George Soros' success at Soros Fund Management has made him one of the biggest names in the financial world. While his firm's investment methodology defies easy characterization, Soros Fund typically embraces stocks with secular growth opportunities. While they do purchase beaten down stocks, they are also willing to pay rich valuations for stocks so long as their growth opportunities justify prices.
Here are some companies that famed hedge fund investor George Soros might like. Investors should take a closer look.
SIRIUS XM Radio (NASDAQ:SIRI)
Soros wouldn't be the only smart money fund manager invested in this name. John Malone's Liberty Media owns a major stake and Steven Cohen's SAC Capital Advisors recently increased their holding. In addition, we have been optimistic about this interesting company and even listed it on our list of 5 Stocks That Could Double in Price.
Soros is known as a macro oriented investor. Soros could view this stock as a major thematic opportunity. Clues for this macro opportunity are evident in the financial statements of one of SIRI's biggest customer partners, General Motors (NYSE:GM). According to General Motors, the automobile industry has modestly rebounded in the last few years, but during this time, the global auto market has experienced extraordinary growth. While the US' industry vehicle sales grew from 10.607 million in 2009 to 11.778 million in 2010, General Motors was able to grow their sales by 10%. In contrast, China experienced massive growth over this same period. Vehicle sales grew from 13.745 million to 18.354 million between 2009 and 2010. In addition, General Motors' sales in China grew 28.81% over that period. While SIRI is currently only operates in the US and Canada, any international growth could provide significant opportunities to investors.
In the quarter ending March 31, 2011, the company generated $723.839 million in revenues. This was a 9.05% increase from the same quarter last year. In addition, the company has also benefited from improved scale that allowed them to reduce operating expenses as a percentage of sales from 81.2% to 77.3%.
Not only is SIRI a content provider, they are also a bandwidth provider. This later aspect is under appreciated at this point but it could provide a coiled upside catalyst in the near term. In addition, the company's sizeable unique automobile based subscribers are a valuable network. As of March 31, 2011, the company had 20,564,028 subscribers
TravelZoo Inc (NASDAQ:TZOO)
The growing internet company has 22 million subscribers and more than 2,000 companies that use their service. Soros could love this small company because of its huge upside based on industry valuations for comparable opportunities.
Soros has proven in the past that he is not afraid to chase popular growth stocks so long as they have the secular growth opportunities to justify valuations. In addition the fund owns other significant online travel sites including: Expedia (NASDAQ:EXPE), Priceline.com (NASDAQ:PCLN) and Orbitz Worldwide (NYSE:OWW).
TZOO trades at a forward P/E of 26.01, a PEG ratio of 1.39 and a price/sales of 8.21. Like other popular stocks, TZOO has both domestic and international opportunities. In 2010, 78% of revenues were from North America and 22% were from Europe.
Between 2008 and 2010, the company increased sales by 39%, but this is not a cheap stock. Most of the excitement involves the company's burgeoning Local Deals product. Leveraging off of the Groupon popularity, the Local Deals segment provides locally targeted emails with time sensitive offers from merchants and restaurants. They have an active exposure to more than 35 markets.
Ralph Bartel owns 66.2% of the outstanding shares in this company. As such, it is a poor choice for an activist investor but this is not Soros Fund's staple method of operation.
ChipMOS TECHNOLOGIES (NASDAQ:IMOS)
The Bermuda based chip company is dirt cheap on a trailing earnings valuation. Trailing P/E is 3.98, price/sales is 0.38 and price/book is 0.64. Their operations are primarily in Taiwan and China. Between 2008 and 2010, revenues declined from $727.647 million to $379.875 million. While revenues have been in decline, there could be reason to believe in a stabilization if not a turnaround. Even without grow, the stock price could see upside just based on a move towards industry valuations.
IMOS is a small cap stock with surprising ownership among smart money funds, including: DLS Capital, Renaissance Technologies and Aegis Value.
SodaStream International (NASDAQ:SODA)
Founded in 2007, SODA provides home beverage carbonation technology. The company is still fairly new but it is one of the most popular stocks in the market after more than doubling from its $25 stock price in late 2010.
It bears some similarities with Soros Fund Management's previous holding, Green Mountain Coffee Roasters Inc (NASDAQ:GMCR). Like Green Mountain, SodaStream could benefit from a nice recurring revenue stream model as well as a secular trend towards home beverage preparation driven by factors that include more efficient time management, healthier living and environmental responsibility. Like Green Mountain, which sells both the coffee machine and the coffee cups, SodaStream sells the soda makers as well as carbon dioxide refills at $14.99 per 60 liter refill or $29.99 for a 130 liter refill. They also sell flavors for $4.99 for a 500 ml serving that produces 12 liters of carbonated beverage.
SODA is not cheap. The company trades at a trailing P/E of 60.6 and a forward P/E of 45.27. While the stock sports a rich price/sales of 5.19 vs. a modest profit margin of 6.06%, it does have a PEG ratio of 1.17. In comparison, GMCR trades at a trailing P/E of 96.3 and a forward P/E of 36.4. They have a price/sales of 5.68 and a profit margin of 5.92%.
The company estimates that they have 4.5 million active customers who use their products to create a carbonated beverage at least once every two weeks.
James River Coal Company (JRCC)
Owned by Steelhead Partners, Jeffrey Gendell, Dreman Value Management. They are one of the least expensive coal companies in the market. With their latest purchase of Magnetar Capital's coal assets, they were able to double their size and expand international sales channels at a price that was below market valuations at the time. At the time of the deal, we speculated the coal miner could have 50% price upside based on industry valuations.
Since the initial rally following the acquisition announcement, the stock has drifted lower. The company currently trades at a trailing P/E of 31.7 and a forward P/E of 7.9. Before accounting for the new properties, the company has a price/sales of 1.01 and a price/book of 1.52.
Range Resources (NYSE:RRC)
Soros would not be the only notable investor in this name. Range Resources' shareholders include Capital Research Global Investors and Blue Ridge Capital Holdings.
Like other hedge fund investors, Soros has had exposure to energy stocks. More specifically, they have owned natural gas producers like Petrohawk Energy (NYSE:HK), Pioneer Natural Resources (NYSE:PXD) and InterOil Corp (NYSE:IOC).
The Texas based company is an independent explorer and developer of natural gas properties in the United States. Around 80% of their proved reserves are located in the Marcellus Shale and Nora Area in the Appalachia and the Barnett Shale. At the beginning of 2011, the company had proved reserves of 4.4 Tcfe, with 80% natural gas and 49% proved developed. The reserves had a 22.3 year reserve life based on Q4 2010 production rates.
The company trades at a forward P/E of 34.2, a price/sales of 8.80 and a price/book of 3.82. But average sales prices per mcfe have nearly halved since peak levels in 2008. While the company has successfully grown revenues since then, any return toward 2008 peaks could provide substantial upside to the stock price. In addition, any secular shift towards a higher share of natural gas utilization would also be a very positive catalyst.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SODA, JRCC, SIRI, IMOS, RRC, EXPE, OWW over the next 72 hours.
Additional disclosure: I own JRCC shares