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George Soros is more engaged in managing his personal fortune than he has been in years. These are the five best-performing stocks of 2016 among Soros Fund Management's top holdings.
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Five years ago, legendary investor George Soros decided to return outside money to his investors and convert Soros Fund Management into a family office in order to avoid a more onerous regulatory regime. Nevertheless, the firm continues to report its holdings to the Securities and Exchange Commission on a quarterly basis. On that basis, here are Soros's five best-performing stocks of 2016:
|
Name |
Position initiated |
Return* |
|---|---|---|
|
Caesars Acquisition Company |
Q4 2013 |
68% |
|
Liberty Broadband Corp |
New |
36% |
|
TiVo Corp |
New |
35% |
|
Essent Group Ltd |
Q4 2013 |
27% |
|
SPDR Gold Trust |
New |
24% |
*At the close on Sep. 19. Source: Soros Fund Management filings, author's calculations.
For the purpose of this article, I looked at the stocks in the firm's portfolio on Jun. 30, some of which were bought this year -- in which case, Soros's gains almost certainly differ from the stocks' year-to-date performances. Furthermore, I have only considered stocks that represented at least a half percent of the total value of reported holdings at the end of the second quarter.
Finally, I would remind readers that Foolish investors do not buy or sell stocks solely on the basis of the actions of other investors, no matter how famous or successful they are. If you invest in individual stocks, it's imperative that you do your own due diligence. With that said, here are my thoughts on three of these positions:
Liberty Broadband Corp, YTD return: +36%
At first glance, Liberty Broadband (LBRDK 0.02%) looks like the most interesting among these top-performing stocks. Indeed, the company is part of John Malone's stable. Mr. Malone is a first class "jockey" -- an operator with a keen eye for capital allocation and a long track record of creating value on behalf of his investors.
Apart from Soros, there are several successful value investors among Liberty Broadband's top shareholders, including Jana Partners, Soroban Capital Partners, and Harris Associates. Here is how another such investor, the Weitz Value Fund, qualified their investment in their most recent quarterly commentary (my emphasis):
Liberty Broadband holds a 17% ownership interest (25% aggregate voting power) in Charter Communications in addition to a minority equity interest in Time Warner Cable. Charter Communications is the fourth-largest cable operator in the U.S. and provides advanced video, high-speed internet, and telephone service to residential and business customers.
In the second calendar quarter, "New Charter" was formed with a merger between Charter, Time Warner Cable and Bright House Networks. Furthermore, at the time of the merger announcement (a year and one-half ago), Liberty Broadband agreed to invest $5 billion into "New Charter" at a fixed price ($195 per share) that proved to be a material discount to Charter's market price at the time of closing ($225 per share), thus giving Liberty Broadband shareholders an immediate unrealized gain. Our investment in Liberty Broadband represents additional upside to our business value estimate for Charter on a stand-alone basis.
Essent Group Ltd, YTD return: +27%
Soros Fund Management was an early (pre-IPO) backer of the Essent Group (ESNT 0.01%), a mortgage insurer founded in 2008 by former Radian Group executive Mark Casale. Soros remains a top 20 shareholder, with 1.6% of shares outstanding, according to data from Bloomberg.
All of Essent Group's stock gains have transpired since the end of June on the back of a series of analyst upgrades. Despite this, I think Essent Group is unsuitable for an individual investor's portfolio. The lack of a demonstrated economic moat and incredibly complex financial statements. Each one of these is individually problematic; in combination, they scream "PASS!"
SPDR Gold Trust, YTD return: +24%
Gold has had a great run so far in 2016, with a year-to-date gain of 26%. The yellow metal has not delivered a better annual return since 2010 -- in fact, returns have been negative for the past three years. Soros initiated a position in the SPDR Gold Trust (GLD +0.01%), the most popular gold ETF, in the second quarter to replace a (larger) call option position that the firm put on in the previous quarter.
This is a demonstration of excellent timing from George Soros, who called gold "the ultimate bubble" in early 2010. It also appears to be consistent with his bearish option position on U.S. stocks -- the largest position among his reported holdings.
However, brilliant as he is, Mr. Soros is a speculator first. As such, I would urge individual investors to refrain from following him into this trade. Gold is not a productive asset, and it has no intrinsic value. One may speculate on gold, but it's literally un-investable.