George Soros’s Quantum Fund is one of the best performing of its type of all time. Here we look at a few of his latest buys:
Golar LNG Partners LP (GLMP): Shares are trading at $25.01 at the time of writing, in the middle of their 52-week trading range of $22.41 to $29.74. These shares are the partnerships shares formed by Golar LNG Limited (GLNG) and floated in April 2011. Soros holds 1,230,000 shares
The partnership produced net earnings to shareholders of $13.1 million for the second quarter of 2011, on operating income of $25.4 million, and paid a dividend to shareholders of $0.385 as it had forecast at the time of its IPO. If it continues to pay this level of quarterly dividend, the share would be on a forward dividend yield of 6.10%. Perhaps Soros has been swayed to make this purchase by his holding in Golar LNG (GLNG). When measured against Teekay LNG Partners (TGP), which trades on a price to earning multiple of 37.39, the shares look reasonably valued, but the share price will surely be determined by the strength of the economies around the world, and the need to use its containers to move light natural gas.
Target Corp (TGT): Shares are trading at $51.34 at the time of writing, as against their 52-week trading range of $45.28 to $60.97. At the current market price, the company is capitalized at $34.66 billion. Earnings per share for the last year were $4.21, placing the shares on a price to earnings ratio of 12.20. It paid a dividend of $1.20 (a yield of 2.40%). Soros added to his holding in the second quarter of this year, and now holds 552,600 shares.
Say the word Target, and the name Wal-Mart (WMT) springs forth as well. The two companies operate in the same retail space, and its not surprising that the market rates them so similarly. Gross margins are 29.87% against 25.17%, and this comes down to operating margins of 7.76% and 6.00% respectively. It is for this reason that Target trades on a slightly higher price to earnings ratio of 12.20 against 11.32. Not much to choose between the companies. Then compare to Costco (COST), where gross margins are a lowly 12.20%, and operating margin is down at 2.79%. Target shares seem a much better buy, until the quarterly (year on year) revenue growth rates are studied. Costco is gaining rapidly on its rivals, growing at around 16% quarterly, whereas Target’s revenue growth of 4.60% pales in comparison. It is for this reason that Costco are more highly rated by the market, and trade on a price to earnings multiple of 24.30.
International Business Machines Corp (IBM): Shares are trading at $172.62 at the time of writing, as against their 52-week trading range of $122.28 to $185.63. Earnings per share for the last year were $12.32, placing the shares on a price to earnings ratio of 14.02. It paid a dividend last year of $3.00, a yield of 1.80%. Soros owns 150,400 shares.
Growth at IBM will be led by its pre eminence as the world’s leading server provider. Hewlett Packard (HPQ) seems to be losing its way in the market place, with no forthright strategy going forward. It is trying to break into the tablet market, dominated by Apple, and has lost momentum in its traditional pc and server based market. Step up IBM, which is relishing the fight and continues to outpace its main rivals in revenue growth. A good buy.
Seagate Technology (STX): Shares are trading at $11.67 at the time of writing, as against their 52-week trading range of $9.96 to $18.35. At the current market price, the company is capitalized at $4.90 billion. Earnings per share for the last fiscal year were $1.09, putting the shares on a price to earnings ratio of 10.71. It paid a dividend of $0.72 last year, a yield of 6.50%. Soros owns 3,523,800 shares. Recently, it has been reported that PC sales grew by just 4% year on year, and Acer has just reported its first quarterly loss in its history. Applied Materials (AMD) has said it saw a large downturn in July PC sales, and thinks the outlook for the sector is gloomy. Meanwhile, Google (GOOG) is increasing customers of its cloud-based memory offering, and Apple’s (AAPL) sales of tablet products grows exponentially. Seagate may have leading edge products, but these are in a market that appears to be contracting. Seagate plans to buy Samsung’s hard drive operations. With Western Digital buying Hitachi’s storage unit, the number of hard drive manufacturers would be cut to three, and Seagate have a 40% market share. The shares have dropped from their 12-month highs because of concerns over the longevity of its business model. I share that concern.
General Motors Company (GM): Shares are trading at $23.79 at the time of writing, as against their 52-week trading range of $21.18 to $39.48. At the current market price, the company is capitalized at $37.15 billion. Earnings per share for the last fiscal year were $4.75, putting the shares on a price to earnings ratio of 5.01. It paid no dividend last year. Soros added to his holding in the second quarter of 2011, and now owns 642,500 shares. When economies weaken, new car sales do not rise. This, unfortunately, is a fact of life. The economy is weakening because of the huge debt burden in public and private finances, and General Motors sells cars. So why buy General Motors’ shares? Perhaps the answer is in its large net cash position, which underpins its share price at these levels -–the book value works out at $20.47 per share. Compare to Ford (F), where the book value is $1.40 per share (current market price $10.93), and you start to get the picture. The best of the car manufacturers, and a hold if you own them, but what I would consider a speculative buy over the next twelve months.