5 Best Stocks to Buy According to Billionaire Seth Klarman

Key Takeaways

• Baupost holds ~7% of portfolio in Union Pacific.
• Stake increased 9% to 1.63 million shares Q4 2025.
• $3.3 billion capital plan for 2026 improvements.
• Earnings outlook mid‑single‑digit amid volume headwinds.
• Railroad services span grain, coal, renewables, food transport.

Summary

Billionaire investor Seth Klarman’s Baupost Group has added Union Pacific (UNP) to its 13F portfolio, now representing roughly 7% of its holdings. The railroad giant announced a $3.3 billion capital‑improvement plan for 2026, aiming to tighten its operating ratio despite macro‑economic headwinds. Baupost increased its stake by about 9% in Q4 2025, holding 1.63 million shares. The company’s earnings outlook remains in the mid‑single‑digit range, reflecting volume and cost pressures.

Pulse Analysis

The railroad industry remains a cornerstone of U.S. logistics, delivering essential commodities from grain to renewable fuels. Klarman’s Baupost Group, known for value‑oriented allocations, recently boosted its Union Pacific position, underscoring a belief that rail assets can generate stable cash flows even when broader markets wobble. By allocating roughly 7% of its portfolio to UNP, Baupost signals that the company’s scale, regulated rates, and diversified cargo mix provide a defensive buffer against inflationary pressures.

Union Pacific’s $3.3 billion 2026 capital‑expenditure program targets network upgrades, advanced signaling, and higher‑efficiency locomotives. These investments aim to improve the operating ratio—a key profitability metric—by reducing fuel consumption and enhancing train throughput. Management’s acknowledgment of macro headwinds, such as slower industrial production and weaker housing starts, suggests the firm is preparing for a tighter operating environment while positioning itself for a rebound when economic activity picks up.

For investors, Baupost’s increased stake offers a template for evaluating rail stocks as part of a broader defensive strategy. The mid‑single‑digit earnings outlook reflects modest growth expectations, but the substantial capital plan could unlock incremental margin improvements over the next few years. As supply‑chain disruptions ease and demand for bulk commodities stabilizes, Union Pacific may deliver consistent dividends and total‑return potential, making it a compelling addition for portfolios seeking resilience and long‑term value creation.