Invest Like Billionaire Seth Klarman: Ocwen Financial Group (OCN), Antero Resources Corp (AR), Cheniere Energy, Inc. (LNG)

By Shira Gonen

Harvard Business School graduate Seth Klarman is a billionaire hedge fund manager and successful author. He is the manager and founder of Baupest LLC, known for its unconventional yet high returning investment strategy. Despite this stellar reputation, his $6 billion fund lost 22.42% in the last quarter. Let's take a look at some of Klarman's investment activity of the third quarter in companies Ocwen Financial Group OCN, Antero Resources Corp AR, and Cheniere Energy, Inc. LNG.

Ocwen Financial Group

In the third quarter, Klarman reduced his shares of OCN, a financial services holding company, by 32%, which now accounts for 0.58% of his total holdings.

For this quarter, the company suffered from a slew of bad press, including a lawsuit from a shareholder of Home Loan Servicing Solutions, one of its affiliates, regarding a decision to sell assets that were not voted on by shareholders. Another scandalous event was the company's audit by California's Department of State which examined whether or not it complied with state and federal laws regarding foreclosure actions.

Most notably, the stock dropped 28% after the company posted disappointing Q2 earnings at the end of July, marked by increased expenses. Finally, the company cut 300 jobs at the end of September as a way to reduce costs.

Klarman's investment in this company seems to align with analyst consensus, as 2 analysts downgraded the stock at the end of the third quarter. In the past 3 months, only 1 analyst rated the stock with a Hold and $6.50 price target on TipRanks.

Antero Resources Corp

Klarman added Antero Resources to his portfolio in the third quarter, which now represents over 5% of his total portfolio. In June alone, the stock fell over 13% due to industry data suggesting an oversaturation of natural gas, creating pricing pressure. However, the company posted better than expected Q2 earnings in terms of revenue and EPS. In August, the company announced an agreement to build an advanced wastewater treatment complex with Veolia Water Technologies as well as acquire Antero Resources' integrated water business. Despite these announcements, the stock fell 46% in the third quarter.

Klarman's bullish activity was in line with analyst consensus, as 2 out of the 3 analysts who rated the stock in the past 3 months on TipRanks gave a Buy rating, while the other remains on the sidelines.

Cheniere Energy, Inc.

In the third quarter, Klarman increased his holding in Cheniere Energy, Inc. by nearly 50%, now representing 18% and the majority of his total holdings. Highlights from the third quarter include the construction of a $550 million export terminal in Texas, a strong Q2 earnings report, and a deal to sell 24 cargoes to French energy company EDF from 2017-2018.

Like many other energy stocks, the company suffered a massive 36% drop in the third quarter due to rapidly falling oil prices. According to TipRanks statistics, most hedge funds are bullish on this stock as hedge fund holdings for LNG increased by 34.1 million shares in the third quarter.