In this article we will take a look at the top 10 stock picks in Seth Klarman’s portfolio. You can skip our detailed analysis of Klarman’s history, investment philosophy, and hedge fund performance, and go directly to Seth Klarman’s Portfolio: Top 5 Stock Picks.
Investment guru Seth Klarman, Co-founder of the Boston-based firm Baupost Group, is an expert in value investing. Often described in the American media as “The Oracle of Boston”, inspired by Warren Buffett’s nickname “The Oracle of Omaha”, Seth Klarman serves as the chief executive officer and chief investment officer of Baupost Group. He earned his B.A from Cornell University as an economics major and his M.B.A from Harvard Business School. Klarman’s book “Margin of Safety” is seen as somewhat of a cult classic among investors, with only 5000 copies made.
According to the most recent 13F Filings, Baupost Group, as an investment fund, manages more than $12.3 billion in 13F securities. Baupost Group portfolio is diversified across 11 sectors, with the technology sector proving to the heaviest, making up 42.3% of the fund’s total portfolio. A majority of the companies in the fund’s portfolio are large-cap stocks. Stocks with a size of more than $10 billion in market cap make up 24% of the total holdings value. On the other hand, small-cap stocks make up only 4.8% of the fund’s portfolio.
Some of the top stocks in the investment portfolio of Baupost Group at the end of the second quarter of 2021 were Liberty Global Inc. (NASDAQ:LBTYA), Alphabet Inc. (NASDAQ:GOOG), Facebook Inc. (NASDAQ:FB) and Intel Corporation (NASDAQ:INTC), among others discussed in detail below.
Seth Klarman of Baupost Group
Our Methodology
With this background in mind, let us now look towards the top 10 stock picks in Seth Klarman’s portfolio. We made use of Baupost Group’s 13F portfolio for the second quarter for this analysis.
Why should we pay attention to Seth Klarman’s stocks? Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Seth Klarman’s Portfolio: Top 10 Stock Picks
10. Willis Towers Watson Public Limited Company (NASDAQ:WLTW)
Klarman’s Stake Value: $435 million
Percentage of Seth Klarman’s 13F Portfolio: 3.53%
Number of Hedge Fund Holders: 70
Willis Towers Watson Public Limited Company (NASDAQ:WLTW) is a leading British multinational risk management, insurance brokerage and advisory company. Ranked tenth on the list of the top 10 stock picks in Seth Klarman’s portfolio, Willis Towers Watson Public Limited Company (NASDAQ:WLTW) has a market capitalization of $30.16 billion.
Seth Klarman’s Baupost Group presently holds over 1.89 million shares of Willis Towers Watson Public Limited Company (NASDAQ:WLTW), amounting to more than $435 million in worth and representing 3.53% of the fund’s portfolio. By the end of the second quarter of 2021, 70 hedge funds out of the 873 tracked by Insider Monkey held stakes in Willis Towers Watson Public Limited Company (NASDAQ:WLTW) worth roughly $5.59 billion. This is compared to 66 hedge funds in the previous quarter with a total stake value of approximately $5.18 billion.
As of the fiscal second quarter of 2021, Willis Towers Watson Public Limited Company (NASDAQ:WLTW) reported an earnings per share of $2.66, beating estimates by $0.70. The company also generated revenues of $2.29 billion, surpassing estimates by $56.84 million.
On August 16, Wolfe Research analyst Michael Zaremski initiated coverage of Willis Towers Watson Public Limited Company (NASDAQ:WLTW) with an “Outperform” rating and gave a price target of $261.
Just like Liberty Global Inc. (NASDAQ:LBTYA), Alphabet Inc. (NASDAQ:GOOG), Facebook Inc. (NASDAQ:FB) and Intel Corporation (NASDAQ:INTC), Willis Towers Watson Public Limited Company (NASDAQ:WLTW) is one of the top 10 stock picks in Seth Klarman’s portfolio.
9. Translate Bio Inc. (NASDAQ:TBIO)
Klarman’s Stake Value: $493.5 million
Percentage of Seth Klarman’s 13F Portfolio: 4%
Number of Hedge Fund Holders: 17
8. Facebook, Inc. (NASDAQ:FB)
Klarman’s Stake Value: $537.9 million
Percentage of Seth Klarman’s 13F Portfolio: 4.36%
Number of Hedge Fund Holders: 266
Facebook, Inc. (NASDAQ:FB) is a multinational social networking services company based in Menlo Park, California. Ranked eighth on the list of the top 10 stock picks in Seth Klarman’s Baupost Group, Facebook, Inc. (NASDAQ:FB) has a market capitalization of $974.15 billion.
Seth Klarman’s Baupost Group currently holds owns 1.54 million shares in Facebook, Inc. (NASDAQ:FB), amounting to $537.9 million in worth and accounting for 4.36% of the fund’s portfolio. At the end of the second quarter of 2021, 266 hedge funds in the database of Insider Monkey held stakes worth $42 billion in Facebook, Inc. (NASDAQ:FB), compared to 257 in the previous quarter’s worth $40 billion.
In the second quarter of 2021, Facebook, Inc. (NASDAQ:FB) reported earnings per share of $3.61, beating estimates by $0.58. Facebook, Inc. (NASDAQ:FB) also reported revenues amounting to $29.08 billion, surpassing forecast estimates by $1.19 billion.
On September 9, HSBC analyst Nicolas Cote-Colisson raised the firm’s price target on Facebook, Inc. (NASDAQ:FB) from $275 to $300 and kept a Reduce rating on the shares.
First Eagle Investment Management, an investment management firm, In its Q2 2021 investor letter mentioned Facebook, Inc. (NASDAQ:FB). Here is what the fund said:
“Leading contributors in the First Eagle Global Fund this quarter included Facebook, Inc. Class A. Facebook has continued to post impressive results for both revenue and active users of its traditional platforms. In the meantime, the social media giant continues to make progress on new initiatives—like Facebook Horizon (virtual reality) and Facebook Shops (e-commerce)—and maintains attractive monetization optionality around services like Messenger and WhatsApp.”
7. Micron Technology, Inc. (NASDAQ:MU)
Klarman’s Stake Value: $608.7 million
Percentage of Seth Klarman’s 13F Portfolio: 4.93%
Number of Hedge Fund Holders: 87
Micron Technology, Inc. (NASDAQ:MU) is a technology company based in Idaho that engages in the provision of innovative memory and storage solutions. Ranked seventh on the list of the top 10 stocks in Seth Klarman’s portfolio, Micron Technology, Inc. (NASDAQ:MU) has a market capitalization of $83.55 billion.
At present, Seth Klarman’s Baupost Group holds 7.16 million shares of Micron Technology, Inc. (NASDAQ:MU), worth $608.7 million and representing 4.93% of the fund’s portfolio. At the end of the second quarter of 2021, 87 hedge funds in the database of Insider Monkey held stakes worth $6.3 billion in Micron Technology (NASDAQ:MU), down from 100 in the preceding quarter worth $7.6 billion.
On August 30, Deutsche Bank analyst Sidney Ho lowered the firm’s price target on Micron Technology, Inc. (NASDAQ:MU) to $95 from $110 and kept a Buy rating on the shares.
Just like Liberty Global Inc. (NASDAQ:LBTYA), Alphabet Inc. (NASDAQ:GOOG), Facebook Inc. (NASDAQ:FB) and Intel Corporation (NASDAQ:INTC), Micron Technology, Inc. (NASDAQ:MU) is one of the top 10 stock picks in Seth Klarman’s portfolio.
In its Q1 2021 investor letter, Bonsai Partners, an asset management firm, highlighted a few stocks and Micron Technology (NASDAQ:MU) was one of them. Here is what the fund said:
“Micron is a manufacturer of memory semiconductor chips. Micron appreciated 17.3% during the quarter.
With the semiconductor cycle in full swing, sentiment continued to improve for major DRAM and NAND suppliers. Spot pricing for DRAM continues its upward march due to supply shocks across the industry and sustained demand levels that continue to outstrip supply.
As a result, Micron showed improving results for the fiscal first quarter, raised guidance intra-quarter for the fiscal second quarter, and offered strong guidance for the fiscal third quarter in both growth and margins.
While the cyclical nature of DRAM hasn’t changed, the cycles themselves continue to become more benign, leading to long-term economic improvement across these businesses. Micron is now continuously profitable, with industry players in a dramatically stronger position than even just five years ago.
The biggest negative surprise in the quarter came from Micron’s exit from its 3D XPoint hybrid memory business. The company also announced its decision to sell its accompanying Utah fab. Fortunately, this development does not alter the investment thesis much since 3D XPoint was an option ticket for future growth. While it’s unfortunate this product didn’t pan out, now is an excellent time to sell a fab, so perhaps it is a blessing in disguise?”
6. Alphabet Inc. (NASDAQ:GOOG)
Klarman’s Stake Value: $729.2 million
Percentage of Seth Klarman’s 13F Portfolio: 5.91%
Number of Hedge Fund Holders: 155
Alphabet Inc. (NASDAQ:GOOG) is a multinational conglomerate that owns and runs several internet-related platforms. Ranked sixth on the list of the top 10 stock picks in Seth Klarman’s portfolio, Alphabet Inc. (NASDAQ:GOOG) has a market capitalization of $1.89 trillion.
Seth Klarman’s Baupost Group currently holds 290,930 shares of Alphabet Inc. (NASDAQ:GOOG), amounting to $729 million in worth and accounting for 5.91% of the fund’s investment portfolio. As of the second quarter of 2021, 155 hedge funds tracked by Insider Monkey have positions in Alphabet Inc. (NASDAQ:GOOG), worth over $33.7 billion, compared to 159 in the first quarter, worth $29 billion.
On July 27, Alphabet Inc. (NASDAQ:GOOG) released its quarterly earnings report for the second quarter of 2021, with reported earnings per share at $27.26, crossing estimates of $19.10 by $8.16. In addition, the company also reported revenues of $61.88 billion, beating forecast estimates by $5.80 billion.
On 18 September, Jefferies analyst Brent Thill raised the firm’s price target on Alphabet Inc. (NASDAQ:GOOG) to $3,325 from $3,150 and keeps a Buy rating on the shares, owing to the company’s improved margin profile.
In the Q2 2021 investor letter of Artisan Partners, the fund mentioned Alphabet Inc. (NASDAQ:GOOG). Here is what the fund had to say:
“Top contributors included Alphabet. Advertising is recovering, and Alphabet is a key beneficiary through its search business and online video business YouTube. We continue to see large profit pools for Alphabet in the early stages of monetization, along with the migration of advertising dollars away from traditional mediums, like TV, to online search and video. These factors give us confidence Alphabet continues to have a long runway to grow revenue and profits. In addition, Alphabet’s cost controls are improving, which is driving more revenue growth to the bottom-line. Finally, management has begun to aggressively return capital to shareholders, which we think is another lever that is increasing per share value of the business. We view Alphabet as one of the best businesses in the world, capable of expanding revenues at a rapid rate for years to come, with a bulletproof balance sheet and an average asking price. It’s a name we’ve owned since 2012 and for which we continue to have high hopes regarding future prospects.”
To see the rest of the stocks in this list, click Top 5 Stock Picks in Seth Klarman’s Portfolio.
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Disclosure. None. Seth Klarman’s Portfolio: Top 10 Stock Picks is originally published on Insider Monkey.
