCA)’s second quarter earnings call. Also bullish on Liberty Ventures (NASDAQ:LVNTA) is Brian Ashford-Russell and Tim Woolley‘s Polar Capital LLP, which disclosed ownership of 1.58 million shares worth $59 million as of June 30.

#1. Citigroup Inc (NYSE:C)

– Shares Owned by Baupost Group (as of June 30): 5.16 Million

– Value of Baupost Group’s Holding (as of June 30): $219 Million

Finally, there’s Citigroup Inc (NYSE:C), which Baupost acquired more than 5.16 million shares of between April and June. Citigroup Inc (NYSE:C) has had a tough 2016, and is down by more than 10% year-to-date. However, the stock has performed better of late, gaining 10.1% since the end of June. Citigroup made a notable increase to its dividend payments after passing the Fed’s stress test for the second-straight year. The investment back tripled its quarterly dividend to $0.16, pushing the stock’s annual dividend yield to 1.38%. While sizable, Baupost’s stake was dwarfed by Harris Associates’ 28.35 million-share position valued at over $1.20 billion on June 30.

Disclosure: Javier Hasse holds no interest in any of the securities or entities mentioned in this article.