Here is What Billionaire Seth Klarman is Buying and Selling

The 2015 year didn’t end on a particularly cheerful note for billionaire Seth Klarman‘s Baupost Group. Analysis done by Insider Monkey shows that the companies with a market cap of over $1 billion that the fund held during the year delivered a weighted average return loss of 27.7%. In comparison, Bill Ackman’s Pershing Square and David Einhorn’s Greenlight Capital fared better by delivering weighted average return losses of 21.7% and 24.9%, respectively. Since we don’t include the returns delivered by a fund’s short positions in our analysis or those returns generated through an investment firm’s exposure to bonds, options, or private investments, it is quite possible that the actual returns of a fund differ drastically from the returns estimated by us. While 2015 wasn’t great for Baupost Group, its recently submitted 13F filing for the period ending December 31, reveals that the fund prepared itself during the fourth quarter to fare better in 2016 by making some major changes in its equity portfolio. In this article we are going to analyze the five most notable moves made by the fund during the quarter.

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Let’s start with Frontier Communications Corp (NASDAQ:FTR) in which the fund reduced its stake by 19% to 10.9 million shares during the fourth quarter. After making their lifetime high of $8.46 last February, shares of the communications company have almost halved since then and are trading down by over 9% this year. This massive decline in its stock has resulted in the $.105 per share quarterly dividend that it pays to represent a highly lucrative annual dividend yield of 9.91% at the stock’s current market price. The company is slated to report its fourth quarter results next week and analysts are projecting it to declare a loss of $0.03 per share on revenue of $1.42 billion, compared to the EPS of $0.04 on revenue of $1.33 billion that it reported for the same quarter of 2014. Most analysts that cover the stock are bullish on it, having an average rating of ‘Overweight’ and an average target price of $6.29. Ken Griffin‘s Citadel Investment Group sold its entire stake of nearly 8.00 million shares of Frontier Communications Corp (NASDAQ:FTR) during the fourth quarter.

Taking into account the recent rise in gold prices and its resultant effect on NovaGold Resources Inc. (USA) (NYSEMKT:NG)‘s stock, it seems Baupost Group made the wrong call by reducing its stake in the company by 12% during the fourth quarter. Most of the 14.73% rise that the stock has enjoyed this year has come this month, after gold prices shot up from sub-$1,120 per ounce levels to over $1,240 per ounce. On January 27, the company reported its fourth quarter earnings, declaring a loss per share of CAD$0.03 ($0.0217) versus the loss of CAD$0.02 ($0.0145) per share it reported for the same quarter of 2014. On February 5, analysts at JPMorgan Chase & Co. reiterated their ‘Neutral’ rating on NovaGold Resources Inc. (USA) (NYSEMKT:NG)’s stock. Robert Pitts‘ Steadfast Capital Management increased its stake in NovaGold Resources Inc. (USA) (NYSEMKT:NG) by 1% to 7.64 million shares during the fourth quarter.

Moving on, Baupost Group increased its stake in Antero Resources Corp (NYSE:AR) by 19%  to 19.16 million shares during the fourth quarter, during a period in which the stock hit its lifetime low of $18.50. It seems the fund timed its move perfectly on this one, as since the start of the year shares of Antero Resources Corp (NYSE:AR) have appreciated by 19.36%. Antero Resources Corp (NYSE:AR) is expected to report its fourth quarter earnings next week and the consensus among analysts is for it to report EPS of $0.14 on revenue of $597.78 million. For the same quarter of 2014, the company reported EPS of $0.27 on revenue of $654.97 million. On February 2, analysts at Suntrust Robinson downgraded the stock to ‘Reduce’ from ‘Buy’ and also lowered their price target on it to $21 from $35. Jacob Rothschild‘s RIT Capital Partners sold its entire stake of 895,900 shares of Antero Resources Corp (NYSE:AR) during the fourth quarter.

Baupost Group initiated a stake in EMC Corporation (NYSE:EMC) during the fourth quarter, purchasing nearly 29.25 million shares of the company. With this stake being worth $751.10 million as of December 31, it ranked EMC Corporation (NYSE:EMC) as Baupost Group’s second-largest equity holding going into 2016. Shares of the company spiked by nearly 20% in early-October after Dell Inc. announced that it will be acquiring it in a deal worth $67 billion; however, they have given up all of those gains since then. According to the latest reports, Dell is finding it hard to raise the $45 billion in debt that it needs to finance the deal, due to the recent weakness in the credit markets. Although Dell is hoping that it will be able to close the deal by October, if it fails to do so, it will have to pay $4 billion to EMC Corporation (NYSE:EMC) as a breakup fee. On January 27, analysts at Mizuho upgraded EMC Corporation’s stock to ‘Buy’ from ‘Neutral’, but lowered their price target on it to $28.50 from $30.00. John A. Levin’s Levin Capital Strategies increased its stake in the company by 15% to 11.35 million shares during the October-to-December period.

After boosting its stake in its top pick Cheniere Energy, Inc. (NYSEMKT:LNG) by 12% and 48% during the second and third quarters respectively, Baupost Group again increased it in the fourth quarter, by 15% to nearly 26.09  million shares. However, since the shares of Cheniere Energy, Inc. (NYSEMKT:LNG) have declined consistently from the $80 levels they crested in March of last year to the $25 level they are sitting around now due to the slump in natural gas prices, Baupost Group will be sitting on a huge paper loss on this investment. The fund now owns 11.05% of all outstanding shares of Cheniere Energy, Inc. (NYSEMKT:LNG), worth $971.84 million as of December 31. For its fourth quarter, analysts are projecting the company to report a loss per share of $0.54 on revenue of $63.65 million, well off the loss per share of $0.06 on revenue of $66.60 million that it reported for the same quarter of 2014. On January 13, Citigroup Inc. upgraded the stock to ‘Buy’ from ‘Neutral’ and also greatly increased its price target on it, to $71.00 from $33.47, suggesting upside potential of over 175%. Legendary activist investor Carl Icahn of Icahn Capital LP increased his stake in Cheniere Energy, Inc. by 2,556% during the fourth quarter to over 28.5 million shares.

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