Insider Monkey

12 Cheap Value Stocks To Buy According To Seth Klarman

Ramish Cheema
10 min read

In This Article:

In this piece, we will take a look at the 12 cheap value stocks to buy according to Seth Klarman. If you want to skip our analysis of the hedge fund and value investing, then take a look at 5 Cheap Value Stocks To Buy According To Seth Klarman.

Seth Klarman's Baupost Group is one of the biggest hedge funds in the world. As of June 2022, the firm had $26.3 billion in assets under management (AUM), placing it at 15 in the list of hedge funds ranked by AUM. Unlike most other hedge funds, Mr. Klarman, who currently runs Baupost and is the one most commonly associated with the firm, did not actually set up Baupost. In fact, the hedge fund was set up by a group of professors from Harvard and MIT, with Mr. Klarman asked to run the fund. Baupost was set up by the capital Harvard professor William Poorvu made after selling shares in a television station. The hedge fund investor is a graduate of the illustrious Harvard Business School, where he received his Master in Business Administration (MBA) along with peers such as Jamie Dimon who heads the world's biggest private bank JPMorgan Chase & Co. (NYSE:JPM) and Stephen Mandel of Lone Pine Capital.

Over time, Mr. Klarman would continue to capitalize on his Harvard and Ivy League links, and his first claim to fame would come during the financial crisis of 2008. This crisis would see him utilize an approach that is called Value Investing. Value Investing is quite popular in the financial world, and it has also influenced the trading decisions of Warren Buffett and enabled him to capitalize on a firm's fundamentals to bet that the share price will rise in the future. Simply put, value investing involves evaluating a firm's 'intrinsic value' and then checking to see how this compares to the current price in the market. The aftermath of the 2008 financial crisis saw Mr. Klarman literally seep in like an eagle on the equities market that had seen a massive outflow of capital. This would see him pile into distressed equities and bonds, which would see some of his bonds post double digit returns once the market stabilized.

These days, Baupost Group manages quite a sizeable portfolio and maintains its approach towards value investing. As of the first quarter of this year, the fund's portfolio was worth $5.8 billion, placing it high on the list of the funds with the largest portfolios. Diving deeper into the latest portfolio, Mr. Klarman's hedge fund added three new positions in the March quarter. These are Jazz Pharmaceuticals plc (NASDAQ:JAZZ), Seagate Technology Holdings plc (NASDAQ:STX), and Skyworks Solutions, Inc. (NASDAQ:SWKS). Two of these are in the semiconductor industry, which appears to be quite crucial and reminds one of Mr. Klarman's approach during the financial crisis. Just like the broader equity market was in a downturn back then, the chip sector was in the midst of a downturn throughout the tail end of last year and in early 2023 as well. In fact, fundamentally speaking, the sector is believed to have 'bottomed out' by the end of H1 2023 since the inventory that had created a glut in the market is finally believed to be clearing out. So naturally, and especially since the long term outlook for the chip sector estimates that it could be worth trillions of dollars, right now would appear to be the right time to buy and Baupost seems to have done exactly this.

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