Seth Klarman Pitches Syneron Medical (ELOS)

Not a new position for Seth Klarman of Baupost Group but a postion worth noting especially since Jim Cramer of Mad Money just interviewed the CEO and mentioned the stock a few times the last few weeks so we’re going to dive into the world of Seth Klarman and why he would put 5% of Syneron Medical in his fund that has returned 20% since inception.

After receiving his MBA from Harvard in 1982, Klarman start Baupost with $27 Million in investments but now he has over 5 billion in management.  He got his BA from Cornell.  According to a BusinessWeek profile of him in August of 2006, since then Klarman has returned 6,133% net of fees.  His investing philosophy is centered on value and risk averse techniques which I think is not used enough except for the great Mr. Buffet.  His emphasis is that investors are naive to look for returns which is the positive and never look at the risk.  We all think yes Apple will go to $180 but we never think hey it could go to $80 instead.

“Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor” a book he publish in 1991 increased his notoriety along with his great returns among investors and academia.   Since the book is no longer in print, it actually is a much desired item that goes for between $700 to $1200 on Amazon and Ebay.  The book is such a collector’s items that many library either protect it or has gotten it stolen.  I wish I could get my hands on it.  I may track it down one day while the librarian watches me.

This value investor has in his great portfolio, Syneron Medical Ltd., an Israeli maker of aesthetic medical devices which provide cosmestic laser surgery and other cosmestic procedures.  Last earnings were decent, Syneron earned $10.3 million, or 37 cents per share, up 16 percent from $8.9 million, or 32 cents per share, in the same period a year ago while revenue rose 36 percent to $37.5 million from $27.5 million.  It matched analyst earnings of 37 cents while beating analyst estimates of sales of $33.2 by 13%.  Not too shabby I say.

Also better news is that the company boost expectations of sales for this year to $146 million, up 25 percent from the prior year topping forecast of only 20% revenue growth.  On earnings day, it rose to $25 but now as I write with the market downturn, it’s $23.56 trading at a PE of 16 and forward PE of 12.  No debt.  93 million in cash.  AValue?  Yes.  Growth?

Growth?  Yes.  It’s growth at 20 plus percent and with a Price to Earning’s Growth PEG at 0.94 is awesome.  Recently they got approval for the Vela platform that removes that cellulite from the back of women…well men too..legs.  It’s approved by the U.S. Food and Drug Administration and the European Union.  Is America become more self conscious?  Yes.  Is America become more over weight?  Yes.  Baby boomers want to wear shorts?  Of course, especially if they move to Las Vegas or Arizona.  So Seth Klarman sees a decent trend and bought it for value.  But it’s a growth play too.

MAD MONEY: CRAMER PICKS TECHS

Cramer started his show saying that now techs are something that you can keep as something defensive because of their strong balance sheets and cash holdings.  He suggested Intel, INTC,  Texas Instruments, TXN, Cisco Systems, CSCO and Microsoft, MSFT.  But he was a fan of Intel because August was usually the bottom of the tech market and suggest everyone should buy this stock.  (Disclosure: I hold Intel Oct Calls).  Cramer says it’s cheap, flushed with cash and growing quickly. 

Once again Cramer reiterated that Ben Bernanke needs to cut rates!  He told Ben to stop thinking about inflation because this environment is deflationary and should take a trip to the bond desk instead.  Jim said “Bond traders are afraid…AAA-rated mortgage bonds are trading horribly or not at all.”  Cramer says this panic is not pricing the bonds correctly because of the liquidity squeeze and panic.  While he claims that the Europeans heard him, Ben has turned a blind ear to his claims!  I need to refinance my house soon…let’s cut some rates!

SHORT LIST:

Cramer said everyone has to sell MGIC, MTG, MBIA, MBI, KB Home, KBH, Blackstone, BX, Centex, CTX, Beazer Homes, BZH, and Washington Mutual, WM.   Cramer said “Greed is not good…The Market makes you pay for it”

FLASH MEMORY TRADE:

Cramer pitched SanDisk, SNDK as a tech to benefit from the flash memory market which is the fastest growing market in the semiconductor market according to CEO Dr. Harari and he doesn’t see it ending soon.  With Apple, AAPL using flash and mobile products becoming more of norm, everyone can see that it’s going to expand in the next few years.  Even today with the blood in Wall Street, SanDisk was up almost two percent!
LIGHTNING ROUND HIGHLIGHTS:

Southern Copper, PCU: “A lot of these mineral stocks are being hit by funds that are blowing up that own these. … A lot of them own PCU. … You’ve got to wait until $90 before I would buy it, and the reason why is because the holders are so bad. … But this one has a 6% dividend. When it gets down to my level … pull the trigger.”

“My favorite speculative stock in the group is Nastech Pharmaceutical, NSTK”

 “Best of breed in the space, Cramer said, is Schlumberger, SLB”  Once again picking the oil sector.  

“I like Allegheny Tech, ATI. It’s better than Titanium. I’ve been saying that for years. It’s definitely better.” as a pick for metals.  

Progressive, PRG: “The earnings are going to explode for Progressive. PGR is a great stock to own here! … Progressive is two tumbs up.”  I’m not sure about this one in the insurance industry but Berkshire Hathaway’s insurance sectors had good markets but we’ll see.  

Progressive, PRG, Allegheny Tech, ATI, Schlumberger, SLB, Nastech Pharmaceutical, NSTK, Southern Copper, PCU, MGIC, MTG, MBIA, MBI, KB Home, KBH, Blackstone, BX, Centex, CTX, Beazer Homes, BZH, Washington Mutual, WM, Intel, INTC,  Texas Instruments, TXN, Cisco Systems, CSCO, Microsoft, MSFT