George Soros Completely Exited These Stocks Last Quarter

by: Rash Menaria

I discussed the Top New Buys of George Soros in a previous article. In addition to the top new buys, it is also interesting to look at the stocks George Soros recently turned bearish on and completely exited last quarter. The following is a list of top ten stocks that George Soros completely exited in the last quarter.



Shares Held - 06/30/2011

Shares Held - 09/30/2011

Danaher Corp.




Thermo Fisher Scientific Inc.




RF Micro Devices Inc.




Petroleo Brasileiro




Stanley Black & Decker Inc.




Western Digital Corp.




Itau Unibanco Banco Holding SA




Golar LNG Ltd.




Target Corp.




Coinstar Inc.




Source: 13F Filing

I believe Thermo Fisher and RF Micro Devices are good shorts at current levels. Danaher and Stanley Black & Decker also appear to be good exits given the cyclical nature of their business. However, one company where I don’t agree with George Soros is Western Digital and I would instead like to go long on the stock.

Thermo Fisher Scientific Inc. is engaged in serving science. It provides analytical instruments, equipment, reagents and consumables, software and services for research, manufacturing, analysis, discovery and diagnostics. It operates through two segments: analytical technologies and laboratory products and services. The analytical technologies segment includes pharmaceutical, biotechnology, academic, government and other research and industrial markets. The laboratory products and services segment offers a combination of products and services that allows its customers to engage in their core business functions of research, development, manufacturing, clinical diagnosis and drug discovery. Thermo Fisher’s EPS forecast for the current year is 4.14 and next year is 4.75. According to the consensus estimates, its top line is expected to grow 8.10% in the current and next year.

Thermofisher has historically been considered a defensive stock. However, this is no more the case given secular and cyclical headwinds the company is facing. Given the dire state of US Government’s financials potential federal/state funding curtailment in research is likely. Research appears to be stretching existing dollars till there is more clarity on the public funding environment. This has already started to demonstrate in Thermo Fischer’s results and the company reported disappointing 3Q11 results. The company also reduced guidance for the remainder of 2011, just two months after increasing it in late August. Secular headwinds in academic/government end markets makes the company more dependent on Industrial end markets for growth, which are more cyclical. Given the slowing economy, demand from Industrials markets is also expected to decrease going forward. Although, Thermo Fischer has a good amount of backlog to burn in Industrial markets, which will prevent it from seeing an immediate impact on the earnings, a multiple compression is very likely for the stock.

RF Micro Devices, Inc. is engaged in the design and manufacture of radio frequency components and compound semiconductor technologies. RFMD manufactures gallium arsenide-based and gallium nitride compound semiconductors for RF applications. RFMD’s EPS forecast for the current year is 0.41 and next year is 0.57. According to the consensus estimates, its top line is expected to decline 10% current year and grow 13.90% next year.

Although RFMD is executing well, I expect the stock to underperform its peers due to increasing competition, a slowdown in MPG business, uncertainty in engagement with the leading Qualcomm platform and downside risk from Nokia exposure. Avago (AVGO) is a much better option to go long on in the industry and provides better risk rewards with similar growth trends. Avago has shown consistent execution, has diversified exposure to wireless and wireline end markets, and has proprietary FBAR technology that is driving share gains in 4G and in the new iPhone 4S.

Western Digital Corporation designs, develops, manufactures and sells hard drives. It sells its products worldwide to original equipment manufacturers and original design manufacturers for use in computer systems, subsystems or consumer electronics devices, and to distributors, resellers and retailers. Its hard drives are used in desktop computers, notebook computers, and enterprise applications such as servers, workstations, network attached storage, storage area networks and video surveillance equipment. Western Digital’s EPS forecast for the current year is -1.37 and next year is 4.00. According to the consensus estimates, its top line is expected to decline 27.20% current year and grow 47.20% next year.

A lot of positive developments have taken place for Western Digital in the recent past. The company has received conditional approval of the Hitachi deal by the EC that could yield $5-$6 in EPS in FY2012 once the deal closes and synergies are recognized. Further, the recently announced long-term supply agreement with TDK secures enough heads and sliders for quarterly HDD production to return to ~30M units, or roughly 50% of its pre-flood capacity. WDC badly needed this as after the recent Thai floods all of its slider production facilities were under water. Western Digital is currently trading at an undemanding valuation of 6.8x 2013e EPS. Further there a good chance of upward revision in the estimates going forward as the market realises potential of the Hitachi deal. I am bullish on the stock from a medium time perspective and see good upside if one can hold the stock for the next two years.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.