The potential for an acquisition of Theravance makes this stock interesting in 2010, especially given the recent uptick in M&A activity.
One new position in Baupost's portfolio is Solar Capital (SLRC), a firm that invests in middle market leveraged companies. Solar Capital was one of 2010's early IPOs, hitting the market in early February. Baupost took a $40.4 million position in the firm.
Since going public, Solar Capital has been the beneficiary of bullish analyst coverage, no doubt buoyed by major investments from the likes of Seth Klarman. Part of the positive tilt on the company, though, is thanks to its generous dividend payouts, which currently sit at 60 cents per quarter. That payout to shareholders is possible largely because of the favorable rates that Solar Capital generates on its lending investments. While that's a boon to investors when times are relatively good, another credit crunch could be a tough pill to swallow.
That said, the current economy should continue to support the hefty payout. With a strong management team and flush funding, expect Solar Capital to impress investors when it announces earnings on June 30.Another new position for Baupost last quarter was ADC Telecommunications (ADCT). The hedge fund took up a $36.5 million stake in the company. ADC Telecom is a broadband infrastructure company whose customers include telecom carriers, cable providers, and enterprise clients. As such, the company has business relationships with some of the biggest names in the industry, fuelling mid single-digit growth in recent years. With an increased focus on revamping old infrastructure right now, the company should continue to perform well. But don't expect to see big gains for your own portfolio in this play. Tyco Electronics (TEL) announced earlier this month that they'd be acquiring ADC for $12.75 per share -- a 40% premium to its former price, but only a 2.3% risk premium to current levels. To see the rest of Seth Klarman's plays, check out the Seth Klarman - Baupost Group Portfolio on Stockpickr.-- Written by Jonas Elmerraji in Baltimore.
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