Monday, November 21, 2011

Klarman's Baupost Group 3rd Quarter 2011 13F-HR: Bullish On HP?

At the very least, regulatory filings this past quarter reveal no shortage of investors who are building meaningful positions in large capitalization technology stocks.

This article in Institutional Investor this past Friday highlights that Ralph Whitworth of Relational Investors LLC now owns 1 percent of Hewlett-Packard (HPQ). He also secured a board seat.

The article also points out Baupost's Seth Klarman disclosed a substantial position in HP.

Baupost has assets under management north of $ 20 billion. So while this HP position may make up an awful large percentage of the stocks Baupost owns that trade in the U.S., it's actually a relatively small part of the whole. This Bloomberg Businessweek article says Baupost had $ 3 billion in U.S. stocks on September 30th.

So that $ 3 billion in stocks make up only a small portion of the portfolio.

From that point of view it reveals less but still a meaningful move.

Here's the top five Baupost equity positions that trade on a U.S. exchange:

Top Five Positions
BP ADS (BP): 16.4% of the portfolio. More than doubled the position (increased position ~150%).
Hewlett Packard (HPQ): 15.4% of the total portfolio. New position.
ViaSat (VSAT): 11.6% of the total portfolio. Minor increase to position size (~ 4%).
News Corp. (NWSA): 10.8% of the total portfolio. Slight increase to position (~10%)
Microsoft (MSFT): 9.9% of the total portfolio. No Change.

The portfolio is, not unlike Berkshire Hathaway's (BRKa), very concentrated with roughly 50% in the top five.

Berkshire's top five is more like 75% as of the latest filing.

There's been a notable number of large capitalization technology stock purchases by those not normally associated with making such investments. Some for the first time ever. Most notable, of course, is Warren Buffett.

Last week we learned he made a major purchase (nearly $ 11 billion) of IBM (IBM) and a much smaller (~ $ 200 million) investment in Intel (INTC).

Berkshire Hathaway's 3rd Quarter 2011 13F-HR

Two stocks not too long ago many thought Buffett would never have an interest in.

What has suddenly put these on the radar? Price relative to value, of course. When a perceived discount to a conservative estimate of intrinsic value exists, value-oriented investors usually begin to take notice. What seems an uninteresting alternative at the higher price, considering the specific risks involved, becomes front and center.

Paying a low price relative to well-judged value (conservatively calculated, of course) may help regulate investment risk, but reveals nothing about the likely near-term or even somewhat longer-term price action of a stock.

Adam

Baupost Group 3rd Quarter 2011 13F-HR

Long positions in HPQ, BP, MSFT, and INTC
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