Tracking George Soros's Portfolio - Q3 2018 Update

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Includes: AABA, ADM, AET, ALLT, AMZN, BAC, C, CAG, CMA, CNQ, COL, COUP, CRM, CVX, CZR, DIS, DVN, EA, EEM, EQT, ESRX, ETRN, GLIBA, I, JPM, KHC, LBRDK, LGF.A, LPLA, MRVL, MSFT, NFLX, NOW, NXPI, P, QCOM, QQQ, RNG, SIGM, SIVB, SMH, SPOT, SPY, T, TRCO, VICI, VR, WFC, XL, XLE, XOP
by: John Vincent
Summary

Soros' 13F portfolio value decreased from $6.25B to $4.56B this quarter. The number of positions decreased from 203 to 189.

Soros added Tribune Media, while reducing NXP Semiconductors. The large net short positions in the S&P 500 Index and the Nasdaq 100 Index was turned into a small net long position during the quarter.

Liberty Broadband at ~14% of the portfolio is the largest individual stock position.

This article is part of a series that provides an ongoing analysis of the changes made to George Soros’s 13F stock portfolio on a quarterly basis. It is based on George Soros’s regulatory 13F Form filed on 11/14/2018. Please visit our Tracking Soros Fund Management Holdings article for an idea on his investment philosophy and our previous update for the fund’s moves during Q2 2018.

Soros Fund Management invests globally, and the long positions in the US market reported in the 13F filings represent ~15% of the overall portfolio. The 13F portfolio value decreased ~27% this quarter from $6.25B to $4.56B. The number of positions decreased from 203 to 189. Very small stock positions and large debt holdings together account for ~30% of the 13F holdings. The investments are diversified with a large number of very small equity positions, a small number of large equity positions, and a few large debt holdings. As the small positions (<0.5%) do not indicate a clear bias, the focus of this article is on the lsarger equity positions. The top three individual stocks held are Liberty Broadband (LBRDK), VICI Properties (VICI), and Caesars Entertainment (CZR). To learn about Soros’ distinct trading style and philosophy, check out his The Alchemy of Finance and other works.

New stakes

Tribune Media (TRCO), Archer Daniels Midland (ADM), Walt Disney (DIS), and Kraft Heinz (KHC): These are new individual stock positions established during the quarter. TRCO is a 1.35% of the portfolio stake purchased at prices between $32 and $39, and the stock currently trades near the top end of that range at $38.57. The 0.79% of the portfolio position in ADM was established at prices between $45 and $51, and it currently goes for $46.38. DIS is a 0.77% position purchased at prices between $104 and $117, and it is now at ~$116. The 0.68% KHC stake was established at prices between $55 and $65, and it currently trades below that range at $52.08.

SPDR Energy (XLE) Calls, SPDR Oil & Gas Exploration (XOP) & Calls: The 1.66% long position in XLE through calls was purchased as the underlying traded between $72 and $77, and it is now below that range at $67.18. The 0.93% XOP stake was established at prices between $39 and $45, and it currently trades well below that range at $34.75.

Stake Disposals

Rockwell Collins (COL): The COL stake was increased by ~165% in Q1 2018 at prices between $133 and $139. That was followed with a ~14% increase last quarter. The stock is now at ~$133. The 1.37% portfolio stake was disposed this quarter.

Note: In September last year, United Technologies (UTX) agreed to acquire Rockwell Collins in a cash-and-stock deal valued at $140 per share ($93.33 per share in cash and the rest in stock subject to a 7.5% collar).

XL Group (XL): XL was another merger arbitrage stake established in Q1 2018 and increased by ~80% last quarter. In March, AXA agreed to acquire XL Group for $57.60 per share cash. The transaction closed in September, thus eliminating the position.

Chevron (CVX) & Calls and VanEck Vectors Semiconductor ETF (SMH) Puts: These two small ~1% positions were established last quarter but disposed this quarter. CVX was purchased at prices between $112 and $130 and disposed at prices between $114 and $128. The stock is now at ~$119. SMH Puts stakes was established as the underlying traded between $97 and $112 and disposed as it traded between $101 and $110. It currently trades at $94.28.

ServiceNow Inc. (NOW) and Canadian Natural Resources (CNQ) Calls: These two very small (less than ~0.60% of the portfolio each) stakes increased last quarter were eliminated this quarter.

Invesco QQQ ETF (QQQ), Sigma Designs (SIGM), and Validus Holdings (VR): These are small (less than ~1% of the portfolio each) stakes kept steady last quarter but disposed this quarter.

Note 1: Validus Holdings was a merger arbitrage stake: In January, AIG agreed to acquire Validus Holdings for $68 per share cash, and that transaction closed in July.

Note 2: Soros had a 13% ownership stake in Sigma Designs.

Stake Increases

Intelsat SA (I) & Calls: The bulk of the ~2% of the portfolio position in Intelsat was purchased over the last two quarters at prices between $3.60 and $31, and the stock currently trades at $25.67.

Note: Intelsat has returned a whopping ~500% since April.

Devon Energy (DVN) & Calls, Microsoft Corp. (MSFT), Pinnacle Foods, and iShares MSCI Emerging Markets ETF (EEM): These four positions saw large increases this quarter. The ~1.6% DVN stake was increased by ~160% at prices between $38.50 and $45.50, and it is now well below that range at $29.56. The 1.21% MSFT position saw a whopping ~800% increase this quarter at prices between $99 and $115, and it currently trades at ~$108. Pinnacle Foods was a merger arbitrage stake that saw a ~500% increase this quarter. Conagra (CAG) agreed to acquire Pinnacle Foods in June, and the transaction closed last month. The 1.2% EEM stake saw a ~550% increase this quarter at prices between $41 and $45, and it currently goes for $40.90.

Coupa Software (COUP): The ~1% COUP stake was established last quarter at prices between $44.50 and $64.50 and increased by ~14% this quarter at prices between $61 and $81. It is currently at $63.94.

EQT Corporation (EQT) & Calls: EQT is a 0.60% portfolio stake purchased in Q2 2017 at prices between $30 and $33.50 and increased by ~20% the following quarter at prices between $38.50 and $46.50. There was a ~22% selling in Q1 2018 at prices between $25 and $38.50, and that was followed with a ~42% reduction last quarter at prices between $25.50 and $36.50. The stock is now at $16.63. This quarter saw a marginal increase.

Note: The prices quoted above are adjusted for the Equitrans Midstream Corp. (ETRN) spinoff this month.

Express Scripts (ESRX), Lions Gate Entertainment Corp. (LGF.A), and SVB Financial (SIVB): These are very small (less than ~0.70% of the portfolio each) stakes that saw substantial increases this quarter.

Stake Decreases

Liberty Broadband: LBRDK is the largest individual stock position by far at ~13.5% of the portfolio. The stake was established in Q2 2016 at prices between $55 and $60.50. The stock is now well above that range at $83.79. There was marginal trimming in the last three quarters. For investors attempting to follow Soros, Liberty Broadband is a good option to consider for further research.

Altaba Inc. (AABA) (previously Yahoo): AABA is a fairly large (top-five) 4% portfolio position established in Q2 2017 at prices between $46 and $56 and increased by ~10% the following quarter at prices between $54.50 and $67.50. The stock is now well above that range at $63.59. There was a ~4% trimming last quarter and a marginal reduction this quarter.

SPDR S&P 500 (SPY) Calls & Puts: The net long position through SPY Calls & Puts is now a minutely small 0.37% portfolio stake. It was a large 7.31% net short position last quarter. SPY traded between $257 and $279 last quarter and between $271 and $294 this quarter. It is currently at ~$274.

Aetna Inc. (AET): The 1.51% AET stake was built over the two quarters through Q1 2018 at prices between $151 and $194. The stock currently trades at ~$209. There was a ~6% trimming last quarter and a one-third reduction this quarter at prices between $185 and $206.

Note: Last December, CVS agreed to acquire Aetna in a cash-and-stock deal ($145 per share in cash and 0.8378 CVS shares for each share held).

AT&T Inc. (T): T was a fairly large ~3% of the portfolio stake established last quarter. Soros had a position in Time Warner, and AT&T’s deal ($107.50 per share, half cash) for Time Warner closed in June. The position saw a ~75% selling to a small ~1% portfolio stake this quarter at prices between $30 and $34. The stock is now at $30.29.

Spotify Technology (SPOT) and Pandora (P): SPOT is a ~1% of the portfolio position. It had an IPO in April and started trading at ~$135 per share. The stock is now at ~$134. The position was reduced by ~63% this quarter at prices between $169 and $196. The ~1% Pandora stake was purchased last quarter at prices between $4.50 and $8.50 and reduced by ~25% this quarter at prices between $6.75 and $10. It is currently at $8.91.

JPMorgan Chase (JPM): The ~0.66% JPM stake was acquired in Q1 2018 at prices between $107 and $119 and reduced by ~60% this quarter at prices between $104 and $119. It currently trades at ~$110.

Bank of America (BAC) and Netflix Inc. (NFLX): These small positions (less than 1% of the portfolio each) saw large increases in Q1 2018 but were reduced over the last two quarters. The 0.64% BAC position saw a whopping ~815% increase in Q1 2018 at prices between $30 and $33. It saw a ~55% selling this quarter at prices between $27.75 and $31.80, and the stock is now at $27.75. NFLX is now a minutely small 0.11% stake. It had seen a ~205% increase in Q1 2018 at prices between $201 and $331. There was a ~45% reduction last quarter at prices between $280 and $417, and the position was almost eliminated this quarter at prices between $317 and $419. The stock is now at $286.

Amazon.com (AMZN) & Calls and Wells Fargo (WFC): These small positions (~1% of the portfolio each) established in Q1 2018 saw significant selling since. AMZN is a ~1% of the portfolio position purchased at prices between $1180 and $1600, and it is now at $1593. Last quarter saw a ~42% selling at prices between $1372 and $1750, and that was followed with another ~25% selling this quarter at prices between $1694 and $2040. The 0.42% WFC stake was established at prices between $51 and $66 and reduced by ~60% this quarter at prices between $52.50 and $59. It currently goes for $52.94.

NXP Semiconductors (NXPI): The fairly large 3.36% NXPI position saw an ~80% increase in Q1 2017 at prices between $96 and $104, and that was followed with another ~45% increase in Q4 2017 at prices between $113 and $118. There was a ~45% increase in Q1 2018 at prices between $115 and $126, and that was followed with a ~150% increase last quarter at prices between $92 and $120. This quarter saw the position almost sold out at prices between $85 and $110. It is now at $84.97.

Note: NXP Semiconductors was to merge with Qualcomm (QCOM) at $127.50 per share cash, but that transaction fell through in July.

Allot Communications (ALLT), Citigroup (C), Comerica (CMA), Electronic Arts (EA), GCI Liberty (GLIBA), Marvell Technology Group (MRVL), RingCentral Inc. (RNG), and Salesforce.com (CRM): These very small (less than ~0.80% of the portfolio each) stakes saw reductions this quarter.

Kept Steady

VICI Properties and Caesars Entertainment: In October last year, Caesars Entertainment combined with Caesars Acquisition in a merger (bankruptcy court reorg). The bankruptcy reorg included the spinoff of VICI Properties, whereby the creditors received VICI shares. The 10.20% of the portfolio position (~7% of the business) in VICI came about as a result of this transaction - Soros had huge stakes (both equity and debt) in the parent businesses. The stock started trading at $18 per share and currently goes for $21.30. The CZR position is currently the third-largest stake at ~8% of the portfolio. The reorg terms also called for Caesars Acquisition shareholders to receive 1.625 shares of CZR for each share held. Q1 2018 saw the stake increased to 34.5M shares (4.9% of the business) as Soros’ debt holdings got converted in the reorg. The stock currently trades at $8.51.

LPL Financial Holdings (LPLA): The very small 0.81% portfolio stake in LPLA was kept steady this quarter.

The spreadsheet below highlights Soros’s significantly large 13F positions as of Q3 2018:

George Soros - Q3 2018 13F Report

Disclosure: I am/we are long BAC, NXPI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.