A Look Inside Billionaire Seth Klarman's Portfolio
Seth Klarman is one of the most highly respected investors ever. He is a value investor and portfolio manager of the investment partnership, the Baupost Group, founded in 1983. The Baupost Group now manages $7 billion and has average returns of nearly 20% annually since their inception. Seth Klarman is the author of the book "Margin of Safety," which currently sells for over one thousand dollars. Since he rarely gives public interviews, the best way to see his thoughts on the market is to see the top 10 stocks he has in his portfolio. In this video, we are going to go through Klarman's portfolio and see what stocks he owns. Stick around because, who knows, you might just get an idea for your own portfolio!
Unlike most value investors, there are a lot of tech companies and even SPACs (gasp) in Klarman's portfolio. Let's get right into it! The largest position in Klarman's portfolio is Liberty Global Class C, ticker symbol LBTYK. This position is worth around $1.5 billion dollars and accounts for roughly 12% of the entire portfolio. Liberty Global Class C stock trades for around $30 a share with a P/E ratio of 7.6. Klarman's investment fund, the Baupost Group, is actually the single largest shareholder of the company, owning nearly 15% of the entire company.
Liberty Global provides cable TV, phone, and internet access to its customers. It is the biggest cable network in the UK, Ireland, Belgium, Slovakia, and Poland. The company has sold its operations in Latin America, Austria, and Switzerland in recent years. The company has a market cap of $16.5 billion and had revenue of $12 billion in 2020.
The second largest position in the portfolio is Intel, ticker symbol INTC. This position is worth $1.2 billion dollars and accounts for 10% of the entire portfolio. Intel trades for around $50 a share and has a P/E ratio of 10. Intel designs, manufactures, and sells computer components and related products. The company's major products include microprocessors, chipsets, and many other computer and tech-related products. The company did $78 billion dollars in sales and $5.30 in earnings per share in 2020. Intel currently has a market cap just shy of $200 billion.
Before we move on to the next stock in the Baupost Group portfolio, I recently did a video that summarized the main points in Seth Klarman's book "Margin of Safety." You can watch the video here. A single copy of this book costs around a thousand dollars because it is so rare. So if you still want to learn about the information without paying that kind of money, make sure to check out the video.
The third largest position in the portfolio is eBay, ticker symbol EBA.Y. This position is worth north of $1 billion dollars and makes up 8.5% of Klarman's entire portfolio. eBay currently trades for $78 dollars a share and has a P/E ratio of 21, lower than both the S&P 500 and other technology stocks. eBay is an online marketplace where both new and used items can be sold. eBay originally got its start as an online auction platform where people could bid on rare collectible items. However, since the success of other online marketplaces, such as Amazon's third-party seller marketplace, eBay has tried to transition away from strictly an auction platform to a marketplace where people can buy new goods as well, with just one click instead of waiting days for an auction to end.
eBay makes its money by charging sellers a percentage of the value of the product they sold, as well as to promote listings and search results. Surprisingly, sixty percent of eBay sales occur outside of the United States. The stock has been quite hot this year, up 56% year-to-date. The company did $10.3 billion dollars in sales and $3.41 in EPS in 2020, with a current market cap of around $50 billion.
Next up is a company I had honestly never heard of before doing the research for this video. The fourth largest position in Klarman's portfolio is Qorvo, ticker symbol QRVO. This position is worth a little over $1 billion dollars and makes up 8.5% of the entire portfolio. The stock currently trades at around $165 per share and has a P/E ratio of 19. Qorvo is a leader in the development and commercialization of technologies and products for wireless and wired connectivity. Its products are made for mobile devices such as cell phones and cell tower infrastructure applications and aerospace and defense systems such as radar and satellites.
The company serves major cell phone manufacturers such as Apple, Qorvo's largest customer, and Huawei with 4G and 5G antennas and other communication equipment. To get a scale of just how much money Seth Klarman is running, his fund is the third largest shareholder in Qorvo. The company had sales of $3.2 billion dollars and an EPS of $6.31 in 2020, with a current market cap of $18 billion.
The fifth largest position in the portfolio is Viasat, ticker symbol VSAT. Another company I had not heard of before putting this video together. This is why I like studying great investors' portfolios; it helps you learn about new companies and better understand their thought process around investing. Viasat stock currently trades at $56 dollars a share, with a P/E ratio of 54. Viasat is an $800 million dollar position in the fund and makes up 6.5% of the portfolio. Viasat offers broadband, digital satellite communications, and wireless networking services, as well as satellite communication products such as network control systems and information distribution systems, modems, terminals, and simulation equipment.
The company had sales of $2.3 billion dollars and an EPS of $1.14 in 2020, with a market cap of $4.1 billion. Klarman's fund owns a staggering 22% of the entire company and is by far the largest shareholder. This means it would be difficult for Klarman to sell out of this position without significantly moving the stock price.
The sixth largest position in the fund is Alphabet, ticker symbol GOOGL. This position is worth $730 million dollars and makes up 6% of the entire fund. Alphabet is the holding company of Google, the firm behind the world's largest search engine Google, the world's most used smartphone operating system Android, and a variety of other internet-based services including YouTube. Alphabet's other holdings include Chrome, Gmail, Google Drive, and Google Maps. Alphabet stock currently trades at $2,800 a share and has a P/E ratio of 27.
The company is on pace to do $207 billion dollars in sales this year, more than double the sales it did just a few years back in 2018. Despite this impressive growth, the company is trading at a similar P/E ratio to that of the S&P 500, making the stock a favorite of many value investors who previously avoided investing in technology companies.
Next up in the portfolio is Micron Technology, ticker symbol MU. This position is worth $600 million dollars and makes up 5% of the entire portfolio. The stock currently trades at around $70 a share and has a P/E ratio of 12. Micron is one of the largest memory chip makers in the world. Its memory and storage solutions enable disruptive trends, including artificial intelligence, 5G, machine learning, and autonomous vehicles in industries like data centers, consumer, and automotive. Micron generates around 50% of its sales from the United States. The company had sales of $21.4 billion dollars and an EPS of $2.83 in 2020, with a market cap of $77 billion.
The eighth largest position in the portfolio is Facebook, ticker symbol FB. This position is worth over $500 million dollars and represents 4.5% of the total fund. Facebook stock currently trades at around $320 and has a P/E ratio of 22. This P/E ratio is significantly below the P/E ratio of the S&P 500 index as well as other large fast-growing technology companies. Facebook, with its core Facebook platform, as well as its family of apps that include Instagram and WhatsApp, has a staggering 2.8 billion monthly users, as well as 10 million businesses and entrepreneurs that advertise across the family of apps.
Facebook generates substantially all of its revenue from selling advertising placements to marketers. Its ads enable marketers to reach people and potential customers based on a variety of factors, including age, gender, location, interests, and behaviors, with the marketer being able to narrowly select the group of people that it wants to see a particular ad. It is clear to see why this form of advertising is more effective than the more traditional forms of advertising, such as TV ads, billboards, and newspaper ads, where everyone, regardless of how likely they are to buy the product, sees the same ad. Facebook is one of the most dominant digital advertising companies. The company is on pace to have sales of $120 billion dollars this year, tripling sales from 2017, just four years ago. Facebook is also on track to do $14 in earnings per share this year. Despite this fast growth and strong market position, the stock trades at a discount to the broader stock market. It's clear why this would appeal to a value investor like Seth Klarman.
The next stock in their portfolio is Willis Tower Watson, ticker symbol WLTW. This position is worth $435 million dollars and accounts for 3.5% of the portfolio. Willis Tower Watson stock currently trades at $244 dollars a share and has a P/E ratio of 24. Willis Tower Watson is a top global insurance brokerage and advisory firm. It provides brokering advice and software services. It also provides reinsurance and risk underwriting. Seth Klarman isn't the only large investor that thinks this company is undervalued. Recently, activist investors have been taking fairly large stakes in the company. Activist investors target companies that they believe are being mismanaged by executives and, as a result, are undervalued. They then lobby the firm to make changes to improve their operations and ultimately the profitability of the firm. If these changes are successful, the stock price can increase dramatically as a result, and that's how activist investors make their money. Willis Tower Watson had sales of $9.4 billion dollars and earnings per share of $11.70 last year. The company's current market cap is $31 billion.
The 10th largest position in Klarman's fund is International Flavors and Fragrances, ticker symbol IFF. This position is worth $300 million dollars and accounts for 2.5% of the total portfolio. The stock currently trades at around $150 per share, with a P/E ratio of 46. The company creates, manufactures, and supplies flavors and fragrances for the food, beverage, personal care, and household products industries. International Flavors and Fragrances has approximately 38,000 customers, of which 65% of its customers are small and mid-sized companies and the remaining 35% are from large global consumer product companies. The company had revenue of $5.1 billion dollars and earnings per share of $5.70 in 2020, with a current market cap of $37 billion.
Now that we have covered the 10 largest positions in Klarman's portfolio, I want to cover something interesting I noticed about it. Klarman has a ton of small positions in different SPACs. SPAC is an acronym for Special Purpose Acquisition Company, also known as a blank check company, which is a shell corporation listed on a stock exchange with the purpose of acquiring a private company, thus making it public without going through the traditional initial public offering process. These positions are surprising because a lot of value investors have come out as being vocal critics of SPACs. However, Klarman will see this as a value opportunity, which could explain why he's spreading his money out amongst a large number of these SPACs without taking a large position in any single one of them.
So there you have it! If you're interested in following my personal portfolio, use the link in my description to download the Public app and receive a slice of stock of your choosing with a deposit of as little as one dollar. And if you like this video, please give it a like and subscribe to the Investor Center. Talk to you soon!