In this article, we discuss 10 stocks legendary value investor Seth Klarman is buying. If you want to skip our detailed analysis of Klarman’s stock picks and hedge fund history, go directly to Legendary Value Investor Seth Klarman is Buying These 5 Stocks.
Seth Klarman co-founded Baupost Group in 1982, and currently serves as its chief executive and portfolio manager. The New York-born billionaire met his cofounders while studying at Harvard Business School for an MBA. These were a group of Harvard professors who called on Klarman to run the hedge fund. He’s been at the helm since, and has managed to take it from $27 million startup capital in 1982 to $9.3 billion in assets under management as of the first quarter of 2022. Klarman employs a long-only strategy, and is a vocal proponent of value investing. He follows the investment philosophy of Benjamin Graham, who was known as the ‘father of value investing’. This strategy revolves around buying undervalued assets at a margin of safety and then riding out the wave to profitability. Seth Klarman has authored a very influential book on investing called ‘Margin of Safety’, which enjoys its own unique stature in the financial world, selling for thousands of dollars due to its limited number of copies in circulation.
The stock market has shed billions in value since the start of the year, on the back of rising inflation, a bump in interest rates by the Fed, soaring energy prices and geopolitical tensions emanating from the Russia-Ukraine crisis. The S&P500 has lost 18.4% in the year to date, and the tech-heavy Nasdaq composite has plummeted 28.3% in the year to date. In the present-day market volatility, many analysts are predicting a recession.
In the first quarter of 2022, Baupost Group increased its stake in a total of 9 stocks, and initiated positions in 3 equities. Klarman’s fund completely sold off 2 stocks and reduced its holding in 29. The top 10 stocks represent 69.73 % of the total portfolio. Some of the most prominent stocks in the portfolio of legendary value investor Seth Klarman include Alphabet Inc. (NASDAQ:GOOG), Meta Platforms, Inc. (NASDAQ:FB), and Intel Corporation (NASDAQ:INTC). But in this article, we’ll be talking about the stocks in which the billionaire recently initiated or increased his position.
Seth Klarman of Baupost Group
Our Methodology
We went through Baupost Group’s portfolio for the first quarter of 2022, and picked the top 10 stocks in which the fund initiated positions or increased its stake. To give our readers a more holistic picture of how the larger investment world views each stock, we have provided hedge fund sentiment around each stock, which has been derived from Insider Monkey’s database of 900+ elite hedge funds.
Legendary Value Investor Seth Klarman is Buying These 10 Stocks
10. Qorvo, Inc. (NASDAQ:QRVO)
Baupost Group’s Stake Value: $824.73 million
Percentage of Baupost Group’s 13F Portfolio: 8.86%
Number of Hedge Fund Holders: 44
Increase in Stake: 12%
Qorvo, Inc. (NASDAQ:QRVO) is a semiconductor firm based in North Carolina which deals in technology related to the wireless and wired connectivity industries around the globe. The semiconductor industry is poised to grow significantly in the coming years, given it powers almost all of modern-day technology. Klarman increased his stake in Qorvo, Inc. (NASDAQ:QRVO) by 12% in the first quarter, thereby consisting of 6.64 million shares valued at $824.7 million, which amounted to a 8.86% slice of his total portfolio. This made Baupost Group the largest shareholder of the semiconductor firm.
On May 18, analyst Jim Kelleher from research firm Argus maintained his ‘Hold’ rating on Qorvo, Inc. (NASDAQ:QRVO) shares, noting that the firm’s “cautious guidance” reflected the lockdown situation in China, and resulted in a sell off despite the firm beating Q4 expectations. Kelleher holds that the firm is well-positioned for long-term growth in its mobility, infrastructure and aerospace markets, notwithstanding the ongoing supply chain concerns.
For the first quarter, Qorvo, Inc. (NASDAQ:QRVO) posted an EPS of $3.12, beating estimates by $0.18. The company raked in $1.17 billion in revenue for the quarter, beating estimates by $15.9 million.
44 hedge funds were bullish on Qorvo, Inc. (NASDAQ:QRVO) shares at the end of the fourth quarter, as reported from the database of Insider Monkey. The same number of hedge funds were long on the company shares a quarter ago as well.
Vulcan Value Partners, an investment firm, discussed many stocks in its Q1 2022 investor letter, and Qorvo, Inc. (NASDAQ:QRVO) was one of them. The fund said:
“Qorvo Inc. is one of the two major providers of radio frequency RF systems which are critical components of mobile devices including smart phones and the Internet of Things (IoT). Two transitory concerns have recently affected the company’s stock price. First, supply chain issues continue to be a constraint. Second, Apple recently announced its decision to decrease production of its iPhone SE model. Neither of these issues threatens their long-term competitive position. Qorvo’s value is stable and despite the recent pressure on the stock price, we feel its long-term prospects are promising.”
In addition to Alphabet Inc. (NASDAQ:GOOG), Meta Platforms, Inc. (NASDAQ:FB), and Intel Corporation (NASDAQ:INTC), Qorvo, Inc. (NASDAQ:QRVO) is among the top stocks trending on the radar of investors on Wall Street.
9. Starz Acquisition LLC (NASDAQ:STRZA)
Baupost Group’s Stake Value: $256.88 million
Percentage of Baupost Group’s 13F Portfolio: 2.76%
Number of Hedge Fund Holders: 16
Increase in Stake: 13%
Media firm Starz Acquisition LLC (NASDAQ:STRZA) was purchased by Lions Gate Entertainment Corp. (NYSE:LGF-A) in November 2021 in a deal worth $4.4 billion. Under this agreement, Lions Gate will be able to expand its global distribution capabilities, and enhance its position in the premium scripted television industry.
Seth Klarman’s Baupost Group held 5.61 million shares of Starz Acquisition LLC (NASDAQ:STRZA) in the first quarter, worth $256.9 million worth and representing 2.76% of its total portfolio. This was a jump of 13% in stake over the previous quarter, where the fund held 4.97 million shares of the media and entertainment firm.
16 hedge funds out of 924 tracked by Insider Monkey reported ownership of stakes in Lions Gate Entertainment Corp. (NYSE:LGF-A) at the end of the fourth quarter, up from 15 a quarter ago. The total value of Q4 hedge fund holdings in the firm stood at $462.5 million.
8. Nuvation Bio Inc. (NYSE:NUVB)
Baupost Group’s Stake Value: $54.93 million
Percentage of Baupost Group’s 13F Portfolio: 0.59%
Number of Hedge Fund Holders: 22
Increase in Stake: 22%
Nuvation Bio Inc. (NYSE:NUVB) is up next on the list of stocks Seth Klarman is buying amid the ongoing market crunch. The billionaire purchased an additional 1.82 million shares of the firm in the first quarter, bringing his total to 10.44 million shares worth $54.9 million. This was a 22% increase in holding.
Operating as a biopharmaceutical company based in New York, Nuvation Bio Inc. (NYSE:NUVB) develops novel therapies for hard-to-treat cancers. On May 4, H.C. Wainwright analyst Robert Burns initiated coverage of Nuvation Bio Inc. (NYSE:NUVB) with a ‘Buy’ rating and a price target of $14. The analyst sees the firm as an emerging developer of innovative anti-cancer agents engineered to improve upon prior first-generation agents with similar mechanisms of action, and notes that its NUV-422 may be applicable across a range of cancer types.
For the first quarter, Nuvation Bio Inc. (NYSE:NUVB) reported earnings per share of -$0.08, surpassing estimates by $0.05. The number of hedge funds bullish on the company shares at the close of Q4 2021 stood at 22, unchanged from the quarter before.
7. Dropbox, Inc. (NASDAQ:DBX)
Baupost Group’s Stake Value: $245.77 million
Percentage of Baupost Group’s 13F Portfolio: 2.64%
Number of Hedge Fund Holders: 44
Increase in Stake: 31%
Dropbox, Inc. (NASDAQ:DBX) is an online content collaboration platform with over 700 million registered users around the globe. Its services include data storage, secure file sharing and collaborative online workspaces for organizations.
On February 18, JMP Securities analyst Joey Marincek lowered the firm’s price target on Dropbox, Inc. (NASDAQ:DBX) to $30 from $39, on the back of multiple compression in software. He maintained an ‘Outperform’ rating on the shares after its Q4 results beat estimates and reported higher than expected Average Revenue Per User metric. The analyst notes that the firm’s scale give it a large opportunity for conversion and upsell, despite a deceleration in its sales growth.
Reporting its first quarter earnings on May 5, Dropbox, Inc. (NASDAQ:DBX) posted EPS of $0.38, which was in-line with estimates. $562.4 million in revenue for the quarter outperformed estimates by $3.31 million.
Seth Klarman, according to his Q1 2022 portfolio, owns 10.57 million shares of Dropbox, Inc. (NASDAQ:DBX) valued at $245.8 million. In the previous quarter, the legendary value investor owned 8.1 million shares of the firm, showing a significant increase of 31% in the first quarter.
Overall, hedge funds increased their positions in Dropbox, Inc. (NASDAQ:DBX) at the end of the fourth quarter, with 44 reporting bullish bets on the company shares as compared to 41 hedge funds in the previous quarter.
Here is what RGA Investment Advisors had to say about the prospects of Dropbox, Inc. (NASDAQ:DBX) in its Q4 2021 investor letter:
“Dropbox really let us down this quarter, not because they did anything wrong, but because during our entire tenure holding this stock, it outperformed in periods where long duration assets (aka higher growth) sold off. This time it did not. Despite people asserting this market bifurcation is about selling growth and buying value, Dropbox shares suffered one of their worst stock market quarters in recent years. It’s hard to identify a specific reason, though one story out there is how some investors thought the company could raise the bar on its 30% targeted operating margin upon achieving those levels. Along with the company’s earnings report, instead of raising the bar, they explained how there is more room to drive margin, but in the mean-time the preference at the company is for investing the potential excesses to drive further growth.
This year, the company will have repurchased nearly 9% of its diluted shares outstanding (perhaps more given the Q4 route in shares) and will have delivered a free cash flow yield upwards of 7.5% on its year-end stock price, while growing upwards of 12%. This is a potent recipe for outstanding returns, yet in a market that’s theoretically seeking cash flow, the stock was punished. We think this is one of the most nonsensical moves of them all and find Dropbox to be an especially compelling opportunity heading into 2022. The top line is certainly growing, as the company continues to withstand competition from Microsoft, Google and Box. Plus management continues to make smart tuck-in acquisition, showing what may emerge as a scalable, repeatable recipe for deepening their relationship with existing customers, thus driving down churn and setting the stage for prolonged ARPU growth. This potential strategy started with HelloSign, and is further validated with the acquisition of DocSend…” (Click here to see the full text)
6. Fiserv, Inc. (NASDAQ:FISV)
Baupost Group’s Stake Value: $404.42 million
Percentage of Baupost Group’s 13F Portfolio: 4.34%
Number of Hedge Fund Holders: 61
Increase in Stake: 31%
Fiserv, Inc. (NASDAQ:FISV) is a United States-based provider of payment and financial services technology. Its shares represented 4.34% of Seth Klarman’s portfolio for the first quarter of 2022. The billionaire’s stake was worth $404.4 million and comprised of 3.98 million shares, a 31% increase from the previous quarter where he held 3.05 million shares of the company.
In Q1 2022, Fiserv, Inc. (NASDAQ:FISV) posted $3.91 billion in quarterly revenue, beating analysts’ forecasts by $62.34 million. It also posted above expectations earnings per share, with the figure of $1.40 beating estimates by $0.05.
Goldman Sachs analyst Will Nance on May 17 initiated coverage of Fiserv, Inc. (NASDAQ:FISV) with a ‘Neutral’ rating and a $108 price target, implying a 12% upside to current levels. The analyst is “constructive” on the payments sector, noting that these companies are well-positioned to navigate a high-inflation, low-growth environment.
Out of all the hedge funds tracked by Insider Monkey, 61 held positions in Fiserv, Inc. (NASDAQ:FISV) at the close of Q4 2021, with an aggregate worth of $3.9 billion. In comparison, 65 hedge funds were seen holding the company shares at the end of the third quarter. Harris Associates was the largest shareholder of Fiserv, Inc. (NASDAQ:FISV) in the first quarter, with a $2.44 billion stake which represented 3.21% of its total portfolio.
Cooper Investors, an investment firm, mentioned Fiserv, Inc. (NASDAQ:FISV) in its Q4 2021 investor letter. Here’s what the fund said:
“Finally, the portfolio also sold its position in Fiserv as competition in the financial technology space is only increasing and becoming more intense. We deployed the capital elsewhere in more attractive investment propositions.”
Just like Alphabet Inc. (NASDAQ:GOOG), Meta Platforms, Inc. (NASDAQ:FB), and Intel Corporation (NASDAQ:INTC), Fiserv, Inc. (NASDAQ:FISV) is an exciting stock to consider.
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