Baupost Group’s Portfolio & 10 Largest Public Equity Investments
Baupost’s public-equity portfolio is not heavily diversified. Instead, its holdings are concentrated, featuring high-conviction ideas. The portfolio numbers only 30 equities, the 10 most significant of which account for 69.7% of its total composition. The fund’s largest holding is Alphabet Inc. (GOOGL), occupying around 15.63% of the total portfolio.
Source: 13F filing, Author
Alphabet Inc. (GOOGL) (GOOG)
Shares of Alphabet came under severe pressure last year as the macroeconomic turmoil, including reducing advertising spending and a strong dollar materially impacted the company’s ability to grow. Additionally, due to accelerated hiring and an overall increase in spending, the company’s profitability had been compressed in recent quarters. However, following increased optimism post the company’s most recent results, the stock has rebounded notably.
The company continues to feature one of the healthiest balance sheets in the market, management returns tons of cash to shareholders through stock buybacks, and its overall performance should rebound once the overall market conditions improve. Alphabet is Baupost’s largest holding, with the fund boosting its position by a signifcant 46% during the quarter.
Viasat, Inc. (VSAT)
Media conglomerate Viasat is Baupost’s second-largest holding, accounting for roughly 13.2% of its portfolio. In the current landscape, legacy media conglomerates have been in trouble as content creation is becoming increasingly decentralized.
Companies such as Netflix (NFLX), Amazon (AMZN), and even Apple (AAPL) have started producing their own content, while the news outlets have moved mostly online, generating sales through ads or a subscription fee.
In our view, Baupost holds a stake in Viasat as an activist investor due to the fund holding 21.3% of its total outstanding shares. This indicates the possibility that Baupost wants to have an active influence on how the company is run, with a potential aim towards modernizing.
For retail investors, the position could be a risky long-term bet, though an admittedly attractively priced one.
Qorvo, Inc. (QRVO)
Qorvo develops and markets technologies and products for wireless and wired connectivity worldwide. It is the fund’s largest holding. If the forecasts regarding 5G are realized, the semiconductor industry (along with Qorvo) is likely to enjoy massive growth over the next few years.
At the same time, the company’s revenues are expanding, and Qorvo has started delivering sturdy profits as well. Performance has lagged in recent quarters, illustrating the company’s cyclical nature, nonetheless.
Baupost trimmed its position by around 18% during the latest quarter. The company is the fund’s third-largest holding.
Veritiv Corporation (VRTV)
Veritiv Corporation functions as a B2B provider of value-added packaging products and services, as well as facility solutions, print, and publishing products and services internationally.
Note that while Veritiv’s shares have performed well over the past few years, the company’s business model suffers from extremely low margins. Net income margins over the past four quarters amount to just 4.8%. Hence the company’s ultra-low valuation multiple of 0.2X from a price/sales perspective.
The company is Baupost’s fourth-largest holding and the position was held stable during the quarter. Baupost holds around 24.5% of the company’s total shares, meaning it has an active influence on the company. The fund has been accumulating shares since Q3-2014.
Warner Bros. Discovery, Inc. (WBD)
Warner Bros. Discovery is an international mass media company and one of the largest in the space globally. The stock has now declined to the same levels it was trading 15 years ago, as the combined company has had a hard time integrating its assets and having them produce solid cash flow. On the one hand, Warner Bros. Discover already achieved $750 million in incremental synergies last year, while this year, those synergies are expected to rev notably to $2.75 billion and $3.5 billion in 2024+. On the other, such improvements remain highly uncertain.
The fund trimmed its position on the stock by 18% during the quarter. Warner Bros. Discovery is now Baupost’s fifth-largest holding, and the fund owns 1% of the company’s total outstanding shares.
Fidelity National Information Services, Inc. (FIS)
Fidelity National Information Services, Inc. is a provider of financial technology services for merchants, banks, and capital markets businesses. The company was founded in 1968 and is headquartered in Jacksonville, Florida. FIS offers technology solutions for retail and institutional banking, payments, asset and wealth management, risk and compliance, payment processing, consulting, and outsourcing.
