Baupost Group’s Seth Klarman picked up Amazon in the fourth quarter, but that bet hasn’t paid off for value investors yet as tech stocks have taken a hit this year. The Boston-based hedge fund manager has taken a new position in Amazon worth $489.7 million, making the online retailer its second-largest holding in the company, according to a securities filing. But the tech sector is highly valued, and Amazon has already fallen 13% year-to-date amid continued concerns that AI won’t deliver on its lofty promises. In fact, this megacap entered a bear market last week, falling more than 22% from its recent high. Amazon, one of the three major hyperscalers along with Alphabet and Microsoft, is an unusual position for Claman, who has been compared to Warren Buffett (sometimes called the “Oracle of Boston”) because of his belief in the principles of value investing. Indeed, Claman, along with other value investors, has struggled over the past decade in an era of historically low interest rates, with growth stocks driving the stock market. Still, for many on Wall Street, Amazon is seen as a buying opportunity. The stock has fallen sharply this month after the company’s most recent earnings failure and concerns about margins and capital spending rose, but many analysts remain bullish on the stock. They hope the company’s high spending will be justified. Klarman is likely attracted to the company’s low forward P/E ratio of 25. That’s compared to a five-year average P/E of 35 times, according to FactSet. Baupost also acquired new stakes in Grupo Aeromexico, Mexico’s leading aviation holding company, and Molina Healthcare, a managed care company. Year-to-date, they are down more than 12% and 21%, respectively. We increased our exposure to Fidelity Information Services and Willis Towers Watson, which have also been in negative territory since the beginning of the year. The company reduced its allocation to its largest shareholder, Restaurant Brands International, and also reduced its stake in Alphabet.
