In this article, we shall be going through the top 10 stocks to buy now according to billionaire Seth Klarman. If you want to skip our detailed analysis of Seth Klarman’s history, his investment philosophy, his portfolio and hedge fund performance, go directly to the Top 5 Stocks To Buy Now According To Billionaire Seth Klarman.
Seth Andrew Klarman, an American billionaire investor, hedge fund manager, and author, graduated magna cum laude from Cornell University, before going on to attend Harvard Business School as a Baker Scholar. He currently serves as the chief executive and portfolio manager of the Baupost Group, a private investment partnership, headquartered in Brooklyn, which he founded in 1982 with $27 million. Since then, he has managed to achieve a 20% compounded return on investment, with current assets valued at $27 billion. According to Forbes, his personal value is listed at $1.5 billion, making him the fifteenth richest hedge fund manager in the world. Seth Klarman’s Baupost Group, in their first quarter 13F filings with the SEC, have disclosed 54 holdings in their current portfolio, the value of which has been marked at $9.27 billion, with a steady turnover rate of 7%. Bloomberg ranks the Baupost Group fourth in net gains since its inception in 1982.
Klarman’s Investment Philosophy
According to a story bulletin on Harvard Business School’s Alumni Portfolio, Seth Klarman is a well-known advocate of ‘value investing’, stating on-the-record that he has been an avid believer in this philosophy since the age of 25. In an interview for the aforementioned bulletin, he stated:
“It turns out that value investing is something that is in your blood. There are people who just don’t have the patience and discipline to do it, and there are people who do. So it leads me to think it’s genetic.”
Klarman does not mind “doing nothing” on occasion. According to Bloomberg, before deciding on investing in any given stock, he diverts his primary focus into identifying and establishing the risks associated with it. Then, he chooses the stocks that are excellent bargains, his bottom-up strategy of investment being to identify the undervalued stocks, which are expected to outperform the market. He expands on his investment philosophy in his 1991 publication, “Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor.”
Furthermore, Klarman has been a staunch advocate of the teachings of Benjamin Graham, criticizing the short-term thinking of other hedge-fund managers for having a “this-time-is-different” philosophy in their investment habits and for not looking at the bigger picture. Klarman argues that investment is more than just looking out for returns. He critiques that far too often, hedge fund managers pre-occupy themselves with achieving the maximum amount of returns, ignoring the risks they incur in the process. In an interview with Charlie Rose, he has also denounced the use of the Bloomberg Terminal, stating that owing to his long-term strategy, he rarely pays any significant attention to daily price fluctuations.
This investment philosophy has led him to make unusual investments, buying unpopular assets while they are heavily undervalued, using significantly complicated derivatives, and buying ‘put’ options. He is known to be an incredibly conservative investor and often holds significant amounts of cash in his investment portfolios, sometimes in excess of 50% of the total, in an effort to manage the risks involved and play within the margin of safety. Despite his unconventional strategies, he has continuously and consistently achieved high returns on his investments.
As of Q1 2022, Seth Klarman’s Baupost Group invests primarily in the technology, finance and services sector. However, Klarman’s 13F portfolio decreased from $10.28 billion to $9.27 billion this quarter. The hedge fund’s portfolio continues to be heavily concentrated with the top three positions accounting for ~35% of the 13F portfolio.
Some of the notable stocks in Baupost’s 13F portfolio for the first quarter include Intel Corporation (NASDAQ:INTC), Meta Platforms Inc. (NASDAQ:FB), Liberty Media Acquisition Group (NASDAQ:LMCA), and Alphabet Inc (NASDAQ:GOOG).
Our Methodology
The companies listed below were picked from the the very top of the 13F investment portfolio of the Baupost Group at the end of the first quarter of 2022. Data from 900+ elite hedge funds tracked by Insider Monkey was used to identify the number of hedge funds that hold stakes in each firm.
Top 10 Stocks To Buy Now According To Billionaire Seth Klarman
10. SS&C Technologies Holdings Inc. (NASDAQ:SSNC)
The Baupost Group’s Stake Value: $282M
Percentage of The Baupost Group’s 13F Portfolio: 3.03%
Number of Hedge Fund Holdings: 48
SS&C Technologies Holdings Inc. (NASDAQ:SSNC) is an American multinational holding company, headquartered in Windsor, Connecticut. It primarily deals with the sale of software, and software as a service to the financial services industry. According to Insider Monkey’s database of 900+ tracked hedge funds, New York-based investment firm Select Equity Group is the largest shareholder in SS&C Technologies Holdings Inc. (NASDAQ:SSNC), with 14.6 million shares which are worth more than $1.1 billion.
According to the 13F filings for the first quarter of 2022, Seth Klarman’s Baupost Group owns over 3.7 million shares of SS&C Technologies Holdings Inc. (NASDAQ:SSNC), which are worth more than $282 million, hence representing 3.03% of the Q1 portfolio.
In an investor letter from Q4 2020, Vulcan Value Partners, an asset management firm, highlighted SS&C Technologies Holdings Inc. (NASDAQ:SSNC) amongst the most lucrative investment opportunities in the market. Here is what they said:
“SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) is the leading provider of services to the financial sector. SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) owns several companies including ALPS Fund Services, Advent, GlobeOp, Intralinks, Eze, and DST. SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) operates an array of technology offerings for the financial services industry and provides mission-critical software. We like the company’s recurring revenue, high retention rates, strong free cash flow generation, and high rates of return on capital. Regulatory pressure, the need for greater transparency, and the growth of its core asset classes have led to greater demand for its services.”
9. Willis Towers Watson Public Limited Company (NASDAQ:WLTW)
The Baupost Group’s Stake Value: $290M
Percentage of The Baupost Group’s 13F Portfolio: 3.12%
Number of Hedge Fund Holdings: 49
Headquartered in London, England, Willis Towers Watson PLC (NASDAQ:WTW) is a British-American multinational specializing in risk management, insurance brokerage and consultancy. With roots dating from 1828, it currently stands as the third largest insurance broker in the world. One of the hottest pursuits of many elite hedge funds and investment companies, New-York based investment firm First Eagle Investment Management is the leading shareholder in Willis Towers Watson PLC (NASDAQ:WTW), with the current number of owned shares established to be 4.7 million, which are worth more than $1.1 billion.
Regulatory filings ascertain that Seth Klarman’s Baupost Group currently owns a little more than 1.2 million shares of Willis Towers Watson PLC (NASDAQ:WTW), worth more than $290 million, hence representing 3.12% of their 13F portfolio in the first quarter of 2022.
Vltava Fund, an investment management firm, highlighted Willis Towers Watson PLC (NASDAQ:WTW) in their fourth quarter investor letter of 2021, a copy of which can be obtained here. This is what they said:
“There were two new additions to the portfolio last year – (including) shares of the insurance broker Willis Towers Watson PLC (NASDAQ:WTW). I mentioned both purchases already in the previous newsletter to shareholders. At first sight, these were only minor changes. There were many more transactions in the portfolio over the past year, however. Most purchases were directed to shares we have already held in the portfolio. We have been purchasing virtually all the stocks we hold, many of them repeatedly. While we are by no means opposed to anything new and always are looking for new investment opportunities, we generally tend to gravitate to what we already have in the portfolio, to what we know well, and moreover what we see is working out well.”
8. Fiserv Inc. (NASDAQ:FISV)
The Baupost Group’s Stake Value: $404M
Percentage of The Baupost Group’s 13F Portfolio: 4.34%
Number of Hedge Fund Holdings: 58
Headquartered in Brookfield, Wisconsin, Fiserv, Inc. (NASDAQ:FISV) provides financial technology services around the globe. Like Meta Platforms Inc. (NASDAQ:FB), Alphabet Inc. (NASDAQ:GOOG) and Intel Corp (NASDAQ:INTC), Fiserv Inc. (NASDAQ:FISV) is also losing value in 2022 amid a broader market rotation from tech stocks to value stocks.
With the ownership of over 24 million shares worth more than $2.4 billion, Chicago-based investment company Harris Associates is the leading shareholder of the stock today.
Seth Klarman’s Baupost Group currently owns 3.9 million shares in Fiserv, Inc (NASDAQ:FISV), which are estimated to be worth $404 million. Representing 4.34% of their 13F portfolio for the first quarter of 2022, it also signals that the Baupost Group has increased their hold over the stock by a staggering 31%.
On April 8 2022, celebrated Baird analyst David Koning characterized Fiserv, Inc. (NASDAQ:FISV) as a bullish Fresh Pick, and conferred an ‘Outperform’ rating with a $144 price target. The analyst stated that the organization’s stability in periods of economic uncertainty was commendable, and designated it as one of the swiftest and most stable performers in earnings growth out of every name in his coverage.
According to ClearBridge Investments in their Q4 2021 investor letter, Fiserv, Inc. (NASDAQ:FISV) was one of the most prospective opportunities for investors and hedge funds. They have stated:
“While the threat of disruption risk to these established payment companies should not be taken lightly, it is important to note that many of these emerging disruptors are small relative to the massive global payments network and heavily reliant on the very payment infrastructure they are trying to disrupt. This led us to initiate a position in Fiserv (NASDAQ:FISV), whose stock dropped to a level that embedded projections for negative long-term growth despite no current evidence of disruption. We think Fiserv (NASDAQ:FISV) will continue to grow despite perceived disruption risks given its scale and efficiency. Fiserv (NASDAQ:FISV) also owns cloud-based payments hardware and software system Clover, which is both bigger and faster growing than Square; this provides an additional degree of protection against further disruption risk.”
7. Veritiv Corporation (NYSE:VRTV)
The Baupost Group’s Stake Value: $476M
Percentage of The Baupost Group’s 13F Portfolio: 5.11 %
Number of Hedge Fund Holdings: 19
Headquartered in Sandy Springs, Georgia, Veritiv Corporation (NYSE:VRTV) is a business-to-business provider of packaging, publishing and hygiene products. With an estimated 123 operating distribution centers throughout the United States, Canada and Mexico, Veritiv Corporation (NYSE:VRTV) is the next installment in this list of the top 10 stocks to buy now according to Seth Klarman.
With an ownership of over 3.5 million shares worth over $476 million, Seth Klarman’s Baupost Group assumes the position of the largest shareholder of Veritiv Corporation (NYSE:VRTV). Representing almost 5.11% of the Baupost Group’s 13F portfolio, the latter’s grip over the stock has largely remained the same this last quarter, neither increasing nor decreasing.
In Q1 2022 , 19 hedge funds have reported Veritiv Corporation (NYSE:VRTV) in their investment portfolios.
6. Starz Acquisition LLC (NASDAQ:STRZA)
The Baupost Group’s Stake Value: $510M
Percentage of The Baupost Group’s 13F Portffolio: 5.48%
Number of Hedge Fund Holdings: N/A
Based in Meridian, Colorado, Starz Acquisition LLC (NASDAQ:STRZA) is a media and entertainment firm which was acquired by media goliath Lions Gate Entertainment Corp. (NYSE:LGF-A) in 2016 for $4.4 billion. The acquisition was to aid Lions Gate’s offerings in the global distribution market, and provide a boost to its standing in the premium scripted television market.
With over 43.2 million shares worth over $1.9 billion, Warren Buffett’s Berkshire Hathaway is the leading stakeholder of Starz Acquisition LLC (NASDAQ:STRZA). However, Seth Klarman’s Baupost Group does not trail too far behind with their ownership extending to 11 million shares worth over $510 million dollars. Representing over 5.48% of the Baupost Group’s 13F portfolio, Klarman has increased his hold over the stock by 7% this last quarter, as Baupost Global disclosed owning 10.5 million shares of Starz Acquisition LLC (NASDAQ:STRZA) in the previous quarter, with a combined value of $534.4 million. This was a subsequent increase of 16% over the previous quarter where Klarman held 9.08 million shares in Starz Acquisition LLC (NASDAQ:STRZA).
On December 14 2021, Macquarie analyst Tim Nollen undermined the rating of Lions Gate Entertainment Corp. (NYSE:LGF-A) from ‘Outperform’ to ‘Neutral’, and revisited the price target, decreasing it to $17 from $20. He cautioned investors to be careful on network media stocks as streaming wars have enveloped global markets, rendering network media stocks an unfavorable investment.
However, in addition to Alphabet Inc. (NASDAQ:GOOG), Meta Platforms, Inc. (NASDAQ:FB), and Intel Corporation (NASDAQ:INTC), Seth Klarman picks Starz Acquisition LLC (NASDAQ:STRZA) as one of the top stocks to buy.
Click to continue reading and see Top 5 Stocks to Buy Now According to Billionaire Seth Klarman.
Suggested articles:
- Billionaire DE Shaw’s Top 10 Stock Picks
- Top 10 Stocks to Invest in According to John Smith Clark’s Southpoint Capital Advisors
- Carl Icahn’s Stock Portfolio: Top 12 Picks
Correction: This article was edited at 12:22 PM ET on July 29, 2022, to correct the acquisition date of Starz by Lions Gate Entertainment Corp.
