Soros's 7 Highest-Yield Stock Holdings

 |  Includes: CKSW, CTL, EJ, MDLZ, PFE, T, YPF
by: Rash Menaria

Soros Fund Management LLC is one of the most successful and high-profile hedge funds, managed by billionaire hedge fund manager George Soros. Soros returned an average of 30.5% per year between 1969 and 2000. More recently in 2007, 2008, and 2009, his fund generated a 32%, 8% and 29% return respectively for investors. The following is a list of top seven high yield stocks which Soros Fund Management LLC is holding.

Stock Symbol Shares Held Yield
YPF S.A. YPF 544400 9.40%
Centurylink Inc. CTL 316715 7.80%
Pfizer Inc. PFE 666700 4.10%
Kraft Foods Inc. KFT 330600 3.00%
AT&T Inc. T 378642 6.00%
E-House Holdings Limited EJ 1850000 4.20%
Clicksoftware Technologies Ltd. CKSW 1593874 3.10%
Click to enlarge

Source: 13F Filing

Amongst the above stocks, I would recommend buying YPF, Pfizer and Kraft Foods Inc. Clicksoftware has initiated dividend last year, and if the company is able to maintain its current dividend rate, it might also be an interesting long opportunity.

YPF SA is Argentina's largest integrated oil and gas company. Its business is structured in six activities: Exploration and Production; Refining and Logistics; Marketing; Chemicals; Lubricants, and YPF Gas. The Company's majority shareholder is Repsol YPF SA. YPF's EPS forecast for the current year is $3.77 and next year is $4.40. According to the consensus estimates, its top line is expected to grow 8.80% next year.

The company recently announced an upgrade on its unconventional shale oil to 927 million boe (up from previous 150 million boe). There is an enormous resource potential for the company from shale oil /gas in Argentina and it is likely going to be a key value driver in the long term. The company's management is focussed on full appraisal/development of shale oil assets, with goal of 50tbpd of oil output in 2015-16 and eventual output of 80+ tbpd. This would enable YPF to provide 100% of crude processed in its refineries. The breakeven price for the development of shale oil would be at ~US$60/Bbl. Although company's shale oil/gas resources will take a few more years to monetize, they can be company transforming and will unlock substantial value for long term investors.

Kraft Foods Inc. manufactures and markets packaged food products, including biscuits, confectionery, beverages, cheese, convenient meals and various packaged grocery products. Kraft is trading at a forward PE of 15x. Its EPS forecast for the current year is 2.28 and next year is 2.52. According to the consensus estimates, Kraft's top line is expected to grow 10.50% in the current year and 2.60% next year. Trading at a forward PE of 15, Kraft's valuations are in line with its peers despite its above-average growth rate. I believe this will change going forward as Kraft is planning to split up its high-growth Snacks business and the stable return Grocery business in FY12. This will highlight the above peer growth profile of the global snacks business and hence help the company achieve a better valuation.

I am bullish on Pfizer because of management's commitment to enhance shareholder value through dividend and buybacks, and company's improving product pipeline. Pfizer increased its quarterly dividend by 10% to $0.22 from $0.20 in Q4 and authorized an additional $10 billion share repurchase program with $5 billion in repo expected for 2012. Pfizer is likely to generate ~$20B in free cash flow in 2012, so even with the dividend of ~$6.5B and share buyback of $5B there is still plenty of room for inorganic growth through M&A. In addition, Pfizer entering an interesting new product launch cycle with four $1+ bn opportunities including Xalkori, Eliquis, tofacitinib, and Prevnar 13 adult which could provide organic growth catalysts for the company.

One stock in the above list where I am not too positive is AT&T. Although its undone deal with T-Mobile came somewhat along expected lines, the failure of this deal is a net negative for AT&T, as it will now have to look elsewhere for the spectrum. Further, fall off of this deal is not good from a competitive point of view for AT&T. AT&T would have been a more powerful competitor with the merger. Without the deal, both Verizon (NYSE:VZ) and Sprint (NYSE:S) should be better able to compete.

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