George Soros and his Soros Fund Management family office have been busy. In the fourth quarter of 2022, the billionaire added more than two dozen new stocks to his portfolio. He also added to 18 existing positions.
Alphabet (GOOG 0.56%) (GOOGL 0.66%), The Walt Disney Company (DIS -0.56%), and Tesla (TSLA -1.80%) especially stood out as a few of the most intriguing purchases for Soros in Q4. Why did one of the wealthiest people in the world buy these stocks? And should you consider following his lead?
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Big buys
Soros completely exited or reduced his stakes in more stocks than he bought in the fourth quarter. However, he wasn't shy about investing big bucks in companies that he liked.
His family office already owned more than 1 million shares of Alphabet's class A shares. Soros added another 743,160 shares. He also scooped up 46,600 shares of Alphabet's class C shares.
Soros Fund Management also previously had a stake in Disney of 123,736 shares. The 92-year-old investor decided he wanted even more of the House of Mouse in the fourth quarter, increasing his position in Disney by more than 53%.
As of the end of the third quarter of 2022, Soros owned 89,647 shares of Tesla. He became more bullish about the electric-vehicle (EV) stock at the end of last year, though. The billionaire's position in Tesla now stands at 132,046 shares. He also owned call options to purchase 200,000 Tesla shares as of Dec. 31, 2022.
What was Soros thinking?
Alphabet stock had not sold off on worries about the threat from Microsoft's integration with OpenAI's ChatGPT when Soros bought shares. There's no way to be sure if he was yet aware of any challenges that ChatGPT might present to Google Search. OpenAI initially launched the chatbot on Nov. 30, 2022. Soros could have purchased shares of Alphabet after that date, but he could've bought the stock earlier in Q4, as well.
More than likely, Soros liked Alphabet for two primary reasons. First, the stock's valuation was attractive after being hammered throughout much of last year. Second, the billionaire may have felt that Alphabet's long-term growth prospects were good, especially with its Google Cloud unit.
He also wouldn't have been aware of Disney CEO Bob Iger's turnaround plans in Q4. It wouldn't be surprising, though, if Soros had (and has) a lot of confidence in Iger. Disney stock was beaten down even more than Alphabet in 2022. Soros almost certainly viewed the stock as a good bargain.
But Tesla was the worst performer, by far, among these three stocks. Soros couldn't have known for sure that the EV stock would skyrocket close to 70% in the first seven weeks of 2023.
He undoubtedly felt, though, that the sell-off was overdone. There's simply no way that Soros would have bought a sizable number of call options on Tesla if he didn't think the stock was poised for a solid rebound.
Should you buy these stocks, too?
Investors who aren't billionaires shouldn't automatically follow in lockstep with Soros. His investment goals and risk tolerance will differ from yours.
It's also entirely possible that Soros could already be reducing his stakes in any or all of these stocks. However, there are reasons to consider Alphabet, Disney, and Tesla.
Of the three, I have the least conviction about Tesla. Could the stock continue to soar? Absolutely. However, it will face tough challenges ahead, including increased competition, potential weakening demand in China, and an attempt to unionize its New York Gigafactory.
I think that Disney remains one of the best stocks around for long-term investors. The company has a staggering amount of valuable intellectual property that continues to grow. Disney also has proven that it's able to effectively monetize its creative works in multiple ways.
What about Alphabet? My view is that the sell-off related to the Microsoft/ChatGPT concerns makes the stock a no-brainer buy. I understand the worries but think they're overblown. Many investors are underestimating Alphabet's resilience, in my opinion.
I could be wrong, of course. But I'd bet that Soros has a similar perspective. It won't be surprising if we learn in three months that he added even more to his stake in Alphabet in the first quarter of 2023.
