George Soros of Soros Fund Management and Steven Cohen of SAC Capital Advisors are two of the most famous and successful managers in the hedge fund industry. Neither of them fits perfectly into a specific investment style, rather they both incorporate various factors including macro variables, fundamental data and technical signals. Below is a list of companies that both fund managers owned as of March 31, 2011.
SAC Capital Advisors: 99,544 shares
Soros Fund Management: 293,400 shares
The online internet giant is not a surprising long position considering the stock's strong price momentum and secular fundamental growth opportunities. AMZN trades with a trailing P/E of 83.87 and a forward P/E of 50.96. In addition, the company sports a PEG ratio of around 2.81 and a price/sales ratio of 2.36 despite pedestrian profit margins of 2.85% and return on assets of 5.77%.
Still, it would be wrong to compare Amazon.com's valuations to those of another mega retailer like Wal-Mart Stores (WMT) for two main reasons. First, Amazon.com enjoys a structural advantage because of preferential taxation treatment. As sales taxes increase in responds to deteriorating state and municipal finances, this advantage should grow. Secondly, Amazon.com is much more than a standard retailer. In 2010, the company generated nearly 45% of revenue internationally. In addition, the company's Amazon Web Services ("AWS") offers enterprise web solutions. Globally, this segment contributes less than $1 billion to revenue, but there is strong secular growth and much better margin opportunities than the current retail operation.
With the retailer's pricey valuations, investors should realize that these top investors may exit quickly if sentiment and technical factors change. Any headwinds in Amazon.com's growth segments could have a disproportionately large effect on AMZN's stock price. While Amazon.com deserves praise for its segment defining Kindle e-reader, as we discuss in The Improbable Dominance of Barnes & Noble and Apple, Amazon's industry position is in danger as the lines between tablets and e-readers blurs.
Dendreon Corp (DNDN)
SAC Capital Advisors: 8,203,470 shares
Soros Fund Management: 4,671,699 shares
Dendreon is one of the more interesting biotechnology names in a volatile industry. The growing success of its cancer drug, Provenge, has driven the stock price from $2 to $40 in two years. Like most biotechnology companies, the stock is priced more for its potential than for its trailing earnings strength. The company is expected to make money in 2012. In the meantime, investors can only focus on DNDN's hefty 78.6 price/sales ratio. Still, bears would be foolish to determine the relative value of this stock based on trailing performance.
The company's current burn rate is around $100 million per quarter, but this is expected to diminish as Provenge production and sales of the $93,000 prostate cancer drug increase. While the drug has created controversy because of its cost, so long as Medicare and other insurance continues to cover it, the drug demand should outstrip supply.
Steven Cohen and George Soros are not DNDN's only smart money shareholders. As such, Dendreon was one of the companies we featured in 6 Speculative Biotech Stocks Smart Money Loves.
Express Scripts (ESRX)
SAC Capital Advisors: 3,186,872 shares
Soros Fund Management: 1,318,700 shares
Express Scripts is one of the giants in the North American pharmacy benefits management business. The company's success has also created risks. In 2008, 2009 and 2010, revenue concentration from the top five clients jumped from 18.2% to 23.7% to 55.2%. At the end of 2010, the largest two clients represented 29.2% of revenues. It trades at a trailing P/E of 25.14, a forward P/E of 14.7 and a PEG ratio of 1.04.
The healthcare company is a major holding of Glenview Capital Management in large part because of its view on the secular growth opportunities related to the federal healthcare legislation.
FedEx Corp (FDX)
SAC Capital Advisors: 722,184 shares
Soros Fund Management: 167,000 shares and 610,000 Calls
Gilead Sciences (GILD)
SAC Capital Advisors: 221,554 shares
Soros Fund Management: 1,375,736 shares
Priceline.com Inc (PCLN)
SAC Capital Advisors: 51,849 shares
Soros Fund Management: 46,532 shares
The US based internet travel company is a hedge fund favorite with shareholders that include Renaissance Technologies and Lone Pine Capital. Based on its global reach and international sales growth, PCLN has risen sharply above 2008 highs of $138. Between 2009 and 2010, international operations jumped from $852 million to $1.4 billion. This international growth and exposure explains the company's popularity with smart money and the premium valuations to other internet travel assets.
SAC Capital Advisors: 501,663 shares
Soros Fund Management: 5,547,604 shares
The Canadian based company researches and develops low emissions engines and technologies. The billion dollar market capitalization company is not profitable and still trades largely on its promise. On $128.8 million of sales, WPRT lost $37.1 million. The price/sales ratio is 7.28.