George Soros, “the man who broke the Bank of England”, founded Soros Fund Management LLC, which is regarded as the most successful hedge fund mostly due to Soros' asymmetric way of investing. With astute investments in high risk growth markets, Soros' fund has returned almost 4000% since its inception.
What can we learn from the greatest macro hedge fund manager? Let’s take a look at some of the prominent companies he has in his portfolio.
Coach (COH): Coach is luxury leather goods company founded in 1941 in a loft in Manhattan. Since then, the organization has expanded its presence in several countries and is a player in the high-end accessories market. Soros holds 875,740 shares, approximately 0.62% of his portfolio.
With market capitalization of $19 billion, Coach is flirting with its highest price YTD and continues to grow. Soros recently increased his holding in the company which is a good move, in our opinion, as the company expects major growth coming from the Chinese market.
Citigroup (C): Citigroup was formed in 1998 in one of the largest mergers in history between Citibank and Travelers group. With 2.94 million shares, Citi forms 1.76% of Soros' fund at a market value of $117 million.
Soros has increased his holding in Citi recently by approximately 1.87 million shares. Citi touched its YTD peak of $51.30 and since then has declined to $39.40, at the time of writing. However, Citi has outperformed its major competitors during the same period, but underperformed the S&P 500 and Dow Jones. With EPS of $3.10, Citi is returning to profitably slowly.
We think Citi is a good buy due to its presence in high growth areas. Fundamentals of Citi look good with a strong capital base and significant loan loss reserves. Shareholders of Citi are looking at a favorable return in the future, in our opinion.
Microstrategy Inc (MSTR): Started in 1989, Microstrategy is a worldwide provider of business intelligence software that enables companies to report, analyze and monitor data. The company provides software that help organizations make strategic decisions through better understanding and analysis of data stored across different locations.
With 338,384 shares valued at $45 million, MSTR forms 0.62% of Soros' fund. We think MSTR is a good buy because tech giants like IBM are flush with cash, and MSTR would be a potential acquisition target. Though the P/E ratio of 51.65 is higher than competitors of similar size, the price to earnings growth rate of 1.06 is very close to 1 indicating that the company is fairly priced. IBM or any other company will have to pay a significant premium above the current share price of $172.
Motorola Solutions Inc (MSI): Motorola Solutions was formed in 2011 after the Carl Icahn spinoff of the mobiles unit division into Motorola Mobility (MMI). It is a provider of technology, products and services. It is heavily dependent on government expenditure as it is one of the biggest providers of security equipment for government agencies.
After the split, share prices have been rising steadily hitting a YTD high of around $46. With the economy still not in very healthy shape, government spending woes dim MSI's otherwise bright prospects in the near future.
Google (GOOG): Founded in 1996 as a research project of two phd students, Google is the leading search engine with a primary focus in making information available to everyone. It generates revenue through online advertisements.
Through innovations and partnerships Google has become the market leader in the sector. However its concentration of revenue makes it volatile to any changes in online advertising spending. Though Google’s growth rate is higher than its competitors, Microsoft (MSFT) and Yahoo (YHOO) have been able to significantly increase competition in recent times.
As can be seen by recent developments at Google, it seems that the company is losing its focus in trying to compete with social networking sites, cloud computing and smart phone OS. These new ventures have ramped up sales and marketing costs and will continue to in the near future. We think now is a good time to hold Google, if you've already purchased shares.
Wells Fargo (WFC): WFC is a leading provider of financial services like community banking, retirement and wholesale banking. WFC has a small global presence, has outlined its vision and is looking to expand its operation especially in high growth countries in Asia.
Financial regulations will impact the organization as it is a big player in the derivative markets. WFC has a diversified business which shields the bank from a downturn in a single sector. Historically too WFC has been a outstanding performer and looks like a good buy for the current P/E of 11.33 which is lower then the industry average.
Visteon Corporation (VC): Visteon is one of the world’s largest supplier of motor parts worldwide. Initially most of its growth came from North America, however the share of revenue from this part of the world has declined and is now driven mostly from Europe and Asia.
VC has a very diversified client base ranging from Ford (F) to other international motor companies. Also it has been restructuring and has been successful streamlining its processes. Soros has taken a new position in VC. We think is a very good move looking forward.
Amazon (AMZN): Amazon was started in 1995 as an online book seller. Since then, the company has expanded to sell almost everything under the sun. Today it's the biggest online retailer. Very diversified business, strong cash reserves and retailers filing for bankruptcy has helped Amazon recently. Also Amazon has been increasing its operations globally although this exposes the company to foreign exchange risk. The valuation is cheap when the growth prospects are incorporated as shares trade below a PEG of 1.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.