Every quarter, many money managers have to disclose what they've bought and sold, via "13F" filings. Their latest moves can shine a bright light on smart stock picks.
George Soros is known to some folks these days for his politics and philanthropy, but his fame stems from his wealth, which is a result of his outstanding investing prowess. He founded Soros Fund Management back in 1973, and under its umbrella, the Quantum funds racked up an amazing record, reportedly averaging close to 20% annual growth over four decades. He has noted, though, that hedge funds can't beat the market due to fees.
As The New York Times has explained, "His huge gains have come from macro bets, which aim to profit from global economic trends by trading currencies, commodities, bonds and other securities. Mr. Soros made his name, however, betting on currencies."
Soros Fund Management's reportable stock portfolio totaled $9.2 billion in value as of June 30, 2013.
So what does Soros Fund Management's latest quarterly 13F filing tell us? Here are a few interesting details:
The biggest new holdings are J.C. Penney and Herbalife. Other new holdings of interest include CST Brands (NYSE:CST) and LSI (NASDAQ: LSI). CST Brands, spun off from Valero Energy, is a retailer operating about 1,900 gas stations and convenience stores. In its second quarter, it reported net income down 60% and revenue down 4%, but still topped analyst expectations for revenue and earnings. The drop was largely due to volatile fuel prices last year delivering some higher prices. CST Senior Vice President and Chief Financial Officer Clay Killinger noted, "We believe that we are in a good position coming out of the spin... Ending the second quarter with $414 million in cash, and the additional liquidity available to us from our credit facilities, helps position us to grow for years to come."
Semiconductor company LSI, with a new dividend yielding 1.6%, looks attractive with its forward P/E ratio of 13. Its second-quarter report was strong, with its CEO waxing bullish: "We expect both our storage and networking businesses to be up in the third quarter, with new product cycles contributing to our growth." About the new dividend, he noted, ""The dividend we announced today, coupled with our ongoing share buyback program, further demonstrates our confidence and continued commitment to shareholder return." Analysts at Zacks have upgraded the stock to Outperform, noting repeated estimate-topping results.
Soros Fund Management reduced its stake in lots of companies, including Acacia Research and SanDisk. Among holdings in which it increased its stake was Micron Technology (NASDAQ:MU). Micron is sitting near a 52-week high and has more than doubled in value over the past year. Its purchase of Japanese manufacturer Elpida has boosted expectations, as it enhances Micron's capacity, its pricing power, and its relationship with Apple. It also delivers cash, which Micron might use for share buybacks or to reinstate its long-discontinued dividend. Some worry, though, about competition, the industry's cyclicality, and Micron's debt levels. Micron beat expectations for both revenue and earnings in its last quarter, and recently announced that it was cutting more than 1,000 jobs. Analysts at R.W. Baird recently downgraded the stock on supply chain concerns, but other researchers, such as RBC Capital, are bullish, expecting strength in memory chip prices.
Finally, Soros's biggest closed positions included US Airways and the Market Vectors Gold Miners ETF. Other closed positions of interest include Radian Group (NYSE:RDN) and Westport Innovations (NASDAQ:WPRT). Mortgage insurer Radian has been one of the most popular stocks among hedge funds -- for good reason, apparently, as it has nearly quadrupled in value over the past year. The recovering housing market is helping Radian, along with tighter lending rules likely to lead to greater need for its coverage. (Some wonder, though, whether tighter lending might actually restrict its business.) Radian's recently reported second quarter featured losses narrowing and a 60% increase in new mortgage insurance written. Delinquent loans are a risk for Radian, as is strong competition. In July, its number of delinquent loans dropped a bit.
Westport has been designing engines powered by natural gas, including some heavy trucks. Bulls like its plans to expand in China and the nation's expanding network of fueling stations. But the company remains unprofitable, and it just issued a poorly received earnings report and lowered guidance, depressing its shares (which are down nearly 30% over the past year) and getting downgraded on Wall Street. Ford has announced that F-150 trucks will soon offer Westport-designed natural gas engines. Some note that its prospects remain strong and are just not showing up in financial statements yet.
We should never blindly copy any investor's moves, no matter how talented the investor. But it can be useful to keep an eye on what smart folks are doing. 13-F forms can be great places to find intriguing candidates for our portfolios.