George Soros, hedge fund icon and founder of Soros Fund Management, recently purchased these five stocks. They have since fallen from the price he paid by at least 20 percent. These stocks are particularly sensitive to specific economic risks. In this article, I take a contrarian view by analyzing each company’s valuation, yield and growth metrics on a realtive value basis. Here is my actionable analysis:
Astoria Financial Corp. (NYSE:AF) – This holding company for the Long Island, N.Y.-area savings and loan Astoria Federal issues residential and multi-family real estate loans, some commercial loans, and operates an insurance agency. It is currently trading around $7 a share, which is near the lower end of its 52-week range of $7.14 to $15.25. Share price began its descent in mid-July, reaching its annual low on Oct. 3. Earnings per share is $0.83, and price to earnings ratio is 9.08. AF’s dividend yield of 6.70 percent or $0.52 is quite attractive. Its payout ratio is 62 percent. AF has paid a dividend for over 15 years. In 2009, the company halved its payout from $0.26 to $0.13, where it remains today. AF’s market capitalization is a little over $710 million.
Soros purchased 13,200 shares during the second quarter 2011 and added 6,200 more shares during the third quarter for a total holding of 19,400. AF’s average quarterly price for the second quarter was $12.93.
Net income of $11.2 million for the quarter ended Sept. 30 was down year over year from $21.5 million. Company officials said the decline was due to a decrease of about $400 million in interest-earning assets from the previous quarter, flat interest rates that kept residential mortgage prepayments elevated, and the expensing of $3 million in employee stock option purchases. Officials also said the pace of the decline in balance sheet health and loan portfolio performance slowed, and growth is expected in the fourth quarter 2011 and into 2012.
Analyst recommendations are all over the board, but most trend toward “Hold” with several “Buys,” “Sells,” and “Underperform/Underweight.” Some believe that the company will continue to face challenges with its credit and in improving its net interest margin, in light of persisting low interest rates.
Its competitor New York Community Bancorp Inc. (NYB), which is also a New York City thrift bank, is currently trading near $12 a share. It is also trading near the lower end of its 52-week trading range of $11.13 to $19.33. Earnings per share is $1.16, and price to earnings ratio is 10.35. Its dividend yield of 8.20 percent or $1 a share is also very attractive. Its payout ratio is 87 percent. Its dividend history is also over 15 years, and the company has paid a quarterly rate of $0.25 regularly since May 2004. Its market capitalization is around $5.25 billion.
NYB’s net income was up slightly to $119.8 million from $119.5 million. NYB operates banks in five states, so its customer base is broader than that of AF.
AF is a very small, regional savings and loan, and its financial heath rests on that of the localized economy in which it operates. An investment in AF would make more sense for people who are familiar with or somehow connected to the Long Island area. It is risky and speculative, but it is also cheap, and it pays a very attractive dividend. NYB is also a nice prospect for income investors who prefer the benefits a little larger company with a broader customer base.
General Growth Properties, Inc. (NYSE:GGP) – This real estate investment trust with interests in retail, office and industrial centers is currently trading near $14 a share. It has ranged from $10.68 to $17.43 over the past 52 weeks, dropping toward its lows in August and again in October. It is showing a loss per share of $1.60. Its dividend yield is 2.80 percent or $0.40, which underperforms the industry average. Payout ratio was not available. The company’s market capitalization is around $13.3 billion.
Soros purchases 42,600 shares during the fourth quarter of 2010, sold half the position during the first quarter 2011, purchased 12,750 more shares in the second quarter and the position during the third quarter. Average quarterly prices were $15.96 during the fourth quarter 2010, $15.11 during the first quarter 2011, $15.99 for the second quarter 2011, and $14.43 during the third quarter.
Third quarter funds from operations reached $224.2 million or $0.23 per diluted share. Funds from operations for the same period last year totaled $223.2 million. Other results for the quarter show an increase in tenant sales of 7.8 percent to $471 per square foot, year over year. The percentage of regional mall space under lease reached 92.7 percent, which is an increase of 40 basis points. Initial rents also increased, totaling $63.71 per square foot, which is up 6.7 percent from expired rents. Core net operating income also increased 2.4 percent year over year. GGP also secured cheaper refinancing on several of its properties and entered into several new projects during the third quarter.
Analysts recommendations trend toward “Hold” and “Buy/Outperform.” GGP was hit hard by the housing market crisis. It filed for protection under Chapter. Its reorganization plan included the splitting off of its master-planned communities segment, which is now the Howard Hughes Corporation. Under the reorganization, GGP also transferred many of its properties to creditors.
Its competitor Kimco Reatly Corp. (NYSE:KIM), also a REIT, invests in community shopping centers in 44 states, Canada, and Central America. It is currently trading near $16 a share. It reached its 52-week closing high of $20.30 on July 22 and its low of $14.11 on Oct. 3. Earnings per share is $0.25, and price to earnings ratio is 62.72. Its dividend yield is 4.70 percent or $0.76. Its payout ratio is 350 percent. KIM’s market capitalization is around $6.3 billion.
Funds from operations for the quarter ended Sept. 30 were $0.30 a share. Third quarter rental revenues increased 4.3 percent year over year to $216.1 million. Occupancy reached 93 percent, an increase of 10 basis points year over year. U.S. occupancy increased 50 basis points year over year to 92.9 percent.The two companies announced last week a joint venture to redevelop the Owings Mills Mall in Maryland.
With signs of an improving economy becoming clearer, GGP might prove to be a ruby in the sand for more speculative investors with room for riskier stocks in their portfolios. Of course, GGP’s performance rests on an improving commercial/retail real estate market and all that contributes to it – renewed consumer confidence, declining unemployment and underemployment, flat inflation, and more. KIM, which is trading at a premium to its earnings, may not be a value but offers a nice dividend and boasts a broader market base.
Pengrowth Energy Corporation (NYSE:PGH) – This Canadian oil and gas exploration and development company is currently trading near $10 a share. It has ranged from $7.99 to $14.60 over the past 52 weeks, reaching its lows in October and its highs in April. Earnings per share is $0.08, and price to earnings ratio is 133.90. Its dividend yield is 8.10 percent or $0.84, and its payout ratio is 229 percent. PGH has paid a monthly dividend since the end of 2001 but operated as an income trust prior to this year. PGH’s market capitalization is $3.40 billion.
Soros purchased 26,000 shares during the second quarter 2011 and sold his entire position during the third quarter. PGH’s average quarterly price for the second quarter was $13.10 and $11.43 during the third quarter.
Its reserves are located in the Western Canadian Sedimentary Basin. PGH’s third quarter results showed a 5 percent increase sequentially in oil production to 74,568 boe. The company drilled a total of 11 wells in the Swan Hills trend. Four were completed, but only one was tied in. Company officials expect the remaining three to be tied in and the other seven to be completed and brought into production during the fourth quarter. The company also began drilling in the Virginia Hills area of the Swan Hills trend and continued to acquire land there. Operating expenses increased sequentially to $103 million from $95 million, thanks to higher power prices and higher maintenance costs associated with floods and fires in the second quarter.
Analysts recommendations trend toward “Buy/Outperform” and “Hold.” Some remain skeptical about PGH’s prospect for growth, viewing its assets as mediocre and its plan for building shareholder value as unclear. The Western Canadian Sedimentary Basin is thought of as mature and past its production peak in terms of conventional oil and gas. Company officials say that under the company’s tenure as an income trust it acquired a large and diverse conventional asset base with low operatorship. Over the past year, since it transitioned to a publicly traded company, PGH began acquiring more prospects for unconventional drilling like oil sands and coal bed methane. The conventional assets can provide a steady stream of production while the unconventional assets may lead to growth.
Its competitor Enerplus Corp. (NYSE:ERF) is trading near $27 a share. It traded within a few dollars of its 52-week high of $33.29 from January through July but dropped markedly the first week of August, reaching its 52-week low of $21.65 on Oct. 3. Earnings per share is $4.25, and price to earnings ratio is 6.29. Its dividend yield is 7.80 percent or $2.13 a share, and its payout ratio is 109 percent. The company’s market capitalization is about 4.8 billion.
Daily production volumes for the third quarter averaged 73,245 boe per day, which came in about 3 percent under expectations. Company officials say ERF’s drilling program is delivering as expected, just a little slower due to inclement weather. ERF continues to invest in the Bakken/Three Forks play in North Dakota, the Marcellus Formation, and the Deep Basin region of British Columbia and Alberta.
Whereas PGH may not be a buy-and-hold contender, its dividend is quite attractive in the short term and as long as oil prices stay high. Of course, based on its price to earnings ratio, investors will pay a premium price for its dividend. PGH is particularly sensitive to the price of natural gas and could be adversely affected should prices remain low. The company will also have to be successful with its unconventional drilling activities in the Western Canadian Sedimentary Basin. ERF’s assets, which are a more diverse, are located in more promising areas. The company is also trading at a more reasonable price. Investors considering these stocks should keep in mind that they are speculative, carry regulatory risks, require vigilance and frequent review, and are particularly susceptible to changes in the price of oil and natural gas.
Silver Standard Resources Inc. (NASDAQ:SSRI) – This Canadian silver exploration and production company is currently trading near $14 a share -- less than half of its 52-week high of $35.94, which it approximated in April and May. It began its descent in early September and is currently trading near its 52-week low of $13.62. Earnings per share is $5.17, and price to earnings ratio is 2.66. It does not pay a dividend. SSRI’s market capitalization is a little over $1 billion.
Soros actively traded this stock in 2010, ending the year having closed out his position. He purchased 16,500 shares during the second quarter 2011 and sold the entire position during the third quarter. Average quarterly prices were $29.53 and $26.80, respectively.
Its resources are located in North and South America. The company sold its interests in Australia earlier this year. Its Pirquitas Mine in Argentina began production in December 2009. Equipment malfunctions forced management to halt operations in July and September, and as a result, production was down in the third quarter ended Sept. 30. Feasibility studies were completed on the San Luis Mine in June 2010, and company officials said a production decision would be issued this year, though no updates have been released yet. SSRI purchased Esperanza Resources Corp.’s interest in San Luis earlier this year and now owns 100 percent of the project. A feasibility study on the Pitarrilla mine was expected earlier this year. During the third quarter, management approved $25 million to move the schedule and study forward. Third quarter production was down year over year.
Analyst recommendations depend on the Web site quoted. Yahoo! Finance shows a trend toward “Buy” whereas Reuters shows mostly “Hold” with some “Outperforms” and “Buys.”
SSRI’s competitor Coeur D’Alene Mines Corp. (NYSE:CDE) is currently trading near $28 a share. It traded near the higher end of its 52-week range of $19.30 to $37.59 in March and April and reached its lows in August and again in October. IT has made significant gains since late October. Earnings per share is $0.87, and its price to earnings ratio is 31.93. It does not pay a dividend. The company’s market capitalization is almost $2.5 billion.
CDE is the world’s largest U.S.-based silver producer and an up and coming gold producer. The company reported record sales that were up 190 percent year over year and up 49 percent sequentially. Cash flow of $151 million also set a record, increasing by almost five times year over year and by 30 percent sequentially. Silver production came in at 4.9 million ounces, which was 13 percent higher than the same quarter last year and 3 percent higher than the second quarter. Gold production of 57.052 ounces was up 20 percent over the same quarter last year but was slightly down from the previous quarter.
TheStreet Ratings upgraded its recommendation to “Buy” from “Hold” earlier this week. Other analyst recommendations trend toward “Buy” and “Hold.”
CDE’s price to earnings ratio reflects investors’ confidence in the company’s continued growth, and it indicates that investors are paying a premium for this stock.
Silver tends to be volatile in price. It is currently trading near $35 an ounce. Not only is it viewed as a haven during uncertain economic times, but it also has a significant industrial demand, as it is used in solar energy equipment, water purification, televisions, batteries, medicines, auto electronics and GPS systems.
SSRI definitely has upside potential that bets on rising silver prices, which is likely as long as investors remain uncertain about the overall economy, Euro zone currency turmoil and as long as its industrial demand continues. It is trading at a much more reasonable price the CDE but carries a lot of risks.
Virgin Media, Inc. (NASDAQ:VMED) – This U.S.-based provider of cable, Internet and other communications services in the U.K. is currently trading near $23 a share, which is toward the lower end of its 52-week range of $20.87 to $33.32. It reached it highs in May, June and July but declined sharply in early August. It made a modest comeback in late October but has been trading down since then. Earnings per share is $0.32, and its price to earnings ratio is 73.11. It pays a small dividend of $0.16 a share for a yield of 0.70 percent. The company’s market capitalization is around $6.9 billion.
Soros actively traded this stock in 2010, ending the year with a holding of 11,400 shares. He sold the position in the first quarter of 2011 but bought 13,800 shares during the second quarter. He sold the position during the third. Average quarterly prices were $30.54 and $25.74 for the second and third quarters of 2011, respectively.
Quarterly revenue grew by 2.2 percent year over year but was down slightly over last quarter. Total operating expenses were down year over year and sequentially. Company management has an aggressive plan for market penetration in all four of its communications services categories.
Analyst recommendations trend toward “Buy/Strong Buy/Outperform.”
VMED’s competitor BT Group Plc (NYSE:BT) is currently trading near $29 a share. It has ranged from $25 to $33.58 over the past 52 weeks, trading near its highs throughout the summer and reaching its lows in September and October. Earnings per share is $3.25, and price to earnings is 9.02. BT pays a dividend. Its yield is 5.20 percent or $1.55, and its payout ratio is 35 percent. The company’s market capitalization is around $22.75 billion.
Cash flow, profit and underlying revenue increased during its second quarter ended Sept. 30, and the company is focused on expanding its customer base in all of its 170 markets, including the U.K., Asia, Europe, the Middle East and Africa, and North and South America.
VMED is trading at a premium to its earnings, but management has positioned the company for expansion and growth. BT is among the largest telecommunications service providers in the world. It has the advantage of a very broad customer base with several business/service segments, and it pays a very attractive dividend. VMED may be a promising choice for growth investors, but people diversifying into the international telecommunications sector may consider BT for its dividend, market capitalization and global market base.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.