"Tracking Seth Klarman’s Baupost Group Holdings – Q2 2016 Update"
"Seth Klarman’s US long portfolio increased from $6.92B to $7.37B this quarter.Baupost Group increased Allergan plc and EMC Corporation while decreasing Antero, PayPal, and Novagold during the quarter.The portfolio continues to be heavily concentrated with the top three positions accounting for ~47% 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 08/12/2016. Please visit our  article for an idea on how his holdings have progressed over the years and our  for the fund's moves during Q1 2016.Baupost Group’s US long portfolio increased 6.39% from $6.92B to $7.37B this quarter. The total number of 13F securities held increased from 36 to 39. The portfolio is heavily concentrated with EMC Corporation, Cheniere Energy, ViaSat Inc., Allergan plc, and Twenty First Century Fox together accounting for around 59% 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:Citigroup Inc. (C): C is a medium-sized ~3% portfolio stake established this quarter at prices between $38.48 and $47.33. The stock is now at $45.58. For investors attempting to follow Baupost, Citigroup is a good option to consider for further research.Note: Baupost also has a position in the warrants. They have unrealized losses on that stake (see below).Liberty Ventures (LVNTA) and Liberty Braves (BATRA) (BATRK): These are tracking stocks that represent economic interests in businesses of Liberty Interactive (QVCA). The 1.24% Liberty Ventures position was purchased at prices between $34.70 and $40.34 and the stock is now at $39.24. The 0.74% Liberty Braves stake was established at prices between $14.27 and $19.95 and the stock is now at $16.61.Avis Budget (CAR), Cascadian Therapeutics (CASC), Credit Acceptance Corp. (CACC), and Och-Ziff Capital Management (OZM): These are very small (less than ~1% of the portfolio each) stakes purchased this quarter.Note: Baupost owns 18.49% of CASC.Stake Disposals:Bellatrix Exploration (BXE): BXE was a very small 0.13% 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. Last quarter saw a ~64% stake reduction at prices between $0.80 and $1.42 and the elimination this quarter was at prices between $0.931 and $1.27. The stock currently trades at $0.754. Baupost realized losses.Biotie Therapies (BITI), Genworth Financial (GNW) and La Quinta Holdings (LQ): These are very small (less than ~1% of the portfolio each) stakes disposed of this quarter.Note: The BITI stake was disposed as a result of a merger related tender offer from Acorda Therapeutics (ACOR). Klarman’s BITI ownership before this transaction was ~17%.Stake Increases:Allergan plc (AGN): AGN is a large top-five 6.28% of the US long portfolio stake established last quarter at prices between $266 and $299. This quarter saw a ~16% increase at prices between $202 and $278. The stock currently trades at $250. For investors attempting to follow Baupost, AGN is a good option to consider for further research.EMC Corporation (EMC): EMC is the largest 13F stake at 21.01% of the portfolio. It was established in Q4 2015 at prices between $24.16 and $28.35 and increased by ~77% last quarter at prices between $23.90 and $26.71. This quarter also saw a ~10% further increase. The stock currently trades at $28.48.Note: On October 12, 2015, Dell announced a deal to acquire EMC for $24.05 per share cash and 0.111 per share in VMWare (VMW) tracking stock.Paratek Pharmaceuticals (PRTK): PRTK is a small 0.39% 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. Q2 2015 had seen a ~11% reduction at prices between $24.33 and $32.49. This quarter saw a one-third increase at prices between $12.68 and $16.98. The stock currently trades near the low end of that range at $13.02.Note: Baupost Group controls ~9% of the business.Theravance Biopharma (TBPH): TBPH is a 2.26% of the US long portfolio position established in Q2 2014 as a result of the spinoff of TBPH from Theravance (now Innoviva). The spinoff terms called for Theravance shareholders to receive 1 share of TBPH for every 3.5 shares of Theravance held. The original stake was increased by ~5% in Q1 2015 at prices between $14.70 and $21.73. This quarter saw another ~13% increase at prices between $17.45 and $24.20. The stock is now at $26.96.Note: Klarman controls ~15.5% of the business.American International Group (AIG) WTS and Silver Run Acquisition (SRAQ) & WTS: These are very small stakes at 0.65% and 0.52% of the portfolio respectively. Both positions were increased this quarter. The AIG WTS position was increased by ~20% while the net SRAQ position was increased by one-third through the purchase of warrants.Stake Decreases:Antero Resources Corporation (AR): AR is a fairly large 5.12% 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. The pattern reversed in Q2 2015: ~14% reduction at prices between $34 and $46. Q3 2015 saw a stake doubling at prices between $20.20 and $34.34 and that was followed with a ~19% increase the following quarter at prices between $19 and $26. This quarter saw a one-third reduction at prices between $24.73 and $30.10. The stock currently trades at $27.42. Klarman controls ~4.7% of the business.Innoviva Inc. (INVA) previously Theravance: INVA is a 2.52% of the US long portfolio stake. It is a very long-term position that has been in the portfolio since 2008. This quarter saw a ~11% trimming at prices between $9.91 and $13.76. The stock currently trades at $12.46.Note: Baupost controls ~15.8% of the business.NovaGold Resources Inc. (NG): NG is a 0.79% stake built up over several quarters in 2012 at prices between $3.5 and $12. Q4 2015 saw a ~13% reduction at prices between $3.27 and $4.47 and that was followed with a ~21% reduction last quarter at prices between $3.54 and $5.42. There was another ~37% selling this quarter at prices between $5.05 and $6.51. The stock currently trades at $6.58.Paypal Holdings (PYPL): The 2.81% PYPL position was established in Q3 2015 as a result of the spinoff of Paypal from eBay that closed in July 2015. 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 $38.51. Last quarter saw a ~37% reduction at prices between $31.20 and $41.32 and that was followed with another ~20% reduction this quarter at prices between $34.20 and $40.31.Kept Steady:Atara Biotherapeutics (ATRA): ATRA is a 1.64% 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 $21.22.Note: Klarman controls ~19% of the business.Cheniere Energy (LNG): LNG is Klarman’s second-largest 13F position at 15.21% 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. Q2 2015 saw a further ~11% increase at prices between $68.49 and $80 and that was followed with another 48% increase the following quarter at prices between $47.47 and $70.65. Last two quarters also saw a combined ~32% increase at prices between $24 and $54. The stock currently trades at $42.99. For investors attempting to follow Baupost, LNG is a good option to consider for further research.Note: The size of this position per the latest regulatory 13G filing does not tally with the figure in the 13F report. That report shows Baupost owning 37M shares (15% of the business) compared to 29.84M shares in the 13F.ChipMOS (IMOS): IMOS is a small 0.92% 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. The last significant activity was in Q3 2015: ~14% increase at prices between $15.39 and $22. The stock currently trades at $19.62.Note: Klarman controls 13.75% of ChipMOS.Citigroup WTS (C.WS.A): The warrants have a strike price of $106.10 and expire on 01/04/2019. They currently trade at $0.425 (for ten warrants which can be converted to one Citigroup common stock, Yahoo Ticker C-WTA). The bulk of the 0.08% position was established at prices between $4.50 and $5.80. It is a leveraged bullish bet on Citigroup.Forward Pharma (FWP): FWP is a small 1.32% of the US long portfolio stake established in Q4 2014 at around $22. The stock currently trades at $21.78.Note: Klarman controls ~12% of the business.Keryx Biopharma (KERX): KERX is a 2.32% 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. H1 2015 had also seen a ~40% further increase at prices between $9.32 and $14.68. The stock currently trades well below the low-end of those ranges at $4.29. His cost-basis is at around $12.Note: The latest regulatory 13D filing shows Baupost beneficially owning 59.2M shares (42.53% of the business). This is compared to 25.79M shares in the 13F. The difference is due to $125M in 2020 convertible ($3.74) notes that they also own.Kindred Biosciences (KIN): KIN is a very small 0.14% 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 $3.97.KLX Inc. (KLXI): KLXI is a small ~0.84% of the US long portfolio position established in Q1 2015 at prices between $37.34 and $41.65. Q4 2015 saw a one-third increase at prices between $30 and $41. The stock currently trades near the low-end of those ranges at $34.09.Note: KLXI is a spinoff from B/E Aerospace (BEAV) and it started trading in December 2014.Novacopper (NCQ): This is a minute stake at 0.07% of the US long portfolio. Q2 2015 saw a ~76% increase at prices between $0.50 and $0.66 and the stock is now at $0.605.Note: Klarman’s ownership stake in NCQ is ~10%.Olin Corporation (OLN): The medium-sized 3.62% of the portfolio stake in OLN was established in Q3 2015 at prices between $17 and $26. Last quarter saw a ~50% increase at prices between $12.78 and $17.59 and the stock is now at $20.05Note: The ownership stake in Olin Corporation is ~6.5%.PBF Energy (PBF): PBF is a 3.43% of the US long portfolio position first purchased in Q3 2013 at prices between $21 and $26. It was more than doubled the following quarter 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. The stake has since been doubled through periodic buying. The stock currently trades at $23.12.Note: Klarman’s ownership interest in PBF is ~10%.Sunedison Semiconductor (SEMI): SEMI is a 0.67% 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. The stock currently trades well below his purchase price ranges at $7.97. SEMI was spun-off from Sunedison Inc. (SUNEQ) on May 22, 2014.Note: Klarman’s ownership interest in Sunedison Semiconductor is 19.95%.Twenty First Century Fox (FOX) (FOXA): FOX is a fairly large 5.52% of the portfolio stake established in Q3 2015 at prices between $25.41 and $33.52 and increased by ~41% last quarter at prices between $24 and $28. The stock currently trades at $26.57. For investors attempting to follow Baupost, FOX is a good option to consider for further research.Veritiv Corporation (VRTV): VRTV is a 1.55% of the US long portfolio position established in Q3 2014 at prices between $32.50 and $50.22. Q2 2015 saw a ~9% increase at prices between $35.50 and $45.16 and that was followed with a ~13% increase the following quarter at prices between $33.06 and $42.60. The stock currently trades at $48.34.Note: Klarman’s ownership interest in VRTV is at ~19%.ViaSat (VSAT): VSAT is Klarman’s third-largest US long position at 11.18% 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 $74.33. He is sitting on huge gains on the position.VMWare Inc. (VMW): VMW is a 1.75% of the portfolio stake purchased last quarter at prices between $43.84 and $57.02. The stock is well outside that range at $71.08.Note: Klarman’s largest 13F position is EMC Corporation which is getting bought by Dell. Their VMWare stake will increase significantly when that transaction closes as the terms call for EMC shareholders to receive 0.111 per share in VMW tracking stock.Orexigen Therapeutics (OREX) and Sunrun Inc. (RUN): These very small (less than ~0.5% of the portfolio each) stakes were kept steady this quarter.Note 1: Including the dilutions implied by capital-raise transactions they were involved in, the beneficial ownership in OREX is at over one-third of the business.Note 2: The 13F also lists a small position in Theravance Notes. A small position in Chesapeake (CHK) Notes newly listed as of last quarter is no longer present.The spreadsheet below highlights changes to Klarman's US stock holdings in Q2 2016:13G/A, Form 3/4 thru 5/13/2016: BITI 13D 4/12/2016 - 0. BXE 13G/A 4/8/2016 as of 3/31/2016 - 8.65M shares - 4.51%. OREX 13G/A 3/15/2016 - 27.27M shares - 18.1% of business.13G/A, Form 3/4 thru 2/13/2016: VRTV 13G/A 2/12/2016 - 2.89M shares - 18.04%. TBPH 13G/A 2/12/2016 - 6.42M shares - 16.97%. INVA 13G/A 2/12/2016 - 22.26M shares - 18.99%. ATRA 13G/A 2/12/2016 - 5.36M shares - 18.72%. BXE 13G/A 2/12/2016 - 23.99M shares - 12.50%. SEMI 13G/A 2/12/2016 - 8.37M shares - 19.95%. NCQ 13G/A 2/12/2016 - 10.6M shares - 10.12%. SEMI 13G/A 2/12/2016 - 8.37M shares - 19.95%. PBF 13G/A 2/12/2016 - 11.03M shares - 11.29%. PRTK 13G/A 2/12/2016 - 1.54M shares - 8.77%. IMOS 13G/A 2/12/2016 - 3.75M shares - 13.75%. OREX 13G/A 2/12/2016 - 2.27M shares - 18.13%. NG 13G/A 2/12/2016 - 18.98M shares - 5.97%. AR 13G/A 2/12/2016 - 19.17M shares - 6.92%. BITI 13D 1/20/2016 - 173M shares - 17.1% - Acorda Therapeutics acquisition of BITI also mentioned. LNG 13G/A 1/8/2016 - 37.09M shares - 15.01%. ."