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 $9.1 billion in value as of Sept. 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 Microsoft and FedEx. Other new holdings of interest include Molycorp (NYSE: MCP) and International Paper (NYSE:IP). Rare-earth-materials specialist Molycorp has seen its shares drop some 24% over the past year, falling on news of additional stock-dilution, weak earnings, and the fact that a newly opened mine is producing a lot of a low-value rare mineral, cerium. Molycorp stock is a risky proposition, but one that Soros apparently believes in.
International Paper is facing pressure from the growth of digital communications over paper ones, but it also has a sizable cardboard-packaging business, which can benefit as more people order merchandise online that needs to be shipped. International Paper's last quarterly earnings report topped expectations due to growth in packaging. Deutsche Bank downgraded its stock in September from buy to hold, seeing weak demand and rising inventories, but International Paper has upped its dividend payout by 17% and announced plans to buy back up to $1.5 billion worth of shares in the next few years. It yields 3.2%.
Among holdings in which Soros Fund Management increased its stake was Sarepta Therapeutics (NASDAQ:SRPT). Sarepta stock averaged 66% annual gains over the past two years, but dropped 45% over the past year -- including a whopping 70% drop on a single day, when the FDA squashed hopes of an accelerated approval for its Duchenne muscular dystrophy drug, eteplirsen. Still, Sarepta Therapeutics may turn out to be a strong winner for investors, or poor late-stage clinical trials might be inauspicious for its entire pipeline. Stock dilution is a worry, but some see the stock as quite attractively priced now.
Soros Fund Management reduced its stake in lots of companies, including memory giant Micron Technology (NASDAQ:MU). Micron shares have surged some 250% over the past year, in part on enthusiasm over its acquisition of Japanese company Elpida. That buy made it the world's second-largest DRAM maker, with greater pricing power and an enhanced relationship with Apple. Bears haven't liked Micron Technology's recent net losses and shrinking margins, and want to see its solid-state drive business grow. The company's recently reported fourth quarter was strong, but left some confused, while others still see great value in the stock.
Finally, Soros Fund Management's biggest closed positions included Delta Air Lines and United Continental Holdings. Other closed positions of interest include Alcatel-Lucent (NYSE: ALU), which has seen its shares quadruple over the past year. It has been competing in a tough telecom field, and cutting costs via layoffs and other means. Alcatel-Lucent's third quarter featured surprisingly strong revenue growth of 7% (over year-ago levels), narrowing losses, and growing gross margins. There's still a lot of room for improvement, though, and the company is seeking new financing.
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. 13F forms can be great places to find intriguing candidates for our portfolios.