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.

>To contact the writer of this article, click here: Robert Holmes.

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