Expensive stocks frustrate another value-investing legend, report says
Published: Sept 11, 2017 11:33 a.m. ET
Seth Klarman’s Baupost to return some cash to investors: Bloomberg
DEPUTY MARKETS EDITOR
Apparently Seth Klarman can be added to the list of high-profile value investors frustrated by expensive stocks and a lack of investment opportunities.
Bloomberg reported late Friday that Klarman’s $30 billion Baupost Group plans to return an unspecified amount of capital to investors by year-end due to a lack of opportunities. A Baupost spokeswoman declined to comment on the report.
Bloomberg said Baupost also returned capital to investors in 2010 and 2013 for similar reasons.
Klarman might not be a household name, but he is widely regarded as one of the greatest value investors of all time. Since its founding in 1983, Boston-based Baupost Group produced net gains after fees of $25.3 billion through the end of 2016, ranking it fourth on the list of the world’s top money managers compiled by London-based LCH Investments. A first edition copy of Klarman’s 1991 book, “Margin of Safety,” is available for $860 on eBay EBAY, +0.90%
Value investors seek stocks that they believe are undervalued by the market. A more than eight-year bull market has made stocks expense on a number of historical measures, leaving fewer bargains to be found.
A popular fund that tracks value, the Russell 2000 Value Index RUJ, +1.20% is down 2.1% so far in 2017, compared with a nearly 11% gain for the S&P 500 index SPX, +0.95% and a similar year-to-date advance for the Russell 2000 Growth Index RUO, +0.80% The Dow Jones Industrial Average DJIA, +1.09% maintains a rise of about 11.4%, while the Nasdaq Composite Index COMP, +1.02% is on track for a return of more than 19% over the same period.
So-called growth investing, focuses on buying stocks that have been rising consistently, has been one of the styles often pit against value and one that has outperformed amid a record run for equities.
Read: A major value fund mirrors a major growth one more than you may expect
The slump in value has led to frustration for a number of investors who adhere to that investment style. Activist fund ValueAct Capital Management planned in May to return $1.25 billion to investors due to worries valuations were too expensive, Bloomberg said.
And while Warren Buffett no longer follows what could be called a strictly value approach, the billionaire is still seen as a champion of the investing style. He’s seen his Berkshire Hathaway BRK.A, +1.19% BRK.B, +1.31% pile up nearly $100 billion in cash amid a dearth of opportunities.