We recently published a list of 10 Best Stocks to Buy According to Seth Klarman. In this article, we are going to take a look at where Willis Towers Watson Public Limited Company (NASDAQ:WTW) stands against other 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%.
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).
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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.
Overall, WTW ranks 1st on our list of best stocks to buy according to Seth Klarman. While we acknowledge the potential of 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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Disclosure: None. This article is originally published at Insider Monkey.
