Seth Klarman is not as known as such trading greats as Warren Buffett, George Soros or Carl Icahn, but his track record is certainly up there with the best.

Perhaps even more impressive than the 20%-plus annual returns he's delivered since launching his hedge fund in the early 1980s (he's returned 6,133% since 1982) is the success of his book,

Margin of Safety


By "success," I don't mean to suggest the book was a bestseller that sold many copies. Rather, the price of the book itself has soared almost like shares of


. Currently on eBay you can pick up copies of

Margin of Safety

for $600 because the out-of-print book is in such high demand from hedge fund managers.

The book's title refers to what Buffett has often said are the three most important words in investing. Buffett, in turn, was quoting Benjamin Graham and David Dodd's classic book,

Security Analysis

. Graham looked for margin of safety by seeking companies with hard assets -- cash, real estate, equipment, etc. -- that would be worth more liquidated than the value of the company's shares trading in the market.

Klarman just updated his

Securities and Exchange Commission

filings to reflect the newest positions of his hedge fund,

Baupost Group

, and the results were surprising.


a previous article

, I mentioned Klarman held shares of


(INSP) - Get Report

. In the past quarter, he has increased this holding 271%, and the position now represents close to 5% of his total holdings.

As I mentioned in that column, every aspect of InfoSpace's business is declining. Yet it has valuable assets in its search business, and most importantly, it has $400 million in net cash. Despite all of the downturns in the company's business, analysts recently upped their average expectations on next year's earnings from 5 cents a share 90 days ago to 15 cents a share now.

Others who count InfoSpace among their holdings are

Renaissance Technologies

, the

Jacob Internet fund


House Speaker Nancy Pelosi


Another position that Klarman increased in his latest securities filing was

Multimedia Games


, a maker of slot machines primarily for casinos run by Native American tribes.

I'm intrigued by this because Multimedia Games is also owned by

Prentice Capital

. Prentice was started by two former SAC Capital traders and was funded, in large part, by SAC Capital, one of the best funds out there. My guess is that Prentice often paves the way for SAC, and SAC has a tendency to piggyback Prentice. Prentice and SAC have shared positions such as

Wet Seal

( WTSLA), among other stocks.

Multimedia Games has been hurt in its core market of casinos in Oklahoma by slower sales and competition from

International Game Technology

(IGT) - Get Report

. However, Wall Street doesn't seem to be taking into account that by the third quarter of 2007, sales of machines to Mexico will begin contributing to earnings, and the potential is for Mexico to far outshine Oklahoma in sales.

A hedge fund manager I spoke to who wished to remain anonymous believes that Multimedia Games' expansion into Mexico would result in an additional dollar a share in earnings per year. Another hedge fund that's been loading up on Multimedia Games is

Sowood Capital


I haven't touched on Klarman's brand-new holdings, which include

Encore Wire

(WIRE) - Get Report


Apollo Group


, but it's worth noting that Klarman likes to buy stuff that everyone else has irrationally beaten down. As he has stated: "The Baupost Group seeks situations triggered by urgent, panicked or mindless selling."

For his latest transactions, check out

Klarman's portfolio page

on Stockpickr. Klarman also has been loading up for the past year on so-called blank-check companies, commonly referred to as SPACs (special purpose acquisition companies). I wrote a post on Stockpickr titled "

Why Does Seth Klarman Like Blank Check Companies?

" in which I discuss why one would buy SPACs in the first place and which ones look interesting.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider Multimedia Games and Wet Seal to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

At the time of publication, Altucher and/or his fund had no positions in stocks mentioned, although positions may change at any time.

James Altucher is a managing partner at Formula Capital, an alternative asset management firm that runs several quantitative-based hedge funds as well as a fund of hedge funds. He is also the author of

Trade Like a Hedge Fund


Trade Like Warren Buffett

. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback;

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