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By Darnell Brown

Today’s article will examine seven of the 20 highest-yielding stocks in George Soros' Portfolio. George Soros became famous for his management of the Quantum Hedge Fund. During the 26 years he managed the fund, it realized a 32% annual return. Here is my analysis of his highest-yielders:

Penn West Petroleum Ltd. (PWE) has a market cap of $8.37 billion with a negative price-to-earnings ratio. The stock has traded in a 52-week range of between $12.20 and $28.98. The stock is currently trading at $17.82.

Penn West’s closest competitor is Encana Corporation (ECA), which is trading at $24.92. Encana Corporation has a market cap of $18.53 billion and a price-to-earnings ratio of 25.43. Encana Corporation pays a dividend which yields 3.30% versus Penn West, whose dividend yields 6.20%.

Soros Fund Management LLC owns 25,300 shares of Penn West. The fund sold 486,800 shares in the second quarter of 2011. The shares he sold were purchased at an average cost of $63.00 and were sold for $24.91 per share. Penn West has very little cash on hand, and there is a question its their ability to continue to pay dividends. I agree with Soros' decision to reduce the fund’s holdings in this stock. I rate Penn West Petroleum a sell.

Arlington Assets Investment Corporation (AI) has a market cap of $187.81 million with a price-to-earnings ratio of 5.79. The stock has traded in a 52-week range of between $20.63 and $32.63. The current stock price is $24.55. The company reported second-quarter revenues of $4.77 million compared to revenues of $12.4 million in the second quarter of 2010. Second-quarter net income was $91,000 compared to net income of $8.77 million in the second quarter of 2010.

One of Arlington Assets' closest competitors is KFR Financial Holdings LLC (KFN), which is trading at $8.00. KFR Financial has a market cap of $1.42 billion with a price-to-earnings ratio of 3.81. KFR Financial pays a dividend that yields 9.00% versus Arlington Assets' dividend yield of 14.30%.

Soros Fund Management LLC owns 7,700 shares of Arlington Assets. The fund purchased all 7,700 shares of Arlington Assets in the second quarter of 2011. Arlington Assets had a rough second quarter; its net income dropped from $19.8 million in the first quarter to $91,000 in the second quarter. The balance sheet shows that the company’s cash position increased to $682 million in the second quarter from $579 million in the prior quarter. Arlington Assets buys leveraged residential mortgages that are guaranteed by the US government. It seems that their future income should be safe. I believe that is why Soros purchased this stock. I would not purchase this stock before seeing the third-quarter earnings report. I rate Arlington Assets Investment Corporation as a hold.

DHT Holdings Inc. (DHT) has a market cap of $179.53 million with a price-to-earnings ratio of 11.04. The stock has traded in a 52-week range of between $2.60 and $5.19. The current stock price is $2.79. The company reported second-quarter revenues of $25.9 million compared to revenues of $21.1 million in the second quarter of 2010. Second-quarter net income was $4.27 million compared to $-2.03 million in the second quarter of 2010.

One of DHT Holdings Inc.’s closest competitors is Teekay Corporation (TK), which is currently trading at $25.46. Teekay Corporation has a market cap of $1.82 billion with a negative price-to-earnings ratio. Teekay Corporation pays a dividend that yields 4.90% versus DHT Holdings' yield of 14.30%.

Soros Fund Management LLC owns 18,600 of DHT Holdings Inc. The fund purchased all 18,600 shares in the second quarter of 2011. DHT Holdings Inc. has a mixed dividend history, and over the last five years it has reduced its dividend from $2.13 to $0.40. During the same period, the stock price has gone from $7.46 to its current $2.79. DHT Holdings Inc. does have $73.3 million in cash on hand, and has been able to pay the $0.40 dividend for each of the last five quarters. Perhaps that explains why Soros purchased this stock, or perhaps he thinks it has bottomed out. This stock is 47.8% off of its 52-week high. Even though I like this stock's dividend yield, a high yield is not much use if the stock suffers significant capital losses. I rate DHT Holdings Inc. as a hold.

Pennant Park Investment Corporation (PNNT) has a market cap of $439.95 million with a price-to-earnings ratio of 7.86. The stock has traded in a 52-week range of between $8.79 and $13.19. The stock is currently trading at $9.63, near the low end of its 52-week trading range. The company reported second-quarter revenues of $12.0 million compared to revenues of $11.8 million in the second quarter of 2010. Second-quarter net income was $2.32 million compared to $4.26 million in the second quarter of 2010.

One of Pennant Park’s competitors is MCG Capital Corporation (MCGC), which is trading at $4.31. MCG Capital has a market cap of $331.25 million with a negative price-to-earnings ratio. MCG Capital pays a dividend that yields 15.70% versus Pennant Park's 11.20% yield.

Soros Fund Management LLC owns 11,800 shares of Pennant Park. The fund purchased all 11,800 shares in the second quarter of 2011. The company has been paying a dividend since 2007, and since that time the dividend has increased by 92.8%. The company’s cash position has improved, and its second-quarter balance sheet showed $28.8 million in cash. It appears that Pennant Park will be able to maintain its dividend payments. I agree with George Soros, and rate Pennant Park Investment Corporation as a buy.

Tsakos Energy Navigation Ltd. (TNP) has a market cap of $274.63 million with a negative price-to-earnings ratio. The stock has traded in a 52-week range of between $5.80 and $13.87. The current stock price is $ 5.96, which is near its 52-week low. The company reported second-quarter revenues of $99.2 million, compared to revenues of $105 million in the second quarter of 2010. Second-quarter net income was $9.29 million compared to $19.5 million in the second quarter of 2010.

Tsakos Energy’s primary competitor is Frontline Ltd. (FRO), which is trading at $6.55. Frontline Ltd. has a market cap of $509.97 million with a negative price-to-earnings ratio. Frontline Ltd. pays a dividend that yields 1.20% compared to Tsakos Energy's dividend yield of 9.80%.

Soros Fund Management LLC owns 11,000 shares of Tsakos Energy Navigation Ltd. The fund purchased all 11,000 shares in the second quarter of 2011. In spite of net income in each of the last three quarters, the stock price is down by 52.49% over the last 52 weeks. The company’s second-quarter balance sheet showed $264 million in cash. I believe Soros thinks that Tsakos Energy will maintain its dividend, and that the stock price is near its bottom. I think that Soros' decision to purchase this stock will prove to be correct, and I rate Tsakos Energy Navigation as a buy.

YPF Sociedad Anonima (YPF) has a market cap of $14.49 billion with a price-to-earnings ratio of 11.36. The stock has traded in a 52-week range of between $34.11 and $55.80. The current stock price is $36.84. The company reported 2010 revenues of $3.32 billion and net income of $239 million. In 2010, the company had revenues of $11.1 billion with net income of $1.46 billion.

Soros Fund Management LLC owns 233,400 shares of YPF Sociedad Anonima. The fund purchased all 233,400 shares in the second quarter of 2011. YPF Sociedad Anonima is a large, well-established company based in Argentina. The company has a solid earnings history and pays a monster dividend. George Soros is not the only hedge fund manager that likes this stock; a number of large hedge funds have recently bought YPF. This type of attention should drive the price of this stock higher. I rate YPF Sociedad Anonima as a buy.

CenturyLink Inc. (CTL) has a market cap of $19.91 billion with a price-to-earnings ratio of 16.32. The stock has traded in a 52-week range of between $31.75 and $46.87. The stock is currently trading at $33.14. On August 3 the company reported second-quarter revenues of $4.41 billion compared to $1.77 billion in revenues for the second quarter of 2010. Second-quarter net income was $102 million compared to net income of $239 million for the second quarter of 2010.

CenturyLink Inc.’s largest competitor is AT&T Inc. (T), which is currently trading at $27.83. AT&T Inc. has a market cap of $164.9 billion with a price-to-earnings ratio of 8.10. AT&T Inc. pay a dividends that yields 6.10% compared to CenturyLink's dividend yield of 8.50%.

Soros Fund Management LLC owns 457,768 shares of CenturyLink Inc., and purchased 143,532 shares in the second quarter of 2011. CenturyLink Inc. purchased Savvis Inc. on July 15 for $2.64 billion. The companies are currently going through the pains of integration, and CenturyLink Inc. had to lower its 2011 earnings estimates. Since the merger, the company has realized a substantial increase in revenues. It is also expected that CenturyLink will realize over $400 million in cost savings within the next few years. The company should have no problem maintaining it dividend, as the second-quarter balance sheet showed that the company had $2.55 billion in cash and equivalents. I like the fact that George Soros decided to invest in this company. However, I would not invest in this stock so soon after the company lowered its earnings outlook. I would wait until the company reports third-quarter earnings to see how well the integration is working out. I rate CenturyLink as a hold.

Click here for part 2.

Source: George Soros's 20 Highest-Yielding Holdings Part 1