A couple new additions to the Baupost portfolio include Elan Corporation, plc (ADR) (NYSE:ELN) and DIRECTV (NASDAQ:DTV) , ranking 8th and 17th in Baupost’s portfolio, respectively. Elan Corporation, plc (ADR) (NYSE:ELN) is a leading worldwide specialty pharmaceutical company. S&P sees a 49% decline in 2013 revenues for the company due to the conversion of Tysabri revenues to a royalty-based structure from a co-ownership arrangement. This in part could lead to the stock’s becoming undervalued.
Elan has agreed to buy a 21% stake of Theravance’s royalty rights to some respiratory programs partnered with GlaxoSmithKline for a $1 billion upfront payment. In April 2013, the company repurchased 89 million shares, retiring 14% of its shares. Although Klarman is very bullish on the stock, the analysts’ predictions have the company growing EPS at an annualized 2.2% over the next five years.
Some of the reasons that Klarman might find DIRECTV (NASDAQ:DTV) attractive is its big initiatives for breaking out of the saturated pay-TV market. Its strategies include streamlining cost structure and introducing online video streaming. The company also plans to launch two more satellites in 2014 and 2015, which will further improve its service quality.
The real focus of DirecTV going forward should be Latin America. Some of its key initiatives in the region include penetration of the untapped pay-TV market and implementing wireless broadband and online on-demand video facilities. DirecTV also appears to be super cheap, with a PEG of only 0.56. Billionaire Warren Buffett also loves DirecTV (see why Buffett loves the stock).
The bottom line
Seth Klarman is a famed value investor and he’s up to his old tricks, finding deep value opportunities in a number of stocks last quarter. He kept BP plc (ADR) (NYSE:BP) as his top pick, which I also like. This stock pays investors an impressive dividend yield and still appears to have some overhang from the Deep Horizon incident back in 2010 that could lead to future price appreciation. Meanwhile, I also like American International Group Inc (NYSE:AIG), which appears to be undervalued. Klarman’s selloff of Oracle Corporation (NASDAQ:ORCL) comes as the tech giant might be seeing slowing growth, while his new positions in Elan and DirecTV are great undervalued plays worth checking out.
The article Value Investor Seth Klarman’s Shakeups originally appeared on Fool.com
Marshall Hargrave has no position in any stocks mentioned. The Motley Fool recommends American International Group and DirecTV. The Motley Fool owns shares of American International Group and Oracle. and has the following options: Long Jan 2014 $25 Calls on American International Group. Marshall is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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