"Tracking Seth Klarman’s Baupost Group Holdings – Q1 2017 Update"
"Seth Klarman’s US long portfolio value increased from $7.67B to $8.49B this quarter.Baupost Group added Qorvo Inc. and Qualcomm while decreasing Innoviva and Allergan plc.The portfolio continues to be heavily concentrated with the top three positions accounting for almost one-third of the 13F 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 05/12/2017. Please visit our  article for an idea on how his holdings have progressed over the years and our  for the fund's moves during Q4 2016.Baupost Group’s US long portfolio value increased ~11% from $7.67B to $8.49B this quarter. The total number of 13F securities held remained steady at 41. The portfolio is heavily concentrated with Cheniere Energy, Twenty First Century Fox, ViaSat Inc., Colony Northstar, and Synchrony Financial together accounting for ~45% 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:Colony Northstar (CLNS): Colony Northstar stake came about as a result of the three-way merger of Colony Capital (CLNY), Northstar Asset Management Group (NSAM), and Northstar Realty Finance (NRF). Baupost held stakes in all three of these stocks and those got converted into CLNS shares. They control 8.7% of CLNS and their overall cost-basis is at ~$12.50 per share. CLNS currently trades at $13.14. For investors attempting to follow Baupost, CLNS is a good option to consider for further research.Note: The merger terms called for conversion to CLNS in the ratio 1:1.0996:1.4663 (NSAM:CLNY:NRF). Based on this, Baupost was to have received ~44M shares of CLNS. The 13F report however shows them owning 47.9M shares - they increased their stake by ~10% during the quarter.Qorvo Inc. (QRVO): QRVO is a fairly large ~5.8% portfolio stake established this quarter at prices between $53 and $69 and the stock is now at $67.80.Note: Baupost controls ~5.7% of the business.Qualcomm Inc. (QCOM): QCOM is a ~3.5% of the portfolio position purchased this quarter at prices between $52.50 and $67 and the stock is currently at $55.32.Express Scripts (ESRX) and Silver Run Acquisition (SRUN): These are very small stakes (less than ~1% of the portfolio each) established this quarter.Stake Disposals:Colony Capital Inc. (CLNY), Northstar Asset Management Group (NSAM), and Northstar Realty Finance Corp. (NRF): These three stakes established in Q3 2016 were increased substantially last quarter. Combined, the position was fairly large at ~9% of the portfolio. The positions were eliminated as they merged in an all-stock deal that closed in January. It was structured so that NSAM was renamed Colony Northstar (CLNS).Liberty Expedia (LEXIA) and Citigroup WTS (C.WS.A): These minutely small (less than ~0..5% of the portfolio each) stakes were disposed of this quarter.Stake Increases:Forward Pharma (FWP): FWP is a small 1.41% of the US long portfolio stake established in Q4 2014 at around $22. The stock currently trades at $20.05. There was a ~4% increase this quarter. For investors attempting to follow Baupost, FWP is a good option to consider for further research.Note 1: The stock price doubled in January following settlement of a lawsuit with Biogen (BIIB) that netted $1.25B.Note 2: Klarman controls ~12% of the business.Cascadian Therapeutics (CASC): The minutely small 0.43% stake in CASC was doubled this quarter at prices between $3.50 and $5.10.  The stock is currently at $4.18.Note: Baupost owns ~18% of CASC.Stake Decreases:Synchrony Financial (SYF): SYF, the November 2015 spinoff from General Electric (GE) is a large (top five) 7.1% stake established in Q3 2016 at prices between $25 and $28.50. Last quarter saw a ~18% increase at prices between $26 and $37. The stock currently trades at $26.59. There was a ~15% selling this quarter at prices between $32.50 and $38.Allergan plc (AGN): AGN is a large 6.8% of the US long portfolio stake established in Q1 2016 at prices between $266 and $299. Q2 2016 saw a ~16% increase at prices between $202 and $278. There was another ~70% increase last quarter at prices between $189 and $243. The pattern reversed this quarter: almost 30% sold at prices between $210 and $250. The stock currently trades at $231.Dell Technologies (DVMT): DVMT, the VMWare tracking stock is a fairly large 4.26% portfolio position. It started trading in September 2016 following the close of Dell’s deal for EMC. Baupost had a huge stake in EMC for which they received $24.05 cash and 0.111 shares of DVMT for each share held. There was a ~15% reduction this quarter at prices between $54.50 and $65.Note: DVMT currently trades at $64.95, a wide discount to VMW which is trading at $93.20.Innoviva Inc. (INVA) previously Theravance: INVA is a ~1.88% of the US long portfolio stake. It is a very long-term position that has been in the portfolio since 2008. Q2 2016 saw a ~11% trimming at prices between $9.91 and $13.76 and that was followed with another ~15% reduction in Q3 2016 at prices between $10.53 and $13. This quarter saw another ~23% selling at prices between $10.40 and $13.80. The stock currently trades at $11.71.Note 1: Baupost almost exited the position after the quarter ended: A 13G filing earlier this month shows Baupost owning ~1M shares compared to 11.6M shares in the 13F.Note 2: Last month Innoviva narrowly won an especially ugly proxy contest with Sarissa Capital. They had sought to replace three board seats. Excessive executive compensation was at the root of the proxy fight.Liberty Braves (BATRA) (BATRK), Syngenta AG (SYT), and American International Group (AIG) WTS: These are very small (less than ~1% of the portfolio each) stakes that saw reductions this quarter.Kept Steady:Cheniere Energy (LNG): LNG is Klarman’s largest 13F position at 12.09% 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 $68.50 and $80 and that was followed with another ~50% increase the following quarter at prices between $47.50 and $71. Q4 2015 & Q1 2016 also saw a combined ~32% increase at prices between $24 and $54. Q3 2016 saw an about turn: ~7% trimming. That was followed with a ~22% selling last quarter at prices between $35.50 and $43.50. The stock currently trades at $48.68.Note: Baupost controls ~9% of Cheniere Energy.Twenty First Century Fox (FOX) (FOXA): FOX is a large (top three) ~10% of the portfolio stake established in Q3 2015 at prices between $25.41 and $33.52 and increased by ~41% in Q1 2016 at prices between $24 and $28. Q3 2016 saw another one-third increase at prices between $24 and $29 and that was followed with a similar increase last quarter at prices between $24.50 and $28.50. The stock currently trades at $27.90.ViaSat (VSAT): VSAT is Klarman’s third-largest US long position at 9.89% 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 $64.25. Last quarter saw a ~14% increase at prices between $66 and $81. He is sitting on huge gains on the position.Note: Klarman controls 23.5% of VSAT.PBF Energy (PBF): PBF is a fairly large ~4% 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 $21.50 and $31.50 and was increased by over 175% in Q1 2014 at prices between $24 and $31.50. The stake had since been doubled through periodic buying. Q3 2016 saw another ~50% increase at prices between $21 and $24. The stock currently trades at $22.18.Note: Klarman’s ownership interest in PBF is ~15%.Theravance Biopharma (TBPH): TBPH is a ~4% 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 $14.50 and $22. Q2 2016 saw another ~13% increase at prices between $17.50 and $24. The stock is now at $38.22. Last quarter also saw a ~25% increase at prices between $24.50 and $38.50.Note: Klarman controls ~19% of the business.Antero Resources Corporation (AR): AR is a fairly large 3.90% of the US long portfolio position established in Q3 2014 at prices between $54.50 and $66. The stake was increased by ~185% the following quarter at prices between $38.50 and $55.50. Q1 2015 saw a further ~20% increase at prices between $34 and $42.50. The pattern reversed in Q2 2015: ~14% reduction at prices between $34 and $46. Q3 2015 saw a stake doubling at prices between $20 and $34.50 and that was followed with a ~20% increase the following quarter at prices between $19 and $26. Q2 2016 saw a one-third reduction at prices between $24.50 and $30. The stock currently trades at $21.17.Note: Klarman controls ~4.5% of the business.Keryx Biopharma (KERX): KERX is a 1.87% of the US long portfolio position established in Q1 2014 at prices between $12 and $17. In Q2 2014, the position was increased by two-thirds at prices between $12 and $17 and the following quarter the pattern continued with a ~74% stake increase at prices between $12.50 and $18. H1 2015 had also seen a ~40% further increase at prices between $9.50 and $14.50. The stock currently trades well below the low-end of those ranges at $6.54. 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.Veritiv Corporation (VRTV): VRTV is a 1.86% of the US long portfolio position established in Q3 2014 at prices between $32.50 and $50.50. Q2 2015 saw a ~9% increase at prices between $35.50 and $45 and that was followed with a ~13% increase the following quarter at prices between $33 and $42.50. The stock currently trades at $39.60.Note: Klarman’s ownership interest in VRTV is at ~19%.Atara Biotherapeutics (ATRA): ATRA is a 1.30% 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 $15.25.Note: Klarman controls ~19% of the business.McKesson Corp. (MCK) & Cardinal Health (CAH): MCK is a 1.75% portfolio stake established last quarter at prices between $124 and $167 and the stock is now at $145. The ~1% CAH position was purchased last quarter at prices between $65 and $78 and the stock currently goes for $72.90.Liberty Ventures (LVNTA): The tracking stock represents economic interest in businesses of Liberty Interactive (QVCA). The 0.78% Liberty Ventures position was purchased in Q2 2016 at prices between $34.70 and $40.34. There was a ~40% selling last quarter at prices between $36.50 and $41. The stock is now at $52.03.ChipMOS (IMOS): IMOS is a small 0.73 % 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 $18.43.Note: Baupost controls ~8% of IMOS.AmerisourceBergen (ABC), Centennial Resource Development (CDEV), Credit Acceptance Corp. (CACC), Conyers Park Acquisition (CPAA) & Warrants, GTY Technology (GTYHU), NovaGold Resources Inc. (NG), Orexigen Therapeutics (OREX), Paratek Pharmaceuticals (PRTK), Trilogy Metals (TMQ), Saban Capital Acquisition Corp. (SCAC), and Sunrun Inc. (RUN): These are very small (less than ~0.5% of the portfolio each) stakes kept steady this quarter.Note 1: Baupost controls ~9% each of CPAA & SCAC and ~8% of GTYHU. They are “blank check” companies.Note 2: Baupost Group controls ~9% of PRTK, ~10% of TMQ, and ~9% of CASC.Note 3: Orexigen split 1-for-10 in July 2016. Baupost was involved in a couple of capital raise transactions. Including the implied dilutions, the beneficial ownership in Orexigen is at over one-third of the business.Note 4: The 13F also list small positions in Theravance Notes & Theravance Biopharma Notes.The spreadsheet below highlights changes to Klarman's US stock holdings in Q1 2017:Regulatory Filings thru 2/16/2017: 13G/As dated 2/14/2017: VSAT - 13.16M shares - 23.5%. AR - 14.5M shares - 4.62%. VRTV - 3M shares - 19%. TBPH - 10.14M shares - 19.21%. IMOS - 70M shares - 8.19%. CPAA - 3.7M shares - 9.22%. SCAC - 2.3M shares - 9.31%. INVA - 17.3M shares - 15.55%. PRTK - 2M shares - 9%. Liberty Media - 800K shares - 7.82%. NG - 9.5M shares - 3%. CLNY - 7M shares - 6.14%. NRF - 14.6M shares - 8%. GTYHU - 4.4M shares - 8%. NSAM - 18.7M shares - 9.9%. 1/9/2017 13G/A - LNG - 21.7M shares - 9.25%.: Under the terms of the merger agreement, NSAM will redomesticate to Maryland and elect to be treated as an REIT beginning in 2017, and NRF and Colony, through a series of transactions, will merge with and into the redomesticated NSAM, which will be renamed Colony NorthStar, Inc. NSAM shareholders will continue to own one (1) share of Colony NorthStar common stock for each share of NSAM common stock they previously owned. Colony common shareholders will receive 1.4663 shares of Colony NorthStar’s common stock for each share of Colony common stock they own, and NRF common shareholders will receive 1.0996 shares of Colony NorthStar’s common stock for each share of NRF common stock they own. Each of Colony and NRF has preferred stock outstanding and the holders of such preferred stock will receive shares of preferred stock of Colony NorthStar that are substantially similar to the preferred stock held prior to the closing of the transaction. Based on this & the pattern of trading, Klarman’s cost-basis should be around $12.5 per share. He would own ~44M shares of the combined business (~8% ownership stake)."