Investing

Expensive stocks frustrate another value-investing legend, report says

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, +0.87%









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, +0.79%










The Dow Jones Industrial Average












DJIA, +1.08%










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, +1.21%











BRK.B, +1.34%










 pile up nearly $100 billion in cash amid a dearth of opportunities.

Leave a Reply

Your email address will not be published. Required fields are marked *

19 − 4 =