George Soros's Favorite Low PE Stocks: 2 To Buy, 1 To Avoid

Includes: AAPL, DISH, EXTR, GM, T, VC, 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 low PE stocks which Soros Fund Management LLC is holding.



Shares Held

Forward PE

Visteon Corp




Dish Network Corporation




Apple Inc.




Extreme Networks Inc.








General Motors Company








Source: 13F Filing

I would recommend buying Apple and YPF from among the above stocks.

Apple Inc. looks good, trading below 10x forward earnings despite ~$100 billion in cash and expected 43% growth in sales in the current year. Apple recently posted good December quarter results beating even the most optimistic estimates. Its guidance was also above street estimates. Apple continues to remain a secular growth and market-share-gain story in the smartphone and tablet space. I would recommend buying the company's shares given its low valuations and several upcoming catalysts over the next few quarters; such as strong iPhone 4S sell-through and anticipated iPad 3 and iPhone 5 launches this year.

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.

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.

One stock which I don't like in the above list is DirecTV. I would recommend selling the stock. DirecTV Inc. provides digital television entertainment in the United States and Latin America. Its services include Direct-to-Home digital television, multi channel video programming distribution and video-on-demand. It also offers 160 national high-definition channels and 4 3D channels.

The U.S. pay TV market has reached a mature stage. There is also a stiff competition from cable operators. Going forward, DTV is expected to focus less on subscriber growth and more on retention and profitability. In addition, with new players such as AT&T (NYSE:T) and Verizon (NYSE:VZ) entering this saturated market with new offerings, DTV might even see subscriber losses. I believe this will result in a slower growth for the company going forward.

Also, DTV's programming expense and margins outlook is challenging. It is expected that increasing programming costs will have an incremental negative effect on the margins. Further, Internet TV may pose risk in the long term and the multiples for the pay TV industry may fall if the subscriber base declines.

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