By Michael Williams
Although far more controversial, Hungarian-American investor and billionaire George Soros is considered by many to be an investor on par with such giants as the great Warren Buffett himself. Soros is referred to as "the Man Who Broke the Bank of England" for the legendary profit of over $1 billion he made during the UK currency crisis in 1992. His insights still inspire many investors, and for this reason, it is wise to look at the six newest buy ideas from George Soros. In this article I analyze Soros' picks from a contrarian perspective. I conclude that WebMD (WBMD), Kraft (KFT) and The Medicines Company (MDCO) are the best picks on a relative value basis.
Even after his famous haul of 1992, Soros has continued to prosper through his understanding of the markets. After donating approximately $8 billion from 1979 through 2011, he is still worth an estimated $22 billion, making him the 46th richest man in the world according to Forbes. His insight is obvious, and some of the latest targets of this investment genius include WebMD, Amazon.com Inc (AMZN), Motorola Solutions Inc (MSI), The Medicines Company , Kraft Foods Inc , and Hewlett-Packard Company. (HPQ) Each stock in this group has features that make it a great candidate to consider for purchase.
An American health information services company, this business specializes in providing medically-related info to doctors and private subscribers. The company not only offers web-based medical information. It also publishes a bi-monthly magazine that is distributed to the vast majority of doctors waiting rooms. It has more than three dozen forums for doctors and a physician’s information portal.
Competing against privately held entities like the Centers for Disease Control and Prevention, iVilliage Inc and Mayo Clinic, WBMD offers investors a solid opportunity, appearing among investor Carl Icahn’s top undervalued stock. After a difficult year where the company saw its share price tumble to its lowest point since 2008, WebMD’s P/E stands at 21.50, it has an EPS of 1.47, and its one-year target is more than 10% above its current price. The strong potential of this company makes it a stock worth considering.
Amazon Inc (AMZN)
The Amazon brand has become synonymous with e-commerce, as this company has built itself into the largest online retailer in the world. Founded in 1994, Amazon specializes in selling eBooks, software, electronic equipment, CDs and DVDs, music, video games and more. Competing against other giants like eBay (EBAY), Barnes & Noble Inc (BKS) and Wal-Mart.com (a privately held company), AMZN appears to be on a steady climb upward.
Although the stock price is somewhat high at around $190 per share, the company offers an EPS of 1.90, which is better than the 1.37 of EBAY and far superior to the minus 1.20 of BKS. After tumbling to its 52-week low of 160.59 in March, the company has already gained back over $30 per share, while seeing a year-to-year quarterly revenue growth of over 43%. With such strong revenue, Amazon is another great possibility.
Motorola Solutions (MSI)
Soros has become increasingly bullish on Motorola Solutions Inc, with the telecommunications and business services company now comprising nearly 5% of his sizable portfolio. With almost 7 million shares of MSI stock, he has joined top investors such as Carl Icahn with substantial holdings of this company, preferring it over competitors such as Cisco Systems Inc (CSCO), Honeywell International Inc (HON) and others.
Since Google (GOOG) announced that it would buy Motorola’s wireless telephone division, MSI has become a hot choice. After dropping to just over $30 per share in November 2010, the price has been surging, climbing to over $47 per share. With an excellent year-to-year quarterly revenue growth of 10.3% (in contrast to 4.7% for Cisco and 14.2% for Honeywell) and a PEG ratio of 2.50, (as opposed to 1.2 for CSCO and 0.78 for HON) MSI is sitting on a mountain of cash and looks poised to climb even higher, as evidenced by its 1-year target of nearly $50 per share.
The Medicines Company (MDCO)
A global pharmaceutical company that specializes in treatment of critical care patients, The Medicines Company represents another recent buy made by George Soros. Soros made a strong 3rd quarter move on the company’s stock, picking up 1.7 million shares that ranged in price from just over $12.50 to $17 a share. Since that time, the price has climbed to nearly $18 per share, a 20% increase over the average price of $14.95 that he paid.
Much like its competitors GlaxoSmithKline (GSK) and Pfizer Inc. (PFE), MDCO looks primed to capitalize on a strong pharmaceutical sector to keep growing. Its 1-year target estimate of $23.25 represents a 30% increase, comparing favorably with a 25% rise for PFE and a 17.6% jump for GSK. This strength bodes well for MDCO and indicates why Soros is holding this position.
Kraft Foods (KFT)
Of his recent acquisitions, Soros’ purchase of Kraft is especially interesting for many investors. This global giant is the second largest in the food industry, competing against #1 Nestle (OTCPK:NSRGY) and privately-held companies Mars Inc and Sara Lee North America Retail. With strong growth in the international sector and a planned spin-off of its business operations, the company appears to have great potential moving forward.
A recent year-to-year quarterly revenue growth rate of 11.5% for Kraft has been fueled by strong international gains, allowing it to outpace both Nestle (losing 5%) and the market as a whole. (Up 8.4%) The company will be splitting its rapidly expanding snack business from its steady grocery business during the 2012 fiscal year, allowing it the opportunity to capitalize on its above-average growth in snacks while maintaining its solid position in the grocery sector. This optimism is seen in a 1-year target increase of 15% for KFT, as opposed to a weaker climb of just over 11%.
Hewlett-Packard has been a staple in the competitive computer systems industry. HPQ has competed against the likes of Dell Inc (DELL) and International Business Machines (IBM) in this multi-billion-dollar business sector. Although Soros has been buying, there are signs that suggest other investors might want to wait.
Facing significant challenges in virtually every sector, HP is in danger of losing its lead in both PC sales and servers. Dell is pressing Hewlett-Packard and has been making consistent gains, a move that should concern holders of HPQ stock. With the smallest E/P of the three at 6.08 (DELL is at 7.42 and IBM at 14.02), and a 1-year target well below its 52-week high, investors might be wise to consider moving into either competitor before taking a current position in HPQ.
Investing Like Soros
Although very few investors in the world can invest on the scale of George Soros, it is possible to gain some great insight from his decisions. Of these six buy ideas from George Soros, WebMD, Kraft Foods Inc and The Medicines Company seem to be among the best options for savvy investors looking to take new positions.