Seth Klarman's Baupost Group Increases RHI Entertainment (RHIE) Stake ~ market folly

Monday, April 6, 2009

Seth Klarman's Baupost Group Increases RHI Entertainment (RHIE) Stake

Seth Klarman's Baupost group has filed an amended 13D and Form 4 on their position in RHI Entertainment (RHIE) due to activity on April 1, 2009. In the filings, we learn that Klarman has increased his stake in RHIE and he now owns 36.29%. They show ownership of 4,900,551 shares and as per the Form 4, have added 437,017 new shares at a price of $1.19 on March 30th, 2009. Klarman's stake in RHI is activist (hence the 13D rather than 13G) and they will undoubtedly chat with management about strategic direction and all that good activist stuff. As we've covered previously, Klarman has been adding to his RHIE position over time. In terms of other Baupost positions, Klarman has also been adjusting other names in his portfolio as well. You can view all of Baupost's holdings here. It will be interesting to see what Klarman has lined up with this massive RHIE stake.

In terms of background on Baupost and Klarman for those not familiar: 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% and is ranked 49th in Alpha's hedge fund rankings. 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.

Taken from Google Finance,

RHI Entertainment, Inc. "develops, produces and distributes new made-for-television movies, mini-series and other television programming worldwide. The Company also selectively produces new episodic series programming for television."

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