market folly

Seth Klarman's hedge fund Baupost Group has amended the 13D they filed on Facet Biotech (FACT) which we originally covered here. This amendment comes due to activity on April 27th, 2009 and Baupost still shows a 17.8% ownership stake in FACT. The aggregate amount of shares beneficially owned by them is 4,374,407 shares. Please note that Baupost has not altered the amount of shares they own. They have filed the amendment to state their intentions.

Since a 13D is a filing for activist investments, Baupost filed this statement in the amendment: "The Reporting Persons intend to discuss with the management and board of directors of the Issuer potential changes to the composition of the board of Issuer, as well as aspects of its business, operations, governance, strategy, capitalization, ownership and future plans of the Issuer." So, in plain-jane terms, Baupost is simply going to talk to FACT management and do their activist feather-ruffling to try to institute some changes to generate shareholder value.

Klarman received his MBA from Harvard Business School and started working at Baupost at age 25. Over the past 25 years, Baupost has seen an annual compound return of 20%, is ranked 13th in the 2009 hedge fund rankings, jumping way up from being ranked 49th in Alpha's 2008 hedge fund rankings. Baupost Group's tremendous performance over the years is one of the main reasons that we selected them as one of the hedge funds in our custom Market Folly hedge fund portfolio. Our custom portfolio has seen a total return of 194% since mid-2002 and is returning 17% annualized. It's very evident that Baupost's sterling reputation and performance is a big contributor to our custom portfolio's solid numbers.

Klarman has always considered himself a value investor and has been patient through the market turmoil. The past few years they have had nearly half their $14 billion in assets in cash. But, with turmoil comes opportunity. And, as such, Baupost's cash has been gradually deployed by Klarman and Baupost's 100 employees, leaving them with around a fourth of assets left in cash. Klarman's investment process is detailed in his book Margin of Safety. In it, he lays out a "how-to" on risk-averse value investing. The book is no longer actively printed and is very hard to find. His take on recent market action can be viewed in his interview with Harvard Business School and his thoughts from Value Investor Insight.

In addition to their activity with FACT, Baupost has been pretty active with the rest of their portfolio as well, having just increased their position in RHI Entertainment (RHIE) and having filed numerous other SEC filings as well. You can view the rest of Baupost's portfolio here.

Taken from Google Finance,

Facet Biotech is "a biotechnology company. The Company is focused on developing therapeutics for cancer and immunologic diseases. Its products include Daclizumab, Volociximab, Elotuzumab, PDL192, and PDL241. Daclizumab is a humanized monoclonal antibody, with a potential in a range of inflammatory diseases, including multiple sclerosis. It can be used as a maintenance therapy for organ transplant. Volociximab is a chimeric monoclonal antibody, with a potential in treating a range of solid tumors and its role in angiogenesis also aid in the treatment of age related macular degeneration (AMD). Elotuzumab is a humanized monoclonal antibody used to treat multiple myeloma. PDL192 is a humanized monoclonal antibody used to treat tumor indications including pancreatic, colon, lung, renal, breast, head, and neck cancers. PDL241 is a humanized monoclonal antibody, with a potential in immunologic diseases."