"Tracking Seth Klarman’s Baupost Group Holdings – Q3 2012 Update"
"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 11/13/2012. 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 2012.Klarman’s US long portfolio decreased by around 13.56% during the quarter from around $3.8B to $3.3B. Some large positions were trimmed substantially this quarter, thus accounting for the decrease in portfolio size. 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 and so signifies a bias towards US equities. 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.The number of holdings in the US long portfolio was held steady at 22 this quarter. Baupost eliminated a small ~1% position in Hess Corporation (HES) but initiated a new position in Rovi Corporation (ROVI) thus keeping the number of positions steady.New Stakes:Rovi Corporation (ROVI): ROVI is a small ~2% of the US long portfolio stake established this quarter at prices between $10.01 and $19.14. The stock currently trades at $14.89, near the mid-point of the price-range Klarman could have bought it at. The small stake does not indicate a clear bias.Stake Disposals:Hess Corporation (HES): HES was a small ~1% of the US long portfolio stake established last quarter when the price-per-share varied between $39.95 and $59.55. The stock was disposed-off this quarter at prices between $42.30 and $56.06. The quick about-turn this quarter indicates a mild bearish bias.Stake Increases:Novacopper Inc. (NCQ): NCQ is a minute ~0.30% stake that was acquired last quarter as a result of the spin-off of NCQ from Novagold Resources (NG). The position was increased this quarter by 50% at prices between $1.70 and $2.84. The stock currently trades at near the mid-point of that range at around $2.20. NCQ is a micro-cap with a $110M market capitalization. Klarman generally does not invest in such companies but the stake increase, although minor, indicates a mild bullish bias.Novagold Resources Inc (NG): NG is a ~3.5% stake built up over the last four quarters at prices between $3.5 and $12. The stake was increased by one-third this quarter at prices between $3.68 and $6.19. The stock currently trades at $4.29, about 15% above the lows reached during the quarter. NG had a setback recently when Barrick Gold (ABX), the joint-venture partner for its Donlin Gold project indicated it would not make a decision to construct at this time. It may have been stating the obvious as the permitting process for the mine is expected to take another four years. Never-the-less, the stock price corrected significantly after that news hit the wires. Klarman’s significant stake increase against falling prices indicates a strong bullish bias.Viasat (VSAT): VSAT accounts for over 12% of the portfolio. The position was increased marginally this quarter at prices between $33.85 and $40.85. The stock is currently trading near the low-end of that range at $35.82. Klarman first purchased VSAT in 2008 at much lower price-points but has consistently built the stake over the last four years. The large position size and the stake increase represent a clear bullish bias.Idenix Pharmaceuticals (IDIX): IDIX is a ~1.65% of the US long portfolio stake that was built-up over the last several quarters. It is a very volatile stock and the price fluctuated between $4.3 and $15 during the period of the stake acquisition. This quarter, the position was increased by 20% when the share price varied between $4.36 and $11.02. The stock currently trades at around $4.99, about 15% above the low-point of his most recent purchase. The significant stake increase over several quarters indicates a clear bullish bias.Stake Decreases:BP PLC (BP): BP is Klarman’s second-largest 13F position and represents over 14% of the US long portfolio. However, the stake was decreased by just over 16% this quarter. The pattern of Klarman’s trades over the last year is perplexing: The position was first established in Q2 2011 when the price-per-share varied between $42 and $46 and was decreased by ~22% in Q1 2012 at prices between $42 and $48. The last two quarters saw a stake increase of 40% followed by a stake reduction of over 16%. The stock traded between $36.46 and $45.34 last quarter and between $39.63 and $43.86 this quarter. Currently, it trades at $40.54. Despite the back-and-forth trades in the last few quarters and the stake reduction this quarter, the large position size indicates a clear bullish bias.Hewlett Packard Co. (HPQ): HPQ was Klarman’s third-largest position behind News Corporation and BP Plc. last quarter at over 14% of the US long portfolio. But, after a stake increase of over 55% last quarter, the position was reduced by close to 50% this quarter. The stake was first established in Q4 2011 at a price-range between $22 and $37. The large stake increase last quarter happened at prices between $19.36 and $25.25. The stake reduction this quarter was at prices between $16.71 and $20.36. The stock currently trades well below that range at around $13.50. The large stake reduction indicates a bearish bias.Microsoft Corporation (MSFT): MSFT was a large 5.6% stake that was reduced by a whopping 80% this quarter at prices between $28.63 and $31.46. The original stake was purchased in Q2 2011 at prices between $23.70 and $26.71. It was trimmed by just over 40% in Q1 2012 at prices between $26.76 and $32.85 but was kept steady in Q2 2012. The large stake reduction this quarter indicates a clear bearish bias.News Corporation (NWS): News Corporation is Klarman’s largest 13F position with the Class A (NWSA) and Class B (NWS) shares together accounting for almost 17% of the portfolio. The position was trimmed by around 12% this quarter at prices between $21.73 and $25.22. NWS is a long-term holding and Klarman’s cost-basis is very low compared to the current market price-range. The minor stake reduction does not signify a clear bias.Oracle Corporation (ORCL): ORCL is an almost 13% of the US long portfolio stake established last quarter when the price-per-share varied between $25.61 and $29.70. It was trimmed by around 15% this quarter at prices between $28.82 and $33.10. The stock currently trades at around $30 per share. The stake reduction signifies a mild bearish bias.Theravance Inc (THRX): THRX is a large over 10% of the US long portfolio position that was trimmed by around 7% this quarter at prices between $23.81 and $31.69.  It is a long-term position and the stake reduction indicates a mild bearish bias. The stock currently trades at around $20.50.The rest of the portfolio remained steady during the quarter:Allied Nevada Gold (ANV): ANV is an almost 6% of the US long portfolio position that was kept steady this quarter. The position was increased by around 25% last quarter. The original stake was established in Q1 2011 at prices between $24 and $35 and has since been periodically increased. The stake increase last quarter happened at prices between $23.82 and $32.78. The stock currently trades at around $34.23, outside the price-range Klarman traded at in the quarter. Klarman is bullish on gold and also has a position in Novagold Resources (NG), another small-cap gold stock.Genworth Financial (GNW): GNW is a relatively small ~2.4% of the US long portfolio stake established last quarter at prices between $4.89 and $8.38. A similar sized stake was earlier established in Q4 2011 at prices between $4.80 and $10.68 only to dispose it off the next quarter at prices between $6.55 and $9.54. The current stake was purchased at prices between $4.89 and $8.38 and the stock currently trades at $5.40. GNW is trading at a very large discount to tangible book value and appears to be a classic value pick.Syneron Medical Ltd. (ELOS), Aveo Pharmaceuticals Inc. (AVEO), and Enzon Pharmaceuticals Inc. (ENZN): These are positions in the small-cap pharmaceuticals space, each accounting for less than 2% of the US long portfolio. The long-term nature of these positions indicates a bullish bias.Alliance One International (AOI), Central Pac Financial Corp. (CPF), Ituran Location and Control (ITRN), and Sycamore Networks (SCMR): These are very small positions (<1% of the US long portfolio) that were kept steady this quarter. As the position sizes are very small, they do not indicate a clear bias.The spreadsheet below highlights changes to Klarman's US stock holdings in Q3 2012:"