Seth Klarman's Baupost Buys HP, BP After Shares Collapse

BOSTON (TheStreet) -- Seth Klarman, founder of Boston-based hedge fund Baupost Group, made big third-quarter bets on Hewlett-Packard(HPQ) and BP(BP), according to a 13F filing.

Klarman, who manages more than $20 billion and prefers to stay out of the media spotlight, is unlike other hedge fund managers who have made risky picks and lost money this year. Klarman is risk-averse in his value-investment approach, and his 1991 book Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor, only in publication briefly, is considered the value-investing manual. It now fetches hundreds of dollars on secondary markets.

Seth Klarman, Baupost Group

Baupost held just 22 stocks as of Sept. 30, with BP and Hewlett-Packard as the two largest holdings based on market value. Baupost bought 5.5 million shares of BP during the second quarter and added another 8.2 million shares in the third quarter to make it his portfolio's biggest long position at $495 million.

BP was a popular pick among value investors after the April 2010 rig explosion in the Gulf of Mexico. BP shares were down 18% as of Sept. 30 but have rallied sharply higher, adding nearly 20% since the end of the third quarter.

>>View Seth Klarman's Portfolio

Klarman's biggest bet in the third quarter was on HP, which is down 35% this year. The company went through a stunning transformation in the third quarter after the board of directors dismissed Leo Apotheker and hired Meg Whitman to take over as CEO. Since then, HP has reversed its previous decision to spin off or sell its main computer business.

Baupost Group bought more than 21 million shares of HP in the third quarter, a position that carried a market value of $465 million as of Sept. 30. Klarman also initialed new positions in Genworth Financial(GNW) and NovaGold Resources(NG).

Klarman's fascination with News Corp.(NWS) also continued into the third quarter. The media firm, which has been hampered this year by a phone-hacking scandal in the U.K., has rebounded from its lows of 2011 and is up 6%. Klarman added to his position in the company's Class A shares and initiated a new position in News Corp.'s Class B shares.

In addition to News Corp. and BP, Klarman upped his stake in Idenix Pharmaceuticals(IDIX), Sycamore Networks(SCMR) and Theravance(THRX), among others.

Klarman sold out of only two positions during the quarter: Audiovox(VOXX) and CapitalSource(CSE).

-- Written by Robert Holmes in Boston.

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