In this article, we discuss the 3 stocks value investing legend Seth Klarman is buying for the rest of 2022. If you want to see our detailed analysis of Seth Klarman’s investment strategy and views on the current market situation, go directly to Value Investing Legend Seth Klarman is Buying These 6 Stocks for the Rest of 2022.
3. Warner Bros. Discovery, Inc. (NASDAQ:WBD)
Percentage of Baupost Group’s 13F portfolio: 3.56%
Value of Baupost Group’s Stake: $241.56 million
Number of Hedge Fund Holders: 68
Warner Bros. Discovery, Inc. (NASDAQ:WBD) is an American multinational mass media and entertainment conglomerate that offers consumers a differentiated portfolio of content, brands and franchises across television, film, streaming and gaming. Investment firm Baupost Group holds 18 million WBD stocks as of Q2 2022.
Klarman’s fund initiated a new stake in the company during Q2.
Earlier this August, Citi analyst Jason Bazinet lowered the price target on Warner Bros. Discovery, Inc. (NASDAQ:WBD) to $21 from $29 and kept a Buy rating on the shares post the Q2 results. The analyst continues to like the company based on the merits of its direct-to-consumer pivot and potential synergies from its recently closed merger.
At the end of the second quarter of 2022, 68 hedge funds in the database of Insider Monkey held stakes worth $2.3 billion in Warner Bros. Discovery, Inc. (NASDAQ:WBD), up from 47 in the previous quarter worth $790 million. Among the hedge funds being tracked by Insider Monkey, New York-based firm Laurion Capital Management is a leading shareholder in Warner Bros. Discovery, Inc. (NASDAQ:WBD), with 13.5 million shares worth more than $338 million.
Here is what Longleaf Partners said about Warner Bros. Discovery, Inc. (NASDAQ:WBD) in its second quarter investor letter:
“Warner Bros. Discovery, Inc. (NASDAQ:WBD) – A new purchase within the last year, media conglomerate Warner Bros Discovery’s (WBD) stock price has been materially impacted by a terrible Netflix quarter (that probably is a good sign for WBD long-term) and fears of a downturn impacting advertising revenues and subscribers. While we believe these are valid concerns, media has historically been an attractive industry for our style of investing and media companies have been inflation beneficiaries. While the market is taking a “show me” approach to see how the merger will unfold, we believe the company has multiple levers to grow free cash flow per share. We saw eight different insiders buy shares personally in the quarter, which is an extremely strong vote of confidence from people who have a clear view of the challenges and opportunities facing the company.”
2. New Oriental Education & Technology Group Inc. (NYSE:EDU)
Percentage of Baupost Group’s 13F portfolio: 2.4%
Value of Baupost Group’s Stake: $162.88 million
Number of Hedge Fund Holders: 22
New Oriental Education & Technology Group Inc. (NYSE:EDU), more commonly referred to as New Oriental, is a provider of private educational services in China. Securities filings reveal that Seth Klarman’s Baupost Group owned over 8 million shares of New Oriental Education & Technology Group Inc. (NYSE:EDU) at the end of June 2022 worth $162.88 million, representing 2.4% of the portfolio. EDU was a new arrival in Klarman’s portfolio in the second quarter.
On July 29, BofA analyst Lucy Yu upgraded New Oriental Education & Technology Group Inc. (NYSE:EDU) to Buy from Neutral with a price target of $36.60, up from $18.80. According to the analyst, the stock’s current share price is on par with the company’s new cash and that fiscal year 2023 will “market a year of a new start.”
At the end of the second quarter of 2022, 22 hedge funds in the database of Insider Monkey held stakes worth $721 million in New Oriental Education & Technology Group Inc. (NYSE:EDU), compared to 23 in the preceding quarter worth $260 million.
In its Q3 2021 investor letter, Polen Capital, an asset management firm, highlighted a few stocks and New Oriental Education & Technology Group Inc. (NYSE:EDU) was one of them. Here is what the fund said:
“The quarter’s leading detractors were Chinese companies that were impacted by the CCP’s regulatory crackdown and liquidity concerns at property developer Evergrande. New Oriental Education & Technology Group Inc. (NYSE:EDU)—the largest provider of private educational services in China—moved sharply lower in July after policymakers implemented new rules which effectively turned Chinese tutoring companies into non-profits. Looking at New Oriental Education & Technology Group Inc. (NYSE:EDU), we closed our position as soon as government policy became clear and used the proceeds to allocate to existing holdings.”
1. Amazon.com, Inc. (NASDAQ:AMZN)
Percentage of Baupost Group’s 13F portfolio: 0.93%
Value of Baupost Group’s Stake: $ 64 million
Number of Hedge Fund Holders: 252
Known as “one of the most influential economic and cultural forces in the world”, Amazon.com, Inc. (NASDAQ:AMZN) is a giant among giants in both the tech and the retail industries. During Q2 2022, Seth Klarman added the company to his portfolio with a total stake value of $63.51 million.
DA Davidson analyst Tom Forte maintained his Buy rating and $151 price target on Amazon.com, Inc. (NASDAQ:AMZN) after the company disclosed a purchase of warehouse automation firm Cloostermans on September 12. According to the analyst, Amazon is making a “concerted effort” into the robotics / automation market with this acquisition coupled with the acquisition of iRobot announced in the previous month.
Among the hedge funds tracked by Insider Monkey, 252 funds were bullish on Amazon.com, Inc. (NASDAQ:AMZN) at the end of Q2 2022. As of Q2, 2022, Ken Griffin’s Citadel Investment Group owned 66.08 million shares in Amazon.com, Inc. (NASDAQ:AMZN). The hedge fund’s total stake in the company stood at over $7.01 billion, which accounted for 1.8% of its 13F portfolio.
Vulcan Value Partners, an investment management firm, mentioned Amazon.com, Inc. (NASDAQ:AMZN) in its second quarter 2022 investor letter. Here’s what it said:
“Amazon.com Inc. (NASDAQ:AMZN) has three components to its business model: online retail, cloud-based Amazon Web Services (AWS), and online advertising. We believe that the stock price has declined primarily due to its disappointing online retail results. Retail was extremely successful during COVID, and Amazon spent immensely to protect the consumer experience including buying extra inventory, buying inventory ahead of time, securing alternate shipping routes and adding extra warehouse space.
We believe this long-term behavior has been successful for Amazon as customer retention and engagement remain at high levels. Post-COVID, the company is in the process of rightsizing its cost structure, and it is facing a tough period of comparisons. The retail segment is the smallest contributor to our overall value. The majority of the company’s value is in AWS, which we believe is one of the best businesses in the world. AWS’ revenue is expected to be approximately $80 billion this year, which is nearly double the amount in 2020.
The company’s online advertising has turned into an attractive business that did not exist 15 years ago, and we estimate its revenue to be around $40 billion this year.”
You can also take a look at the Long-Term Analyst: Buy These 5 Stocks and 10 Best Blue Chip Stocks To Buy.
