In a year-end letter to investors reported by Bloomberg in February, Klarman lamented a scarcity of bargains. He did, however, like what he was seeing in energy. "Baupost wasted no time in redirecting additional investment team members into the energy area to sift through the carnage," he wrote.
In the first quarter of the year, Klarman continued to bet on the sector. His latest public holdings disclosure, corresponding to March 31, indicates that nearly 40% of his 27-stock portfolio is allocated to energy. Moreover, one of his top picks -- a new one -- happens to be a company that fellow hedge fund manager David Einhorn hates.
Here are seven energy stocks Seth Klarman is betting on.
Seth Klarman is a big fan of Cheniere Energy (LNG) . As of the end of the first quarter of 2015, the energy company comprises 18.1% of his public equity portfolio, and his stake is valued at $1.1 billion. When Baupost Group first began building a stake in Cheniere a year ago in the first quarter of 2014, its position was valued at $313.3 million.
The company last reported financials on April 30, including a net loss of $267.7 million for the first quarter of the year. Moreover, it raised eyebrows when regulatory filings revealed CEO Charif Souki sold 100,000 LNG shares on May 20.
Though 2015 hasn't been excellent for Cheniere, it hasn't been terrible, either. The stock has climbed 7.71% year-to-date through market close Friday.
Pioneer Natural Resources
Pioneer Natural Resources (PXD) is a new first-quarter buy for Seth Klarman, whose Baupost Group disclosed a $517.8 million stake as of March 31. The company has an 8.8% allocation in the firm's public equity portfolio.
Klarman's position in PXD pits him against fellow hedge funder and billionaire investor David Einhorn of Greenlight Capital. At the Sohn Investment Conference in May, Einhorn lambasted the fracking industry and went for the jugular on Pioneer, which he called the "mother-fracker."
Like many oil and energy companies, PXD has struggled in recent months. Its stock has declined 29.66% over the past year, though it is down just 0.69% in 2015.
Klarman bought into Antero Resources (AR) during the third quarter of 2014 with the purchase of 2.8 million shares. As of the first quarter of this year, he has more than tripled his holdings to 9.3 million shares. Antero now comprises 5.6% of his portfolio.
Zacks upgraded its rating on Antero Resources from sell to hold on Wednesday, while analysts at Howard Weil and BMO Capital Markets have labeled the company an outperform. The stock has had a relatively flat performance in 2015, dropping 1.39% year-to-date.
Seth Klarman left his PBF Energy (PBF) stake untouched in the first quarter of 2015 at 8.7 million shares. As of the end of the period, his position was valued at $239.9 million, accounting for 5% of his total holdings.
On April 30, PBF Energy reported a first-quarter profit of $87.3 million, exceeding Wall Street expectations. Executives also hinted at future acquisitions, though they didn't discuss specific plans. "We will always be interested in acquisitions," said Executive Chairman of the Board Tom O'Mally said during an earnings call. "We pursue every one that is out there. Over time, I believe we're going to succeed, one never knows."
PBF has climbed 0.68% year-to-date.
Baupost Group's $57.3 million stake in Kosmos Energy (KOS) as of the end of the first quarter makes up less than 1% of the fund's public equity portfolio. The Dallas-based company, through its subsidiaries, operates as an oil and gas exploration and production firm.
Kosmos took a dive in early May after missing analysts' expectations for earnings and revenue in the first quarter. But despite a rather poor performance over the past month, the stock is still up 6.01% so far this year. On May 19, the company announced another discovery off of the West African coast -- something that bodes well for future prospects.
Seth Klarman increased his holdings of Bellatrix Exploration (BXE) from 18.1 million shares at the end of the fourth quarter of 2014 to 21.8 million shares at the end of the first quarter of 2015. But given the stock's more than 25% drop in value during the first three months of the year, his total stake in the company fell in value to $53.1 million as of March 31.
Bellatrix has had a rough go on the market in 2015: Its price had fallen 22.53% year-to-date through market close Friday. However, it could soon begin to turn around. The company exceeded expectations with its May 5 earnings report, and Zacks upgraded the stock from a sell to a buy on May 12.
Alon USA Partners
Alon USA Partners (ALDW) is one of Seth Klarman's smallest positions, comprising just 0.3% of his public equity portfolio as of the end of the first quarter. His stake is valued at $17.5 million.
Alon, which owns and operates refining and petroleum products marketing operations, has had an impressive run in 2015. The stock has climbed 57.71% year-to-date.
On May 6, the company announced first-quarter 2015 results, including net income of $36.5 million -- below the $42.2 million recorded during the same period the prior year. At the same time, the board of directors declared a cash distribution for the first quarter of 71 cents.