It's that time of year again -- the period each quarter when hedge funds and other large money managers must publicly outline their recent holdings via 13F filings to the Securities and Exchange Commission. Let's check out the latest 13F from billionaire Seth Klarman's Baupost Group, along with a previous 13G filing from Warren Buffett.
Some people think SEC filings are too "stale" to look at. For instance, money managers don't have to file 13Fs until 45 days after a quarter ends.
But I think that's a very short lag, especially since the value firms whose 13Fs I monitor are all long-term investors. Their stock picks don't usually appreciate much in such short time periods. In fact, since the best value investors try to time market bottoms (which no one can perfectly predict), prices on stocks that they've bought have often fallen lower by the time firms file their 13Fs.
Baupost Group's 13F is a must-read to me. After all, Klarman's 20-year-plus track record of 20% annualized returns speaks for itself. The billionaire isn't perfect, but I've noticed a trend -- every time that Baupost makes a big bet of $1 billion or more, it almost always works out very well.
Here are two stocks that the firm's latest 13F includes:
Cheniere Energy (LNG)
Baupost boosted its position in liquid-natural-gas exporter Cheniere to a $1.3 billion stake during the first quarter.
I've discussed Cheniere before, and readers can see some of my past columns about the company here. What I'll note this time around is that Baupost began buying Cheniere when the stock was trading at around $60, then really loaded up when LNG fell to about $30. (The stock trades at about $35 today.)
Lastly, I'd add that mega-investor Carl Icahn has a huge long bet on Cheniere as well. That said, famed short seller Jim Chanos is shorting the name.
EMC Corp. (EMC)
Baupost's latest 13F also revealed a $1 billion bet on EMC, which is in the process of selling itself to Dell.
Dell plans to pay some $67 billion for EMC even thought the firm currently has about a $57 billion market cap. That seems too good to be true, but the stock seems worthy of a closer examination.
What Warren Buffett Likes
Now, let's look at Seritage Growth Properties (SRG), a stock Buffett disclosed taking an 8% stake in late last year.
"The Oracle of Omaha" almost always invests in stocks via Berkshire Hathaway (BRK.A, BRK.B), but Seritage only has a $1.5 billion market cap -- far too small to move the needle at Berkshire. Buffett usually takes a pass in such situations, but occasionally finds something interesting enough to buy for his personal portfolio. SRG fit that bill.
Seritage is brainchild of CEO Eddie Lampert of Sears (SHLD). Sears spun off more than 200 stores to the REIT last year, then leased them back. Because Lampert is a large shareholder in both firms, it's a safe bet that these leases pay good money.
Buffett reported taking his SRG stake as of Nov. 30, when the stock was trading in the mid-$30s. Seritage subsequently rose to about $53, but has since come down to around $46.
The Bottom Line
I believe prudent investors should always look to major investors' SEC filings to find good investment ideas.
My advice: Follow Wall street's market-beating investors, make sure that you understand a given investment, pay an attractive price and be patient. The results should be quite satisfactory!