"Tracking Seth Klarman’s Baupost Group Holdings – Q4 2016 Update"
"Seth Klarman’s US long portfolio value increased from $7.04B to $7.67B this quarter.Baupost Group increased ViaSat, Synchrony Financial, Twenty First Century Fox, and Allergan while reducing Cheniere during the quarter.The portfolio continues to be heavily concentrated with the top three positions accounting for 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 02/14/2017. Please visit our  article for an idea on how his holdings have progressed over the years and our  for the fund's moves during Q3 2016.Baupost Group’s US long portfolio value increased 9% from $7.04B to $7.67B this quarter. The total number of 13F securities held remained steady at 41. The portfolio is heavily concentrated with Cheniere Energy, ViaSat Inc., Synchrony Financial, Twenty First Century Fox, and Allergan plc together accounting for ~50% 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:McKesson Corp. (MCK) & Cardinal Health (CAH): MCK is a 1.83% portfolio stake established this quarter at prices between $124 and $167 and the stock is now at $150. The ~1% CAH position was purchased at prices between $65 and $78 and the stock currently goes for $80.42.Syngenta AG (SYT), GTY Technology (GTYHU), AmerisourceBergen (ABC), and Liberty Expedia (LEXIA): These are very small (less than ~1% of the portfolio each) stakes established this quarter.Note: Baupost controls ~8% of GTYHU. It is a “blank check” business formed by former CEOs of Accenture & EMC.Stake Disposals:Paypal Holdings (PYPL): The 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% immediately after the transaction. PYPL started trading at $36.71 and currently trades at $41.87. Q1 2016 saw a ~37% reduction at prices between $31 and $41.50 and that was followed with another ~20% reduction the following quarter at prices between $34 and $40.50. The pattern continued last quarter with a ~12% further selling at prices between $36 and $41. The remaining ~3% portfolio stake was sold this quarter at prices between $38 and $44.Olin Corporation (OLN): The stake in OLN was established in Q3 2015 at prices between $17 and $26. Q1 2016 saw a ~50% increase at prices between $12.50 and $18. There was an about turn last quarter: ~40% reduction at prices between $18 and $26.50. The elimination of the remaining ~2% portfolio stake this quarter happened at prices between $20 and $27. The stock is now at $30.87.Note: They had a ~3.7% ownership stake in OLN as of last quarter.VMWare Inc. (VMW): VMW was a 1.67% of the portfolio stake purchased in Q1 2016 at prices between $44 and $57. Last quarter saw a ~30% reduction at prices between $56.50 and $75.50. The elimination this quarter was at prices between $72.50 and $82.50. The stock is now at $90.76.Kindred Biosciences (KIN): KIN was a very small 0.21% of the US long portfolio position. The stake as a percentage of the business was very significant at over 15%. It was established in Q4 2013 at a cost-basis of around $11. The disposal this quarter was at prices between $4 and $5.50. The stock is now at $6.25. Baupost realized losses.KLX Inc. (KLXI), Office Depot (ODP) and Tobira Therapeutics (TBRA): These are very small (less than ~1% of the portfolio each) stakes disposed of this quarter.Note 1: Allergan plc (AGN) acquired Tobira Therapeutics in a transaction that closed on November 1st 2016. The deal was announced in September and the terms called for Tobira shareholders to receive $28.35 per share cash and a Contingent Value Right (CVR) that could pay out up to $49.84 per share. Klarman’s stake may have been an asymmetric risk-reward bet on the CVRs.Note 2: KLXI is a spinoff from B/E Aerospace (BEAV) that started trading in December 2014.Stake Increases:ViaSat (VSAT): VSAT is Klarman’s second-largest US long position at 11.36% 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 $67.45. This 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.Synchrony Financial (SYF): SYF, the November 2015 spinoff from General Electric (GE) is a large (top three) ~10% stake established last quarter at prices between $25 and $28.50. This quarter saw a ~18% increase at prices between $26 and $37. The stock currently trades at $37.28.Twenty First Century Fox (FOX) (FOXA): FOX is a large (top five) 9.58% 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. Last quarter saw another one-third increase at prices between $24 and $29 and that was followed with a similar increase this quarter at prices between $24.50 and $28.50. The stock currently trades at $30.33. For investors attempting to follow Baupost, FOX is a good option to consider for further research.Allergan plc (AGN): AGN is a large top-five 9.40% 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 this quarter at prices between $189 and $243. The stock currently trades at $249. For investors attempting to follow Baupost, AGN is a good option to consider for further research.Theravance Biopharma (TBPH): TBPH is a 3.85% 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 $32.97. This quarter also saw a ~25% increase at prices between $24.50 and $38.50.Note: Klarman controls ~19% of the business.Colony Capital Inc. (CLNY), Northstar Asset Management Group (NSAM), and Northstar Realty Finance Corp. (NRF): These three stakes established last quarter were increased substantially this quarter. Combined, the position is now fairly large at ~9% of the portfolio.Note 1: The three businesses merged in an all-stock deal that closed last month. It was structured so that NSAM was renamed Colony Northstar (CLNS).Note 2: Baupost controlled ~6% of CLNY, ~8% of NRF, and ~10% of NSAM before the merger transaction closed last month.Credit Acceptance Corp. (CACC), Conyers Park Acquisition (CPAA) & Warrants, and Saban Capital Acquisition Corp. (SCAC): These are very small (less than ~0.75% of the portfolio each) stakes that saw substantial increases this quarter. The positions are still very small to indicate a clear bias. CPAA and SCAC are “blank check” companies that started trading in September 2016.Note: Baupost controls ~9% each of CPAA and SCAC.Stake Decreases:Cheniere Energy (LNG): LNG is Klarman’s largest 13F position at 11.74% 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. Last quarter saw an about turn: ~7% trimming. That was followed with a ~22% selling this quarter at prices between $35.50 and $43.50. The stock currently trades at $47.69.Note: Baupost controls ~9% of Cheniere Energy.Liberty Ventures (LVNTA): The tracking stock represents economic interest in businesses of Liberty Interactive (QVCA). The 0.71% Liberty Ventures position was purchased in Q2 2016 at prices between $34.70 and $40.34. There was a ~40% selling this quarter at prices between $36.50 and $41. The stock is now at $43.94.ChipMOS (IMOS): IMOS is a small 1.06 % 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 $15.64. There was minor trimming this quarter.Note: Baupost controls ~8% of IMOS.Centennial Resource Development (CDEV) previously Silver Run Acquisition (SRAQ), Citigroup WTS (C.WS.A), and Cascadian Therapeutics (CASC): These are very small (less than ~0.5% of the portfolio each) stakes that saw further reductions this quarter.Note 1: Baupost owns ~9% of CASC.Note 2: The Citigroup warrants have a strike price of $106.10 and expire on 01/04/2019. They currently trade at ~$2 (for ten warrants which can be converted to one Citigroup common stock, Yahoo Ticker C-WTA). The bulk of the original position was established at prices between $4.50 and $5.80.Kept Steady:PBF Energy (PBF): PBF is a fairly large 5.72% 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. Last quarter saw another ~50% increase at prices between $21 and $24. The stock currently trades at $24.56.Note: Klarman’s ownership interest in PBF is ~15%.Dell Technologies (DVMT): DVMT, the VMWare tracking stock is a fairly large 4.77% portfolio position. It started trading on last September 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.Note: DVMT currently trades at $65.12, a wide discount to VMW which is trading at $90.76.Antero Resources Corporation (AR): AR is a fairly large 4.47% 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 $25.83.Note: Klarman controls ~4.5% of the business.Veritiv Corporation (VRTV): VRTV is a 2.13% 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 $56.Note: Klarman’s ownership interest in VRTV is at ~19%.Innoviva Inc. (INVA) previously Theravance: INVA is a ~	2% 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 last quarter at prices between $10.53 and $13. The stock currently trades at $12.05.Note: Baupost controls ~15% of the business.Keryx Biopharma (KERX): KERX is a ~2% 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 $5.52. 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.Forward Pharma (FWP): FWP is a small ~1% of the US long portfolio stake established in Q4 2014 at around $22. The stock currently trades at $30.52.Note 1: The stock price doubled last month following settlement of a lawsuit with Biogen (BIIB) that netted $1.25B.Note 2: Klarman controls ~12% of the business.Atara Biotherapeutics (ATRA): ATRA is a ~1% 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 $16.10.Note: Klarman controls ~19% of the business.NovaGold Resources Inc. (NG): NG is a 0.56% 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 in the following quarter at prices between $3.54 and $5.42. There was another ~37% selling in Q2 2016 at prices between $5.05 and $6.51. The stock currently trades at $5.97.Paratek Pharmaceuticals (PRTK): PRTK is a small 0.41% 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 $32.50. Q2 2016 saw a one-third increase at prices between $12.50 and $17. The stock currently trades at $15.95.Note 1: Baupost Group controls ~9% of the business.American International Group (AIG) WTS, Liberty Braves (BATRA) (BATRK), Trilogy Metals (TMQ) previously Novacopper, Orexigen Therapeutics (OREX), and Sunrun Inc. (RUN): These are very small (less than ~1% of the portfolio each) stakes kept steady this quarter.Note 1: 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 2: Klarman’s ownership stake in TMQ is ~10%.Note 3: The 13F also list small positions in Theravance Notes & Theravance Biopharma Notes.The spreadsheet below highlights changes to Klarman's US stock holdings in Q4 2016:13G/A, Form 3/4 thru 11/16/2016: IMOS 13G/A 11/9/2016 - 0 shares - 0%. KIN 13G/A 11/9/2016 - 965K shares - 4.85%. SEMI - 13G/A - 10/7/2016 - 0 shares - 0%. INVA - 13G/A - 9/9/2016 - 17.37M shares - 15.29%. PBF - 13G/A - 9/9/2016 - 15.72M shares - 16.07%.13G/A, Form 3/4 thru 8/13/2016: OREX 13D/A 7/12/2016 - 7.4M shares - 37.5%. CASC 13G 7/8/2016 - 25M shares - 18.49%. KERX - 13D/A 6/1/2016 - 59.2M shares - 42.53%."