In this article, we discuss the top 10 stock picks of legendary value investor Seth Klarman. If you wish to skip our comprehensive analysis of Klarman’s history and hedge fund performance, go directly to Top 5 Stock Picks of Legendary Value Investor Seth Klarman.
Seth Klarman runs Boston-based hedge fund Baupost Group, which is an acronym derived from the names of a group of cofounders he met while studying for an MBA at Harvard Business School in 1983. Klarman has been an avid investor since his teenage, and has gone on to become one of the most revered investors on Wall Street. Klarman’s book ‘Margin of Safety’ enjoys a cult-like following in the financial world, and sells for as much as $3,000 given the limited number of copies in the market.
Since being founded in 1983, Baupost Group has posted an average annual return of more than 20% to investors. It boasts assets under management (AUM) of $10.12 billion as of the fourth quarter of 2021. The fund’s top 10 holdings represent 66% of its total portfolio. In Q4 2021, Baupost Group made additional purchases in 5 stocks, bought 6 new stocks, sold out of 9 stocks and reduced holdings in 11 stocks. The investments are distributed across a variety of sectors, with Technology, Services, Financial, Healthcare and Others featuring prominently in the portfolio. Some of the top stocks found in the portfolio of legendary value investor Seth Klarman include Alphabet Inc. (NASDAQ:GOOG), Meta Platforms, Inc. (NASDAQ:FB), and Intel Corporation (NASDAQ:INTC), among others mentioned below.
Seth Klarman of Baupost Group
Percentage of Baupost Group’s 13F holdings: 3.26%
Baupost Group’s Stake Value: $331.1 million
According to regulatory data from its Q4 13F filings, Seth Klarman’s Baupost Group held roughly 985,000 shares of Meta Platforms, Inc. (NASDAQ:FB), with a combined stake value of $331.1 million which accounted for 3.26% of its overall holdings. In total, 224 hedge funds were long on the social media giant’s company shares in the fourth quarter, with aggregate stakes worth $31.8 billion. Fisher Asset Management of billionaire Ken Fisher was a leading shareholder of Meta Platforms, Inc. (NASDAQ:FB) in the fourth quarter, with a stake consisting of 9.58 million shares with a value of $3.22 billion.
Citi analyst Ronald Josey on April 19 upgraded Meta Platforms, Inc. (NASDAQ:FB) to ‘Buy’ from ‘Neutral’, and revised the price target to $300 from $258. He sees the internet sector as “healthy” given that online consumer engagement continues to grow and become more immersive, and also sees multiple vectors ahead for sustained growth in the sector.
Fourth quarter EPS stood at $3.67 for Meta Platforms, Inc. (NASDAQ:FB), which missed estimates by $0.15. The company enjoyed a boom in revenue for Q4, where the recorded figure of $33.67 billion was up 19.95% year-0n-year and surpassed analysts’ forecasts by $230.60 million.
Rowan Street Capital LLC, an investment firm, discussed Meta Platforms, Inc. (NASDAQ:FB) in its Q1 2022 investor letter, stating:
“We are not traders, hedgers, market timers or “renters of stock.” We are strictly business owners and compounders of capital! And just like Mark Zuckerberg who has never sold when the stock of Facebook had declined by 25% or 50%+, and have always focused exclusively on the long term fundamentals of their respective businesses, you should expect us to do the same with our portfolio companies. We have owned Meta Platforms (NASDAQ:FB) in the portfolio since 2018, and are just as optimistic and confident in the long term prospects of the company despite the recent drop in stock price.”
7. Veritiv Corporation (NYSE:VRTV)
Number of Hedge Fund Holders: 20
Percentage of Baupost Group’s 13F holdings: 4.31%
Baupost Group’s Stake Value: $436.9 million
Up next on the list of Seth Klarman’s top 10 stocks to buy is Veritiv Corporation (NYSE:VRTV), a B2B provider of print, publishing, and packaging services, as well as logistics and supply chain management solutions. Baupost Group was the top shareholder of Veritiv Corporation (NYSE:VRTV) during the fourth quarter, holding a $436 million stake comprising of 3.56 million shares which represented 4.31% of the fund’s overall portfolio.
Investors were seen piling into Georgia-based Veritiv Corporation (NYSE:VRTV) in the fourth quarter, where 20 hedge funds were long on the company shares, in comparison to 11 in the previous quarter. The company’s share price has exploded in recent times, recording a growth of 250.61% in the last 12 months and 45.15% in the last 6 months as of April 19.
In March, Veritiv Corporation (NYSE:VRTV) agreed to sell its Veritiv Canada business to Imperial Dade, in a deal with undisclosed terms and subject to approval from Canadian regulatory authorities. This deal is expected to close before the end of the second quarter, and proceeds from this sale will be used to finance Veritiv’s recently announced $200 million share repurchase program along with future growth initiatives.
6. Starz Acquisition LLC (NASDAQ:STRZA)
Number of Hedge Fund Holders: 16
Percentage of Baupost Group’s 13F Portfolio: 5.27%
Baupost Group’s Stake Value: $534.4 million
Starz Acquisition LLC (NASDAQ:STRZA) is a media and entertainment firm which was acquired by media giant Lions Gate Entertainment Corp. (NYSE:LGF-A) in November 2021 in a deal worth $4.4 billion. This acquisition will help expand Lions Gate’s offerings in the global distribution market, and improve its standing in the premium scripted television market.
Baupost Global disclosed owning 10.5 million shares of Starz Acquisition LLC (NASDAQ:STRZA) in the fourth quarter, with a combined value of $534.4 million. This represents 5.27% of the fund’s overall portfolio, and was an increase of 16% over the previous quarter where Seth Klarman held 9.08 million shares in the firm. Warren Buffett’s Berkshire Hathaway was the hedge fund with the largest stake in Starz Acquisition LLC (NASDAQ:STRZA) during the fourth quarter, with 43.21 million shares worth approximately $2.2 billion.
On December 14, Macquarie analyst Tim Nollen downgraded Lions Gate Entertainment Corp. (NYSE:LGF-A) to ‘Neutral’ from ‘Outperform’, and revised the price target to $17 from $20. He advises investors to be cautious on network media stocks as streaming wars have engulfed markets around the globe.
In addition to Alphabet Inc. (NASDAQ:GOOG), Meta Platforms, Inc. (NASDAQ:FB), and Intel Corporation (NASDAQ:INTC), Starz Acquisition LLC (NASDAQ:STRZA) is one of the top stocks to buy according to legendary value investor Seth Klarman.
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