Baupost’s Seth Klarman Thinks Spinoffs Are ‘An Interesting Place To Look’

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Marketfolly recently posted a talk with The Baupost Group’s Seth Klarman from 2009, which some may remember as quite an interesting time in the markets. Mr. Klarman is considered one of the ‘great’ value investors and his words and writings are devoured by both aspiring and professional investors alike. The talk hits on a number of interesting areas (and is a recommended listen – I hadn’t seen it before), but of relevance to this site is one spot Mr. Klarman highlights as a place to look for ideas: spinoffs (big surprise there). Specifically, he noted during his talk that:

Spinoffs are an interesting place to look because there’s a natural constituency of sellers and there’s not a natural constituency of buyers

Very true.  While he isn’t the only value investor to highlight spinoffs (Joel Greenblatt’s book is probably the most famous), it’s always worth noting what someone of Mr. Klarman’s stature thinks is a good hunting ground. Despite their growing popularity, it seems his opinion hasn’t changed over the ensuing seven years as a quick look at the firm’s most recent 13F filing shows a number of spinoff related companies in the portfolio including:

  1. Twenty First Century Fox (FOXA)
  2. KLX Inc (KLXI)
  3. Novagold (NG) and Novacopper (NCQ)
  4. PayPal (PYPL)
  5. Theravance Biopharma (TBPH)…

…and more. Following his own advice, which is always good to see. Of course, Mr. Klarman’s most famous work, Margin of Safety, is no longer in print, but ridiculously expensive used copies can be obtained on the secondary market if that’s your thing. Of course, enterprising sleuths should be able to find a copy…

Disclosure: Author holds no position in any stock mentioned