Billionaire Seth Klarman founded and runs successful hedge fund Baupost Group LLC. Klarman considers himself a value investor and believes that investors should not panic when the market fluctuates. He is considered to have an unconventional, but conservative investment style. He isn’t opposed to keeping cash in his portfolio until he discovers an investment that has a fair price and growth potential.
The $6.92 billion fund generated a 1.21% return for investors in the first quarter. Klarman invests mostly in technology stocks, with basic materials and healthcare to follow. Let’s take a look at the billionaire’s Q1 activity in Micron Technology, Inc (NASDAQ:MU) and Paypal Holdings Inc (NASDAQ:PYPL).
Seth Klarman Stats
Micron Technology, Inc
In Q1, Klarman has distanced itself from Micron, a leading manufacturer in microchip technologies, by completely selling out his stake in the company. Problems for Micron started to surface in 2013, when the development of faster and bigger flash storage and integrated circuits led to a severe supply versus demand imbalance. This was further aggravated by the introduction of new technologies like smaller wafers in 2014. This growing trend of increased competition, resulting in an oversupply of DRAM and NAND technologies, indicates more difficulty for Micron in the future. The quarterly report had reported both declining revenue of 8% and a decreased profit margin of close to 14%. Micron’s stock has soared 26% since Baupost sold out its stock. According to analyst Romit Shah of Nomura Holdings this was due to, “evidence of shortages in supply, that pricing was firming and that the company had executed in delivering much more 20 nanometer chip volume in the marketplace.”
Paypal Holdings Inc
Additionally, Klarman reduced his holdings in Paypal by 36.5%, now making up close to 4% of his total holdings. Although some positive results had been displayed with a new feature introduced by PayPal, OneTouch, there has been an increase in competition from Square, Visa and MasterCard that is worrying investors. With more people having access to prepaid virtual credit cards, PayPal seems to be fighting a losing battle. Originally, PayPal’s core business had been to reduce fraud and risk to its clients by acting as a secure payment gateway. With the advent of virtual credit cards, this perceived risk is also diminishing due to the fact that virtual credit cards cannot be overdrawn like their regular counterparts. Another competitor Paypal has to worry about is Apple, who is also planning on commoditizing the convenience and safety of secure payments, something PayPal has built a strong foundation on. The stock has dropped 9.12% since Klarman reduced.
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