"Tracking Seth Klarman’s Baupost Group Holdings – Q3 2014 Update"
"Seth Klarman’s US long portfolio decreased from $6.14B to $5.74B this quarter.Baupost Group significantly increased Cheniere Energy, eBay Inc., Keryx Biopharma, and PBF Energy.The US long equity holdings continue to be heavily concentrated with the top-three positions accounting for 58% 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 11/14/2014. 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 2014.Klarman’s US long portfolio decreased ~7% from $6.14B to $5.74B this quarter. The decrease was primarily due to the large stake disposal of Idenix, which got acquired by Merck for a huge premium. The number of holdings is at 27 but five of them are very small positions that together account for just 1.10% of the 13F portfolio. The stakes are heavily concentrated with Micron Technology, Cheniere Energy, and ViaSat Inc. together accounting for around 58% of the entire US long portfolio.On November 10, 2014 Klarman filed regulatory forms that showed two new stakes:  a) a 13G  that disclosed a 12.86% ownership interest (~2.5M shares) in Atara Biothereapeutics (ATRA), and b) a 13G  that disclosed a 11.72% ownership interest (~5.4M shares) in Forward Pharma (FWP). ATRA and FWP stakes are currently valued at ~$58M and ~$120M respectively.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:Antero Resources Corporation (AR), Ocwen Financial (OCN), & Veritiv Corporation (VRTV): These are medium-sized positions acquired this quarter. AR is a 2.64% of the US long portfolio established this quarter at prices between $54.50 and $65.71 and the stock currently trades at $52.51. OCN is a 3.19% of the US long portfolio established this quarter at prices between $25 and $37 and the stock currently trades well below that range at $20.60. VRTV is a 2.06% of the US long portfolio established this quarter at prices between $32.50 and $50.22 and the stock currently trades at $46.15. Klarman’s ownership interest in AR, OCN, & VRTV are at ~1%, ~5.6%, and ~14.75% respectively.Stake Disposals:Idenix Pharmaceuticals (IDIX): IDIX posted a stunning 300% return last quarter as a result of the acquisition of IDIX by Merck (MRK) at $24.50 per share cash. The transaction closed in early August. Klarman’s position was built-up over several quarters starting in Q2 2011. It was a very volatile stock and the price fluctuated between $3.50 and $15 during the period of the stake acquisition. The bulk of the shares were purchased at prices between $2.93 and $5.93 since Q2 2012. Q4 2013 saw a ~25% stake increase at prices between $3.56 and $4.85 and that was followed up with a huge 16.42M stake increase in Q1 2014 at $6.50 per share on 02/04/2014.Stake Increases:Cheniere Energy (LNG): LNG is a large 15.61% of the US long portfolio position established in Q1 2014 at prices between $41 and $55. The position was increased by around 5.8% last quarter at prices between $54.28 and $71.70. This quarter, the stake was again increased by ~87% at prices between $70 and $84.29. The stock currently trades at $71.86. The large stake build-up indicates a clear bullish bias.Note: 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.eBay Inc. (EBAY): EBAY is a medium-sized 3.62% of the US long portfolio stake established last quarter at prices between $48.25 and $55.89. It was increased by ~37% this quarter at prices between $50 and $56.63. The stock currently trades at $54.36. 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.Keryx Biopharma (KERX): KERX is a medium-sized 4.38% of the US long portfolio position established in Q1 2014 at prices between $12.16 and $17.04. Last quarter, the position was increased by two-thirds at prices between $12.11 and $17.04 and this quarter the pattern continued with a ~74% stake increase at prices between $12.71 and $18.19. The stock currently trades at $15.21 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 0.49% 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. This quarter saw a ~9% stake increase at prices between $9.25 and $19.38 and the stock currently trades at $8.74. KIN share-price dropped by around one-third on August 20, 2014 when the company announced the failure of their canine arthritis drug in a clinical trial.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. This quarter, the position saw another 28% increase at prices between $23.89 and $28.41. The stock currently trades at $27.09. On November 10, 2014, Baupost disclosed through a 13G  that his ownership interest in PBF has reached 10.37% (8.7M shares). The significant stake build-up spanning several quarters indicates a bullish bias.Stake Decreases:Boyd Gaming (BYD): BYD is a very small 0.17% stake. The original position was purchased at prices between $10.41 and $13.27 last quarter but was reduced by two-thirds this quarter at prices between $9.46 and $12.47. The stock currently trades at $12.06.Theravance Inc (THRX): THRX is a 5.90% of the US long portfolio position. 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. Last two quarters have seen minor selling. The stock currently trades at around $13.23, having dropped over 50% since the split-up of TBPH from THRX.NOTE: THRX split-up into two businesses in the 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.Syneron Medical Ltd. (ELOS): ELOS is a 0.52% of the US long portfolio position that had been kept steady since Q3 2011. This quarter, the stake was reduced by ~25% at prices between $9.74 and $11.03 and the stock currently trades at $10.29. It is a long-term position first purchased in Q2 2006.Kept Steady:ChipMOS Technologies (IMOS): IMOS is a small 1.29% 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 $21.89. Although the relative sizing of the position is small, it is significant that Klarman owns 9.84% of the shares outstanding.Citigroup WTS (C.WS.A): The warrants have a strike price of $106.10 and expire on 01/04/2019. They currently trade at $9 (for ten warrants which can be converted to one Citigroup common stock, Yahoo Ticker C-WTA). The position was increased by ~18% last quarter. The bulk of the 1.22% 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.Kosmos Energy (KOS): The small 0.82% KOS position was purchased last quarter at prices between $10.05 and $11.23 and it currently trades at $9.66.Micron Technology (MU): MU is Klarman’s largest position at 30.82% of the US long portfolio. 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. The stock currently trades outside those ranges at around $32.62. Q4 2013 saw a ~20% stake reduction at prices between $16.55 and $23.14. Klarman is sitting on large gains on this position.NovaGold Resources Inc. (NG): NG is a 1.14% 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 below the low-end of those ranges at $2.88.RF Microdevices (RFMD) & TriQuint Semi (TQNT): RFMD & TQNT are 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% last quarter 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% last quarter at prices between $12.75 and $16.79. RFMD currently trades at $13.57 and TQNT at $22.60. RFMD & TQNT has announced a merger of equals to form a new company named QorvoTM.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 $67.61. He is sitting on huge gains on the position. The stock was up ~60% in 2013 and is up another ~8% so far this year.Theravance Biopharma (TBPH): TBPH is a 2.43% of the US long portfolio position established last quarter 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 ~24% since the May spinoff.Sunedison Semiconductor (SEMI): SEMI is a 1.40% of the US long portfolio position established last quarter at prices between $14.37 and $17.76. The stock currently trades at $17.43. SEMI was spun-off from Sunedison Inc. (SUNE) on May 22, 2014.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, Aveo Pharmaceuticals (AVEO), and Novacopper (NCQ). With AOI, it should be noted that Klarman controls 7.24% of the business.The spreadsheet below highlights changes to Klarman's US stock holdings in Q3 2014:Note 1: RFMD and TQNT announced a merger in Feb 2014. Incorporate that info into the next round of this series.Note 2: KERX stake increased on September 30, 2014 to 18.3M shares (19.93%) from 10.5M shares. The stock traded at around $13.5 at the time. His overall cost-basis is around there as well.Note 3: Klarman also has a ~10% position in LNG (ASX), a similar business as Cheniere Energy (LNG). It was increased significantly in October."