In this installment of fund holding analysis, I will look at five tech buys made by the great George Soros using the latest available SEC filings. In addition to the stock picks, I have also calculated my fair value estimates for these companies and estimated the price Soros might have paid for the purchase.
Amazon.com, Inc (AMZN)
Soros practically initiated a new position in Amazon by increasing his holdings in AMZN by 1516% at an estimated average price of $212.8. As of January 3, 2012, the stock was trading at $179.03 implying a paper loss of 16%. Amazon is an overvalued company in my opinion. The company currently trades at P/E of 91. The estimated long-term growth rate of 25% does not justify this lofty valuation. Applying my P/E estimate of 69.1 to 2012 EPS estimate of 2.02, I arrive at a price target of $139 a share. Based on my preliminary analysis, the stock can decline further by another 20%.
SanDisk Corporation (SNDK)
Soros initiated a new position in SanDisk by purchasing 394668 shares at an estimated average price of $39.87. The investment is currently paying off with the stock trading at $47.58 as of January 3, 2012. SanDisk grew at an annual rate of 28.66% during the last 5 years and is expected to grow its earnings at an annual rate of 18%, slightly outpacing the 16% projected growth rate of the industry. Analysts expect the company to report an EPS of $4.91 in FY 2012. Applying a P/E of 10 to this 2012 EPS estimate, a price target of $49 is obtained. At current levels, the stock is fairly valued in my opinion.
Apple Inc. (AAPL)
Soros added 12623 shares of Apple during the 3rd quarter at an estimated price of $380.51 to take his total position to 83417 shares. The stock has appreciated by 27% during the last year and currently trades around $410. The company grew at an astronomical rate of 62% during the last 5 years and is expected to grow at a more down to earth rate of 19% in the medium term. The stock is substantially undervalued in my opinion. My 12-month price target of $510 is obtained by applying a P/E of 14.6 to consensus 2012 EPS estimate of $34.83. This would represent a return of 24%.
Hewlett Packard (HPQ)
Hewlett Packard has been a popular stock with the funds that I monitor. In addition to Soros’ 376% increase in HPQ stake, Saturna Capital also increased its position in HPQ during the 3rd quarter. Soros bought 298317 shares at an estimated average price of $29.21 above today’s closing price of $26.62. Applying a multiple of 7.8 to 2012 EPS estimate of $4.09, my price target of $32 is obtained. At current levels, a return of 20% is possible.
Cognizant Technology Solutions (CTSH)
Soros increased his position in CTSH by 66% adding 48502 shares at an estimated average price of $66.42 compared with the January 3, 2012, closing price of $65.72. The company is expected to increase its earnings at an annual rate of 19% compared with the 16% growth rate of the industry. Applying a P/E of 24 to 2012 EPS estimate of $3.41, my price target of $81 is obtained. CTSH is undervalued at current levels and deserves further analysis for possible investment.
As always, please do not consider this list as a “buy” list, rather use this list as a starting point for your research. Of the companies listed above, I find AAPL and CTSH particularly attractive based on fundamentals and growth prospects.