"Tracking Seth Klarman’s Baupost Group Holdings – Q3 2015 Update"
"Seth Klarman’s US long portfolio remained steady at ~$6B this quarter.Baupost Group added Alcoa and Twenty First Century Fox while reducing Micron Technology.The portfolio continues to be heavily concentrated with the top three positions accounting for ~39% of the entire US long portfolio.This article is part of a series that provide an ongoing analysis of the changes made to Baupost Group's U.S. stock portfolio on a quarterly basis. It is based on Klarman’s regulatory  filed on 11/13/2015. Please visit our  article for an idea on how his holdings have progressed over the years and our  highlighting the fund's moves during Q2 2015.Baupost Group’s US long portfolio increased remained almost steady at $6B this quarter. The total number of 13F securities held increased from 32 to 39 as they added several small positions and large stakes in Alcoa and Twenty First Century Fox. The portfolio is heavily concentrated with Cheniere Energy, ViaSat Inc., Alcoa, Pioneer Natural Resources, and Antero Resources together accounting for around 53% of the 13F holdings.Since inception (1982), Baupost Group’s US long portfolio has accounted for between 2.4% to 15% of the Assets Under Management (AUM). The current allocation is at the high-end of that range. The rest of the AUM is diversified among cash, debt, real estate, and hedges. The fund continues to hold well over a quarter of the AUM in cash. Seth Klarman’s distinct investment style is elaborated in his 1991 book “”. The book is out-of-print and copies sell for a huge premium.New Stakes:Alcoa Inc. (AA): AA is a very large (third-largest) 8.41% of the US long portfolio stake established this quarter at prices between $8.11 and $11.10. The stock currently trades just below that range at $7.99. As a percentage of the business, the position is at ~4%.Twenty First Century Fox (FOX) (FOXA): FOX is a medium-sized 4.79% of the portfolio stake established this quarter at prices between $25.41 and $33.52. The stock currently trades at $30.02.Paypal Holdings (PYPL): The 5.64% PYPL position was established this quarter as a result of the spinoff of Paypal from eBay that closed in July. Klarman had 9.3M shares of eBay and received the same number of Paypal shares. He also increased the stake by ~17% after the transaction. PYPL started trading at $36.71 and currently trades at $34.53.Aercap Holdings NV (AER), Lifelock Inc. (LOCK), Olin Corporation (OLN), Orexigen Therapeutics (OREX), & Sunrun Inc. (RUN): These are small stakes (less than ~2% of the portfolio each) established this quarter.Note 1: The ownership stakes in the following businesses are very significant: ~4.7% of Lifelock Inc. and ~8% of Olin Corporation.Note 2: With Orexigen Therapeutics, a 13G filing on 10/9/2015 showed Klarman owning 25.8M shares (17.17% of business).Stake Disposals:None.Stake Increases:Antero Resources Corporation (AR): AR is a 5.68% of the US long portfolio position established in Q3 2014 at prices between $54.50 and $65.71. The stake was increased by ~185% the following quarter at prices between $38.60 and $55.51. Q1 2015 saw a further ~19% increase at prices between $34.02 and $42.35. Last quarter, the pattern reversed: ~14% reduction at prices between $34 and $46. This quarter saw a stake doubling at prices between $20.20 and $34.34. The stock currently trades at $22.87. Klarman controls ~5.8% of the business.Atara Biotherapeutics (ATRA): ATRA is a 2.81% of the US long portfolio stake established in Q4 2014 at around $19 per share. In Q1 2015, the stake was increased by ~90% at prices between $18 and $42.90. The stock currently trades at $32.74. This quarter saw a ~11% increase. Klarman controls ~19% of the business.Bellatrix Exploration (BXE): BXE is a very small 0.61% of the US long portfolio stake. It was established in Q4 2014 at prices between $2.99 and $6.15 and increased by ~21% the following quarter at around $2.50. This quarter saw a ~10% increase. The stock currently trades well below those ranges at $1.79. Klarman controls ~12.5% of the business.Cheniere Energy (LNG): LNG is Klarman’s largest 13F position at 18.24% of the US long portfolio. The original stake was established in Q1 2014 at prices between $41 and $55. In Q3 2014, it was increased by ~87% at prices between $70 and $84 and that was followed by another 23% increase the following quarter at prices between $62 and $80. Last quarter saw a further ~11% increase at prices between $68.49 and $80 and that was followed with another 48% increase this quarter at prices between $47.47 and $70.65. The stock currently trades at $46.13. The large stake build-up indicates a clear bullish bias.Note: Klarman also has a ~10% ownership interest in Liquefied Natural Gas Ltd. (LNGLY), a similar business as Cheniere Energy (LNG). It was increased significantly in October 2014.ChipMOS Technologies (IMOS): IMOS is a small 1.03% of the US long portfolio position established in Q2 2013 at prices between $12.30 and $20. The stake was increased by ~19% the following quarter at prices between $15 and $21. This quarter saw a ~14% increase at prices between $15.39 and $22. The stock currently trades at $17.32.Note: Klarman controls ~13% of ChipMOS Technologies.Pioneer Natural Resources (PXD): PXD is a large (top-five) 8.38% of the US long portfolio stake established in Q1 2015 at prices between $135 and $167 and increased by ~28% last quarter at prices between $148 and $180. This quarter saw a marginal further increase. The stock currently trades at $141. For investors attempting to follow Baupost, PXD is a good option to consider for further research.Sunedison Semiconductor (SEMI): SEMI is a 1.47% of the US long portfolio position established in Q2 2014 at prices between $14.37 and $17.76 and increased by ~90% in Q1 2015 at prices between $15.19 and $27.14. Last two quarters have seen very minor increases. The stock currently trades below his purchase price ranges at $9.51. SEMI was spun-off from Sunedison Inc. (SUNE) on May 22, 2014.Note: Klarman’s ownership interest in Sunedison Semiconductor is ~20%.Veritiv Corporation (VRTV): VRTV is a 1.73% of the US long portfolio position established in Q3 2014 at prices between $32.50 and $50.22. Last quarter saw a ~9% increase at prices between $35.50 and $45.16 and that was followed with a ~13% increase this quarter at prices between $33.06 and $42.60. The stock currently trades at $36.55Note: Klarman’s ownership interest in VRTV is at ~17.5%.Biotie Therapies (BITI) and Sanchez Energy (SN): These are very small stakes established last quarter and increased this quarter. BITI was increased by ~44% while SN stake was increased by 61%. Although the relative sizing is small, it is very significant that Baupost controls ~9.3% of BITI.Stake Decreases:Alliance One International (AOI): AOI is a minute 0.16% of the portfolio stake that was reduced by ~28% this quarter. Although the relative sizing is small, Klarman’s ownership stake in AOI is very significant at ~5% of the business.Alon USA Partners LP (ALDW): ALDW is a minutely small 0.14% of the portfolio stake. The stake was reduced by around one-third last quarter at prices between $17.86 and $22 and another ~42% this quarter at prices between $19.61 and $26. The stock currently trades at $26.15.Micron Technology (MU): As of Q3 2014, MU was Klarman’s largest position at 30.82% of the US long portfolio. The stake was first established in Q2 2013 at prices between $9.10 and $14 and increased by just over 50% in Q3 2013 at prices between $12.55 and $17.60. Q4 2014 saw an about-turn as ~62% of the position was sold at prices between $27.03 and $36.49. This quarter, the remaining stake was almost eliminated at prices between $14.06 and $20.12. The stock currently trades at $15. Klarman harvested huge long-term gains from this position.Ocwen Financial (OCN): OCN is a 0.58% of the US long portfolio stake established in Q3 2014 at prices between $25 and $37. In Q4 2014, the position was reduced by ~15% at prices between $14.32 and $26.26. Q1 2015 saw an about turn as the stake was increased by ~30% at prices between $5.77 and $15.10. The pattern reversed this quarter: one-third reduction at prices between $6.67 and $11.76. The stock currently trades at $6.29.Note: Baupost’s ownership of the business is ~4%.Kept Steady:American International Group (AIG) WTS: The AIG Warrants (Strike 45, Expiry 1/19/2021, Yahoo Ticket AIG-WT) is a very small 0.48% of the portfolio position. They currently trade at $22.90.Citigroup WTS (C.WS.A): The warrants have a strike price of $106.10 and expire on 01/04/2019. They currently trade at $4.50 (for ten warrants which can be converted to one Citigroup common stock, Yahoo Ticker C-WTA). The bulk of the 0.79% position was established at prices between $4.50 and $5.80. It is a leveraged bullish bet on Citigroup that would pay off handsomely, if Citigroup common stock trades well above the strike price before expiry.eBay Inc. (EBAY): EBAY is a 3.79% of the US long portfolio stake established in Q2 2014 at prices between $18.95 and $21.95. It was increased by ~37% in Q3 2014 at prices between $19.64 and $22.24. Q4 2014 saw another ~53% increase at prices between $18.80 and $22.59. The stock currently trades at $28.19.Note: EBAY attracted a lot of super-investor interest (Carl Icahn, Wallace Weitz, Mark Hillman, and Leon Cooperman) and activist pressure forced the company to spin-off its PayPal (PYPL) subsidiary. The prices quoted above are adjusted for that spin-off.Forward Pharma (FWP): FWP is a small 2.11% of the US long portfolio stake established in Q1 2015 at around $22. The stock currently trades at $21.87.Note: Klarman controls ~12% of the business.Frontier Communications (FTR) & PFD CNVTs: This is a small 1.57% stake established last quarter.Keryx Biopharma (KERX): KERX is a small 1.41% of the US long portfolio position established in Q1 2014 at prices between $12.16 and $17.04. In Q2 2014, the position was increased by two-thirds at prices between $12.11 and $17.04 and the following quarter the pattern continued with a ~74% stake increase at prices between $12.71 and $18.19. Last two quarters had also seen a combined ~40% increase at prices between $9.32 and $14.68. The stock currently trades well below the low-end of those ranges at $5.07. His cost-basis is at around $12.Note: On Oct 15, 2015 KERX had a capital raise through a convertible debt transaction with Baupost for $125M due 2020 and convertible at $3.74 per share. A Form 3 filed on 10/20/2015 indicates the beneficial ownership including this transaction at 42M shares (34.61% of the business).Kindred Biosciences (KIN): KIN is a very small 0.26% of the US long portfolio position. The stake as a percentage of the business is very significant at over 15%. It was established in Q4 2013 at a cost-basis of around $11. The stock is now at $5.47. KIN share-price dropped around one-third in August 2014 when the company announced the failure of their canine arthritis drug in a clinical trial. Another 30% drop ensued in December 2014 after it terminated its atopic dermatitis program.KLX Inc. (KLXI): KLXI is a small ~0.89% of the US long portfolio position established in Q1 2015 at prices between $37.34 and $41.65. The stock currently trades at $31.28. KLXI is a spinoff from B/E Aerospace (BEAV) and it started trading in December 2014.Kosmos Energy (KOS): The very small 0.56% KOS position was purchased in Q2 2014 at prices between $10.05 and $11.23. Q4 2014 saw a ~52% increase at prices between $7.09 and $10.25. Last quarter there was an about-turn as ~17% of the stake was sold at prices between $7.91 and $9.78. It currently trades at $7.32.Novacopper (NCQ): This is a minute stake at 0.06% of the US long portfolio. Last quarter saw a ~76% increase at prices between $0.50 and $0.66 and the stock is now at $0.39.Note: Klarman’s ownership stake is at ~10% of the business.NovaGold Resources Inc. (NG): NG is a 1.30% stake built up over several quarters in 2012 at prices between $3.5 and $12. The most recent purchases happened in Q3 2012 and Q4 2012 when the stake was increased by roughly one-third at prices between $3.68 and $6.19. The stock currently trades near the low-end of those ranges at $3.57.Paratek Pharmaceuticals (PRTK): PRTK is a small 0.49% of the US long portfolio stake established as a result of a cash-infusion prior to the reverse-stock-split, merger, and name-change transaction of Paratek (privately held at the time) with Transcept Pharma (Nasdaq listed at the time) in November 2014. Last quarter saw a ~11% reduction at prices between $24.33 and $32.49. The stock currently trades at $15.68.Note: Baupost Group controls ~8.8% of the business.PBF Energy (PBF): PBF is a 5.19% of the US long portfolio position first purchased in Q3 2013 at prices between $21 and $26. It was more than doubled in Q4 2013 at prices between $21.44 and $31.46 and was increased by over 175% in Q1 2014 at prices between $23.79 and $31.46. Since then, the stake was increased by ~45% through periodic buying. The stock currently trades at $34.01.Note: Klarman’s ownership interest in PBF is ~12%.Theravance Biopharma (TBPH): TBPH is a 1.18% of the US long portfolio position established in Q2 2014 as a result of the spinoff of TBPH from THRX. The spinoff terms called for THRX shareholders to receive 1 share of TBPH for every 3.5 shares of THRX held. The original stake was increased by ~5% in Q1 2015 at prices between $14.70 and $21.73. Last quarter also saw a marginal increase. The stock currently trades at $16.85. TBPH has dropped ~27% since the May 2014 spinoff.Note: Klarman controls ~19% of the business.Theravance Inc (THRX): THRX is a 2.37% of the US long portfolio stake. It is a very long-term position that has been in the portfolio since 2008. The stock currently trades at $8.86 and is down ~37% so far this year.Note: Baupost controls around 17% of the business.ViaSat (VSAT): VSAT is Klarman’s second-largest US long position at 12.35% of the portfolio. Since Q3 2012, the stake has seen only minor increases. Klarman first purchased VSAT in 2008 at much lower prices and his overall cost-basis is in the high-teens. The stock currently trades at $59.76. He is sitting on huge gains on the position. The stock returned ~60% in 2013 but has since remained flat.Note: The 13F also lists a very small position in Theravance Notes. It was increased by ~20% in Q1 2015 and the stake is currently at 0.53% of the 13F portfolio.The spreadsheet below highlights changes to Klarman's US stock holdings in Q3 2015:"