In this installment of my analysis of recent purchases made by renowned investors, I will look at 4 stocks bought by the George Soros's Soros Fund Management using the latest available SEC filings of the fund. For this article, I have selected non-tech and non-healthcare stocks which offer a minimum return of 15% from current levels. I estimate that most of the names on the list will deliver a return greater than 20%. Additionally, the selected stocks are dividend paying companies with a yield in excess of the 10-year bonds. George Soros's tech and healthcare picks can be accessed here and here.
The list is fairly broad and includes stocks from the beverages (non-alcoholic), food processing, iron and steel, and communication services.
1) Kraft Foods Inc. (KFT)
Kraft Foods is a $68 billion company by market capitalization and is engaged in manufacture and sale of packaged food products such as biscuits, confectionery, beverages and other products. The stock price appreciated by 11% during the last 5 years. This capital gain was in addition to the healthy dividend yield of 3%.
Soros added 322,400 shares of KFT from an initial position of 8200 shares at an estimated price of $34 a share. At the time of writing, the stock traded at $38.47. The company is expected to grow its earnings at an annual rate of 10% compared to the 4% growth rate of the past 5 years. The industry overall is expected to grow at a rate of 14%. Applying my estimated P/E of 19 to 2012 EPS of 2.52, my initial 12-month price target for KFT is $48 a share. A return of 27% (including dividends) is possible from current levels.
2) PepsiCo, Inc. (NYSE:PEP)
Although PepsiCo is commonly known as a beverage maker, the company derives about half its revenues from food products. Additionally, 47% of its revenues are generated outside the U.S. Soros initiated a new position in PEP by purchasing 78,200 shares at an estimated average price of $63 slightly below Friday's closing price of $65.8 a share.
The company is expected to grow its earnings at an annual rate of 8%, which is consistent with the growth rate of the previous 5 years. Applying a P/E of 16.5 to 2012 average analyst EPS estimate of $4.56, my 12-month price target of $75 is obtained. The stock currently yields 3.13%. Including dividends, a return of 17% is possible from current levels.
3) Gerdau SA (ADR) (NYSE:GGB)
Gerdau is a Brazilian producer of steel. The company operates 60 steel producing units (owned and joint ventures) in Brazil, United States, India, Mexico, Guatemala and the Dominican Republic. The company outperforms its peers in terms of higher gross margins, operating margins and net profit margins. The earnings at GGB fell during the last 5 years, but analysts expect a bright future ahead with a projected long term growth rate of 20%.
Soros initiated a new position in GGB by purchasing approximately 510,000 shares at an estimated average price of $8.57 a share. This is another profitable investment with the stick trading at $9.65 a share. The stock has a respectable yield of 2.73%. My 12-month price target for GGB is $12.5 a share and is obtained by applying a multiple of 14 to the low end of analysts' 2012 EPS estimate of $0.88. GGB therefore offers a total return of 31% from current levels.
4) Vodafone Group Plc (ADR) (NASDAQ:VOD)
Vodafone is a UK based mobile communications company. Soros increased his position in VOD by 78% by acquiring approximately 135,000 shares at an estimated average price of $25.3 compared to the current price of $27.1.
VOD grew its earnings at an annual rate of 4% during the last 5 years and is expected to have a respectable growth rate of 10.5% during the next 5 years slightly below the 12% growth rate of the industry. My target of $32 is obtained by applying a P/E of 12 to 2012 EPS estimate of$2.65. Including dividends (a yield of 5.4%), a return of 22% is possible from current levels.
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 GGB particularly attractive based on fundamentals and growth prospects.