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."

David Einhorn's Greenlight Capital Files Amended 13D on MI Developments (MIM)

In an amended 13D filed with the SEC on March 31st, David Einhorn's hedge fund Greenlight Capital has disclosed a 12.3% ownership stake in MI Developments (MIM). The filing was made because on March 30th, 2009, "counsel to Greenlight Inc. submitted a complaint to the Ontario Securities Commission in an effort to ensure MID’s compliance with applicable minority protection regulations prior to entering into certain transactions with its subsidiary, Magna Entertainment Corporation (“MEC”)." As per the filing, the aggregate amount of shares beneficially owned is 5,655,235.

Since this is an amended 13D filing, indicating an activist stake, there's obviously lots going on behind the scenes in regards to Magna's auction plan and this filing references that. For the rest of Greenlight's portfolio, check out their most recent 13F filing, which details their positions as of December 31st, 2008. Since December, Greenlight has been pretty active, as we've also covered their latest new positions in Jones Apparel (JNY) & Harman (HAR), as well as their most recent 13G filing on Ticketmaster (TKTM). Additionally, we've noted in that Einhorn had picked up positions in gold (GLD) & gold miners (GDX) among other things, as noted in our Greenlight investor letter portfolio update.

Greenlight Capital is a $6 billion fund ran by David Einhorn that specializes in spin-offs and value investing and has seen annual returns of over 20%. Einhorn was -1.5% for February 2009 and sits at -0.03% for the year as of the end of February, as mentioned in our latest hedge fund performance numbers list. Einhorn's name has been popping up in the media a lot over the past year, as he talked about his well documented short position in Lehman Brothers (LEH). And, while that position paid off handsomely for him, it barely offset losses he experienced from other positions. He was caught in the massive Volkswagen short squeeze as he detailed in one of his latest investor letters. Einhorn has also recently detailed the saga between his fund and Allied Capital, a company he shorted, in his book Fooling Some of the People All of the Time: A Long Short Story. It gives you an inside perspective as to how Greenlight constructs and researches their investment theses and we highly recommend it. Greenlight approaches things by identifying mispricings in the markets and going from there.

Taken from Google Finance,

MI Developments is "a real estate operating company engaged in the ownership, management, leasing, development and acquisition of industrial and commercial real estate properties. The Company also own land for industrial development and own and acquire land that would be developed for mixed-use and residential projects."

Maverick Capital Makes Silly Calculation Error

In a recently further amended 13G filing with the SEC, hedge fund Maverick Capital has updated their position in CSII. In a very silly mistake, Maverick has noted in the amended filing that they "inadvertently reported a miscalculation of the percentage" (of shares beneficially owned by the reporting persons). In the initial amended 13G filing, Maverick had a 16.2% stake in the company, which is a miscalculation. Now, as you below, they are listed as owning 15.3%.

So, their shares owned amount remains the same, but the percentage ownership stake (as calculated by them) has been adjusted to correct their error. Maverick now shows a 15.3% stake in Cardiovascular Systems (CSII) with 2,228,441 aggregate amount beneficially owned. This just goes to show that while many hedge funds have some very talented minds, everyone makes mistakes and is human.

This was a new position for them as of March 10th, as they did not own it when we covered their portfolio prior to that. Again, please note, Maverick has not altered the amount of shares they own. They are simply amending the filing to correct their calculation error.

If you're unfamiliar with Maverick, here's their background: Lee Ainslie started Maverick Capital back in 1993 with $38 million. Nowadays, the fund is worth $4 billion. Ainslie, like many of the other fund managers we've profiled, has a background rooted in learning from legendary great Julian Robertson at Tiger Management. These proteges (nicknamed 'Tiger Cubs') learned from the best and have had great success running their own funds. Some of the other Tiger Cubs include Stephen Mandel's Lone Pine Capital and Andreas Halvorsen's Viking Global. Maverick's strategy is straight up stock picking, both long and short. While they focus on both the long and short sides of the book, they do not employ pairs trades.

They try to hedge their positions like the true definition of a hedge fund. Maverick uses a value approach (obviously learned from Julian) and one of their most popular metrics is finding companies and comparing their enterprise value to sustainable free cash flow. Their Maverick Fund finished -26.2% for 2008, as noted in our year-end hedge fund performance numbers post.

Taken from Google Finance,

Cardiovascular Systems is "a biopharmaceutical company focused on discovering, developing, in-licensing and commercializing anti-infective products. The Company had been developing its product candidate REP3123, an investigational narrow-spectrum antibacterial agent for the treatment of Clostridium difficile (C. difficile) bacteria and C. difficile infection and its other anti-infective programs based on its bacterial deoxyribonucleic acid (DNA) replication inhibition technology."