Investing is one of those rare disciplines in which it really doesn’t pay to be original. This is money, not literature, and they don’t award Pulitzer Prizes for original work.
You don’t want to mindlessly follow the herd, of course. That rarely ends well. Before you copy the trading moves of another investor, you need to do a little homework of your own, and you should always maintain an independent, skeptical mind when putting your capital at risk. But you don’t get bonus points for coming up with an original trade. Returns are returns, regardless of whose idea the trade was, so there is really no sense in reinventing the wheel.
Today, we’re going to take a look at some of the most recent major trades by some of the smartest investors in the business. Not all of these are trades I would recommend myself. In fact, at least one of them is a stock I would run away from screaming. But it’s worthwhile to track which stocks the masters of the universe are buying. Even if we don’t invest along with them on every trade, we might learn a thing or two.
Cheniere Energy
I’ll start with liquefied natural gas exporter Cheniere Energy (LNG). With the price of crude oil under major pressure in 2015, energy stocks – Cheniere included – have taken an absolute beating. Cheniere is down over 40% from its 52-week high. Yet some of the smartest investors of our lifetimes are backing up the proverbial truck and loading it up with Cheniere.
Last quarter, Seth Klarman – a value investor that most other value investors consider to be an almost legendary god-like figure – increased his already massive position in Cheniere by nearly half. (See “Investing Legends: Baupost’s Seth Klarman”)
Klarman runs a highly-concentrated portfolio; so highly concentrated, in fact, that his top five stocks make up more than half the portfolio. Cheniere now makes up fully 18% of Klarman’s portfolio, and Klarman owns 22 million shares at an average cost basis of $63.57 per share.
So at today’s price of about $48 per share, you can get a much better deal than Klarman, a man universally recognized as one of the savviest value investors to ever play the game.
And Klarman isn’t the only legend aggressively buying Cheniere. Carl Icahn has been aggressively accumulating the shares and bought 27 million shares last quarter at an average price of $61.88 per share. And since the end of the quarter, he’s continued to average down, buying an additional 1.3 million in the mid-$40s. So today, you can buy Cheniere at a better price than Mr. Icahn as well.
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