Few value investors garner the reputation and success of Warren Buffett. The compounded annual returns at Berkshire Hathaway (NYSE:BRK.A) since Buffett took over are legendary and well known in value circles. Over the past 25 years or so, Seth Klarman has earned a spot right up there with Buffett. In fact, when asked about value investors to keep an eye on, Buffett has mentioned Klarman on more than one occasion.

IN PICTURES: 7 Tools Of The Trade

The Results Do The Talking
When it comes to investment skill, a long-term track record is the only defining characteristic. Since Klarman began his investment fund Baupost in 1983, it has posted an average annual total return of over 20%, according to data provided by the hedge fund group. That's a remarkable feat considering the pullbacks the market has had over those past 25 plus years.

As we wrap up what looks to be one of the best performing years for the market in years, it pays to look at some of Klarman's biggest bets. Klarman is willing to wait years for his thesis to play out, but some of his holdings may be worthwhile ideas even today.

A Diverse Group

Baupost's biggest holding continues to be media conglomerate News Corp (NYSE:NWS) which currently trades at $14. Baupost paid less than $14 a share, but the theory is that the sum of the parts is much greater than the whole. Klarman's favorable outlook on media stocks appears strong as Baupost also has a sizable stake in Liberty Media (Nasdaq:LINTA).

The investment fund has several bets on the biopharmaceutical industry with holdings such as Theravance (Nasdaq:THRX) and Enzon Pharmaceuticals (Nasdaq:ENZN).

Baupost has a history of success with biopharmaceutical names, the most recent being Facet Biotech (Nasdaq:FACT), of which Baupost is the largest shareholder according to the most recent filings. Baupost came to own Facet through the fund's ownership of PDL Biopharma (Nasdaq:PDLI), which spun off Facet as a separate entity. As a result of the spin-off, Baupost's gains likely exceeded 100% in under a year. (For related reading, check out Parents And Spinoffs: When To Buy And When To Sell.)

The Bottom Line

It's always a good idea to watch the pros, especially guys like Seth Klarman. It's even a better to watch them closely during strong bull markets since the population of undervalued investments becomes almost non-existent. (For more, check out The Value Investor's Handbook.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Stock Analysis

    Will J.C. Penney Come Back in 2016? (JCP)

    J.C. Penney is without a doubt turning itself around, but that doesn't guarantee the stock will respond immediately.
  2. Stock Analysis

    Allstate: How Being Boring Earns it Billions (ALL)

    A summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
  3. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  4. Stock Analysis

    What Exactly Does Warren Buffett Own?

    Learn about large changes to Berkshire Hathaway's portfolio. See why Warren Buffett has invested in a commodity company even though he does not usually do so.
  5. Investing Basics

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  6. Economics

    Is Wall Street Living in Denial?

    Will remaining calm and staying long present significant risks to your investment health?
  7. Stock Analysis

    When Will Dick's Sporting Goods Bounce Back? (DKS)

    Is DKS a bargain here?
  8. Investing News

    How AT&T Evolved into a Mobile Phone Giant

    A third of Americans use an AT&T mobile phone. How did it evolve from a state-sponsored monopoly, though antitrust and a technological revolution?
  9. Stock Analysis

    Home Depot: Can its Shares Continue Climbing?

    Home Depot has outperformed the market by a wide margin in the last 12 months. Is this sustainable?
  10. Stock Analysis

    Yelp: Can it Regain its Losses in 2016? (YELP)

    Yelp investors have had reason to be happy recently. Will the good spirits last?
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center