"Tracking Seth Klarman’s Baupost Group Holdings – Q4 2014 Update"
"Seth Klarman’s US long portfolio decreased from $5.74B to $5.09B this quarter.Baupost Group significantly increased Antero Resources Corp. and eBay Inc. while reducing Micron Technology.The US long equity holdings continue to be heavily concentrated with the top-three positions accounting for around 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 02/13/2015. Please visit our  article for an idea on how his holdings have progressed over the years and our  highlighting the fund's moves during Q3 2014.Klarman’s US long portfolio decreased ~11% from $5.74B to $5.09B this quarter. The decrease was primarily due to the large stake reduction in Micron Technology, which was his largest position as of last quarter. The number of holdings is at 27 but four of them are very small positions and one is a bond holding (Theravance Notes). The focus of this article is on the remaining 22 stakes. The positions are heavily concentrated with Cheniere Energy, ViaSat Inc., and Micron Technology together accounting for around 47% of the entire US long portfolio.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:Atara Biotherapeutics (ATRA): ATRA is a very small 1.16% of the US long portfolio stake established this quarter at around $19 per share. The stock currently trades at $18. The position was first disclosed in a 13G filing on November 10, 2014 - Klarman controls 12.86% of the business.Bellatrix Exploration (BXE): BXE is a very small 1.29% of the US long portfolio stake established this quarter at prices between $2.99 and $6.15. The stock currently trades at $2.79. On February 10, 2015 Klarman disclosed in a 13G filing that the BXE stake was increased from 18.1M shares to 21.84M shares (11.38% of the business) at around $2.Forward Pharma (FWP): FWP is a small 2.20% of the US long portfolio stake established this quarter at around $22. The stock currently trades at $23. The position was first disclosed in a 13G filing on November 10, 2014 - Klarman controls 11.72% of the business.Paratek Pharmaceuticals (PRTK): PRTK is a very small 1.22% 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. The 12.04% ownership stake was disclosed in a 13G filing on December 11, 2014. The stock currently trades at $26.95.Stake Disposals:RF Microdevices (RFMD) & TriQuint Semi (TQNT): RFMD & TQNT were small ~2 % of the US long portfolio positions each established in Q1 2014. The RFMD position was established at prices between $4.51 and $7.93 and it was increased by ~48% in Q2 2014 at prices between $7.50 and $10.13. TQNT position was established at prices between $8.07 and $13.55 and it was increased by ~55% in Q2 2014 at prices between $12.75 and $16.79. The businesses combined in a merger of equals to form a new company named Qorvo Inc. (QRVO) that started trading on January 2, 2015. The last trading day for RFMD & TQNT was December 31, 2014 and they closed at $16.59 & $27.55 respectively.Note: The merger terms called for a one-for-four reverse-stock-split in both TQNT & RFMD. TQNT & RFMD shareholders were to then receive 1.675 shares & 1 share of QRVO respectively for each share of TQNT & RFMD held.Stake Increases:Antero Resources Corporation (AR): AR is a 6.26% of the US long portfolio position established last quarter at prices between $54.50 and $65.71. The stake was increased by ~185% this quarter at prices between $38.60 and $55.51. The stock currently trades near the low end of those ranges at $40.34.Cheniere Energy (LNG): LNG is Klarman’s largest 13F position at 19.09% of the US long portfolio. The original stake was established in Q1 2014 at prices between $41 and $55. Last quarter, the stake was again increased by ~87% at prices between $70 and $84.29 and that was followed by another 23% increase this quarter at prices between $61.90 and $80.03. The stock currently trades at $74.48. The large stake build-up indicates a clear bullish bias.Note 1: On January 9, 2015, Klarman disclosed a further 120% stake increase in LNG at around $70 per share. The current stake is at 24.8M shares (~10% of the business).Note 2: Klarman also has a ~10% ownership interest in Liquefied Natural Gas Ltd. (ASX:LNG), a similar business as Cheniere Energy (LNG). It was increased significantly in October 2014.eBay Inc. (EBAY): EBAY is a large 10.27% of the US long portfolio stake established in Q2 2014 at prices between $48.25 and $55.89. It was increased by ~37% last quarter at prices between $50 and $56.63. This quarter saw another ~53% increase at prices between $47.88 and $57.53. The stock currently trades near the top end of those ranges at $56.47. EBAY is attracting a lot of super-investor interest and activist pressure has forced the company to unveil plans to spin-off its PayPal subsidiary. Carl Icahn, Wallace Weitz, Mark Hillman, and Leon Cooperman have all made significant purchases recently.Kosmos Energy (KOS): The small 1.19 % KOS position was purchased in Q2 2014 at prices between $10.05 and $11.23 and it currently trades at $9.05. This quarter saw a ~52% increase at prices between $7.09 and $10.25.PBF Energy (PBF): PBF is a 3.38% 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. Last quarter, the position saw another 28% increase at prices between $23.89 and $28.41 and that was followed with a 21% increase this quarter at prices between $22.12 and $29.80. The stock currently trades at $30.18. Klarman’s ownership interest in PBF is at 10.37%. The significant stake build-up spanning several quarters indicates a bullish bias.Stake Decreases:Citigroup WTS (C.WS.A): The warrants have a strike price of $106.10 and expire on 01/04/2019. They currently trade at $7.40 (for ten warrants which can be converted to one Citigroup common stock, Yahoo Ticker C-WTA). The position was increased by ~18% in Q2 2014. This quarter saw an about-turn as ~16% of the position was disposed of at prices between $8.60 and $10. The bulk of the 1.75% 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.Micron Technology (MU): MU was Klarman’s largest position at 30.82% of the US long portfolio as of last quarter. 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. This quarter saw an about-turn as ~62% of the position was sold at prices between $27.03 and $36.49. The stock currently trades at $31.85. Klarman is harvesting huge long-term gains from this position.Note 1: Baupost has increased the position since the end of the quarter. A 02/13/2015 13G filing shows a share-count of 23.71M compared to 19.71M shares in the 13F.Ocwen Financial (OCN): OCN is a 1.77% of the US long portfolio established last quarter at prices between $25 and $37. This quarter, the position was reduced by ~15% at prices between $14.32 and $26.26. The stock currently trades well below those ranges at $9.10. Baupost’s ownership of the business is at around 4.74%.Syneron Medical Ltd. (ELOS): ELOS is a 0.44% of the US long portfolio position that had been kept steady since Q3 2011. Last quarter, the stake was reduced by ~25% at prices between $9.74 and $11.03 and this quarter saw a further ~20% reduction at prices between $8.44 and $10.57. The stock currently trades at $10.16. It is a long-term position first purchased in Q2 2006.Veritiv Corporation (VRTV): VRTV is a 2.36% of the US long portfolio established last quarter at prices between $32.50 and $50.22 and the stock currently trades outside that range at $52.58. This quarter saw a marginal reduction. Klarman’s ownership interest in VRTV is at 14.46%.Kept Steady:ChipMOS Technologies (IMOS): IMOS is a small 1.50% of the US long portfolio position established in Q2 2013 at prices between $12.30 and $20 and increased by ~19% in Q3 2013 at prices between $15 and $21. The stock currently trades at $23.95. Although the relative sizing of the position is small, it is significant that Klarman owns 9.84% of the shares outstanding.Keryx Biopharma (KERX): KERX is a medium-sized 5.09% 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 last quarter the pattern continued with a ~74% stake increase at prices between $12.71 and $18.19. The stock currently trades at $11.63 and Klarman controls just over 11% of the business. His overall cost-basis is at around $14.Kindred Biosciences (KIN): KIN is a very small 0.44% of the US long portfolio position established in Q4 2013 at a cost-basis of around $11. The stake as a percentage of the business is very high at over 20%: 3M shares out of the ~15M shares outstanding. The original position was disclosed in a 13G filing on 01/09/2014 and that immediately aroused speculative interest that resulted in a huge price-spike. Last quarter saw a ~9% stake increase at prices between $9.25 and $19.38 and the stock currently trades well below that range at $6.79. KIN share-price dropped around one-third on August 20, 2014 when the company announced the failure of their canine arthritis drug in a clinical trial.NovaGold Resources Inc. (NG): NG is a 1.26% 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 $3.96.Sunedison Semiconductor (SEMI): SEMI is a 1.51% of the US long portfolio position established in Q2 2014 at prices between $14.37 and $17.76. The stock currently trades at $22.21. SEMI was spun-off from Sunedison Inc. (SUNE) on May 22, 2014.Theravance Biopharma (TBPH): TBPH is a 1.78% 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. TBPH has dropped ~20% since the May 2014 spinoff. It currently trades at $18.51Theravance Inc (THRX): THRX is a 5.51% of the US long portfolio stake. It is a very long-term position that has been in the portfolio since 2008. Baupost controls around 17.2% of the business. The most recent buying happened in Q4 2013 when the stake was increased by ~9% at prices between $33.74 and $41.53. The stock currently trades at around $14.85, having dropped over 50% since the split-up of TBPH from THRX.Note 1: Baupost has increased the position since the end of the quarter. A 02/13/2015 13G filing shows THRX stake at 21.75M shares compared to 19.82M shares in the 13F.Note 2: THRX split into two businesses last quarter - a royalty focused segment that retained the name and a research focused bio-pharma segment Theravance Biopharma (TBPH). As a result, THRX shareholders received one share of TBPH for every 3.5 shares of THRX held. The implied performance of Klarman’s most recent share purchase quoted above is negatively skewed because of this.ViaSat (VSAT): VSAT is currently Klarman’s third-largest US long position accounting for 11.07% of the portfolio. Since Q3 2012, the position has seen only minor stake 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 $62.71. He is sitting on huge gains on the position. The stock returned ~60% in 2013 but has since remained flat.Other very small positions (less than 0.5% of the US long portfolio each) in the portfolio are Alliance One International (AOI), Alon USA Partners LP (ALDW), American International Group (AIG) warrants, and Novacopper (NCQ). Klarman controls 7.20% of AOI & 9.90% of NCQ.The spreadsheet below highlights changes to Klarman's US stock holdings in Q4 2014:"