Value Guru Surrounds News Corp., Jumps Into Biotech

BOSTON (TheStreet) -- Seth Klarman, founder of Boston-based hedge fund Baupost Group , made only one big new bet in the fourth quarter: a small biopharmaceutical company called Targacept(TRGT), according to the fund's latest 13F filing.

Klarman is a strict value investor who manages more than $20 billion and prefers to stay out of the media spotlight. Klarman's risk-aversion and his value-investment approach was documented in his 1991 book Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor, which was only in publication briefly and is considered the value-investing manual. It now fetches hundreds of dollars on secondary markets.

Seth Klarman, Baupost Group

Hedge funds that manage more than $100 million are required to disclose their equity holdings, options and convertible debt on a Form 13F filed to the Securities and Exchange Commission within 45 days of the end of a quarter. Funds aren't required to report short positions betting on declines.

Baupost Group held just 22 stocks as of Dec. 31, with oil giant BP(BP) and ViaSat(VSAT) as the two largest holdings based on market value.

BP was a popular pick among value investors after the April 2010 rig explosion in the Gulf of Mexico. BP shares were flat in 2011 but are up 8.7% this year already. Baupost sold 1.7 million shares of BP during the fourth quarter as the stock rallied about 20%.

>>View Seth Klarman's Portfolio

Klarman's newest bet in the fourth quarter was on Targacept, which is up nearly 16% this year. Klarman may have been attracted to the stock after it plunged sharply in early November after Phase III trial results for its TC-5214 depression treatment failed to meet endpoints. Shares of Targacept dropped more than 60% during the quarter. However, Targacept only represents about 1% of Baupost's portfolio.

Klarman didn't initiate any other new positions in the quarter, although he did add to positions in Class B shares of News Corp.(NWS) (which have voting rights), NovaGold Resources(NG), Idenix Pharmaceuticals(IDIX), Aveo Pharmaceuticals(AVEO) and Allied Nevada Gold(ANV).

Klarman sold out of only one position during the quarter: BreitBurn Energy(BBEP), an oil and gas property company whose shares jumped nearly 20% during the fourth quarter. The stock had been in Baupost's portfolio for several years.

In addition to BP, Klarman reduced his stake in a handful of other companies, including tech giant Hewlett-Packard(HPQ), Class A shares of News Corp.(NWS), PDL BioPharma(PDLI), and health care diagnostics company Alere(ALR).

Hewlett-Packard had been one of Klarman's newest bets after he acquired more than 20 million shares of the company during the third quarter. Shares of HP advanced more than 10% during the fourth quarter, which may have prompted Klarman to take some profits. Shares are up another 13% so far in 2012.

-- Written by Robert Holmes in Boston.

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