Long heralded as the father of the modern hedge fund, George Soros stands atop the investment world as one of the most successful managers of all time – his Quantum Fund is the shining example of what kind of performance is possible. As a result of this recognition and of his success, investors have long since paid attention to the stock picks being made by Mr. Soros. Monitoring his trading activity will not make it possible to duplicate perfectly, but it can give a careful observer some insight into his views on current and developing trends in both the U.S. and globally. Introducing an understanding of these trends into one’s own trading decisions can have a positive influence and boost results.
MEMC Electronic Materials Inc. (WFR, Financial) – As of the end of the fourth quarter of 2010, Mr. Soros flattened his position in WFR, bringing his holdings in the stock down to zero. Despite being classified as a semiconductor company, ownership in WFR is really a solar play, as two of the company’s segments focus on solar energy. As the problems in the economy have persisted, forcing the federal government to focus less on alternative energy, solar energy has largely underperformed. For those investors wishing to maintain exposure in the solar and alternative energy space, while not being completely captive to the fluctuations of an otherwise volatile industry, Applied Materials (AMAT) is a better choice. Where WFR has a trailing P/E ratio above 20, AMAT trades at 7.5; it is a better value. In addition, AMAT is considered one of the leading chip makers in the world, and supplies many of the largest consumer products manufacturers.
Finisar Corp. (FNSR, Financial) – As of the end of the first quarter of 2011, Mr. Soros flattened his position in FNSR, bringing his holdings in the stock down to zero, after having established his position within the previous quarter. While FNSR remains an attractive option relative to competitor JDS Uniphase Corp. (JDSU), a stronger option in the sector is Avago Technologies Ltd. (AVGO). On a trailing P/E basis, where FNSR is trading at 23.2 and JDSU is trading at 41.2, AVGO is trading at 13.9, the only one of the three below the industry average of 19.9. This strength in terms of financial metrics remains intact for operating margin as well: FNSR has an operating margin of 10.2% relative to 4.5% for JDSU and 25.1% for AVGO. In this highly competitive industry, the edge shown by AVGO is quite significant and makes for a better long-term investment, particularly in light of trading at a discount in terms of P/E.
Cabot Oil & Gas Corp. (COG, Financial) – As of the end of the first quarter of 2011, Mr. Soros flattened his position in COG, bringing his holdings in the stock down to zero, after having established his position within the previous quarter. COG has maintained a steady upward trajectory throughout 2011, suggesting that Mr. Soros either reached his profit objective in the stock or found other plays in the oil and gas space to more compelling. Since the end of the first quarter, the stock has appreciated from a trading price of below $50 per share to over $70 per share. In terms of pure financial metrics, Anadarko Petroleum Corp. (APC) is more attractive. Similar to COG, APC operates in both the oil and the natural gas space. On a trailing P/E basis, where COG is trading at 65, APC is trading at 41.4. Both of these are very high readings, particularly within the energy space, but can be explained. Natural gas has lagged for some time, but is expected to reverse – it is currently near the bottom of a well-established range. If this reversal occurs, the earnings for each company should change and bring each in line with more appropriate valuations. Even so, APC appears to be the better choice at current levels.
Fossil Inc. (FOSL, Financial) – As of the end of the first quarter of 2011, Mr. Soros flattened his position in FOSL, bringing his holdings in the stock down to zero, after having established his position within the previous quarter. FOSL, which experienced a price spike from the mid $90s per share at the end of the first quarter to over $130 per share, has showed significant weakness heading into the prime back-to-school period; the stock has traded below $75 recently. A better selection in this space is Guess? Inc. (GES). Despite the fact the GES has a slightly lower operating margin of 16.2% relative to 19.3% for FOSL, the stock is a better value. GES has a trailing price-to-earnings ratio of 10.4 relative to 22.7 for FOSL. On this basis, GES seems very cheap, requiring less than half the price for every dollar of earnings offered to an investor.
Royal Caribbean Cruises Ltd. (RCL, Financial) – As of the end of the first quarter of 2011, Mr. Soros flattened his position in RCL, bringing his holdings in the stock down to zero; he has since reestablished a position in the stock. Since Mr. Soros exited the stock at the end of the first quarter, it has sold off appreciably which is likely why he has established a new position. Relative to Carnival Cruise Lines (CCL), the closest competitor, RCL is a better value. Trading at a trailing P/E ratio of 9 and a P/E over growth ratio (PEG) of 0.73, RCL has better readings; CCL has readings of a trailing price-to-earnings ratio of 12.9 and a price-to-earnings over growth ratio (PEG) of 1.12. Adding Mr. Soros’s current interest, RCL is the better choice.
Ryder Systems Inc. (R, Financial) – As of the end of the first quarter of 2011, Mr. Soros flattened his position in R, bringing his holdings in the stock down to zero. R is another stock that has sold off precipitously heading into the fall, and left the picture in its sector uncertain. Relative to competitor Con-way, Inc. (CNW), the key financial metrics are mixed. Where R has the superior trailing price-to-earnings ratio and operating margin of 16.3 and 6.2% relative to 42.9 and 2.9% for CNW, when growth in considered, CNW is stronger: R has a price-to-earnings over growth (PEG) reading of 1.04 relative to 0.88 for CNW. The PEG for CNW suggests that growth prospects may be depressing other levels. Overall, a wait-and-see approach may be most appropriate in this sector, or a diversification approach may work as well.
MEMC Electronic Materials Inc. (WFR, Financial) – As of the end of the fourth quarter of 2010, Mr. Soros flattened his position in WFR, bringing his holdings in the stock down to zero. Despite being classified as a semiconductor company, ownership in WFR is really a solar play, as two of the company’s segments focus on solar energy. As the problems in the economy have persisted, forcing the federal government to focus less on alternative energy, solar energy has largely underperformed. For those investors wishing to maintain exposure in the solar and alternative energy space, while not being completely captive to the fluctuations of an otherwise volatile industry, Applied Materials (AMAT) is a better choice. Where WFR has a trailing P/E ratio above 20, AMAT trades at 7.5; it is a better value. In addition, AMAT is considered one of the leading chip makers in the world, and supplies many of the largest consumer products manufacturers.
Finisar Corp. (FNSR, Financial) – As of the end of the first quarter of 2011, Mr. Soros flattened his position in FNSR, bringing his holdings in the stock down to zero, after having established his position within the previous quarter. While FNSR remains an attractive option relative to competitor JDS Uniphase Corp. (JDSU), a stronger option in the sector is Avago Technologies Ltd. (AVGO). On a trailing P/E basis, where FNSR is trading at 23.2 and JDSU is trading at 41.2, AVGO is trading at 13.9, the only one of the three below the industry average of 19.9. This strength in terms of financial metrics remains intact for operating margin as well: FNSR has an operating margin of 10.2% relative to 4.5% for JDSU and 25.1% for AVGO. In this highly competitive industry, the edge shown by AVGO is quite significant and makes for a better long-term investment, particularly in light of trading at a discount in terms of P/E.
Cabot Oil & Gas Corp. (COG, Financial) – As of the end of the first quarter of 2011, Mr. Soros flattened his position in COG, bringing his holdings in the stock down to zero, after having established his position within the previous quarter. COG has maintained a steady upward trajectory throughout 2011, suggesting that Mr. Soros either reached his profit objective in the stock or found other plays in the oil and gas space to more compelling. Since the end of the first quarter, the stock has appreciated from a trading price of below $50 per share to over $70 per share. In terms of pure financial metrics, Anadarko Petroleum Corp. (APC) is more attractive. Similar to COG, APC operates in both the oil and the natural gas space. On a trailing P/E basis, where COG is trading at 65, APC is trading at 41.4. Both of these are very high readings, particularly within the energy space, but can be explained. Natural gas has lagged for some time, but is expected to reverse – it is currently near the bottom of a well-established range. If this reversal occurs, the earnings for each company should change and bring each in line with more appropriate valuations. Even so, APC appears to be the better choice at current levels.
Fossil Inc. (FOSL, Financial) – As of the end of the first quarter of 2011, Mr. Soros flattened his position in FOSL, bringing his holdings in the stock down to zero, after having established his position within the previous quarter. FOSL, which experienced a price spike from the mid $90s per share at the end of the first quarter to over $130 per share, has showed significant weakness heading into the prime back-to-school period; the stock has traded below $75 recently. A better selection in this space is Guess? Inc. (GES). Despite the fact the GES has a slightly lower operating margin of 16.2% relative to 19.3% for FOSL, the stock is a better value. GES has a trailing price-to-earnings ratio of 10.4 relative to 22.7 for FOSL. On this basis, GES seems very cheap, requiring less than half the price for every dollar of earnings offered to an investor.
Royal Caribbean Cruises Ltd. (RCL, Financial) – As of the end of the first quarter of 2011, Mr. Soros flattened his position in RCL, bringing his holdings in the stock down to zero; he has since reestablished a position in the stock. Since Mr. Soros exited the stock at the end of the first quarter, it has sold off appreciably which is likely why he has established a new position. Relative to Carnival Cruise Lines (CCL), the closest competitor, RCL is a better value. Trading at a trailing P/E ratio of 9 and a P/E over growth ratio (PEG) of 0.73, RCL has better readings; CCL has readings of a trailing price-to-earnings ratio of 12.9 and a price-to-earnings over growth ratio (PEG) of 1.12. Adding Mr. Soros’s current interest, RCL is the better choice.
Ryder Systems Inc. (R, Financial) – As of the end of the first quarter of 2011, Mr. Soros flattened his position in R, bringing his holdings in the stock down to zero. R is another stock that has sold off precipitously heading into the fall, and left the picture in its sector uncertain. Relative to competitor Con-way, Inc. (CNW), the key financial metrics are mixed. Where R has the superior trailing price-to-earnings ratio and operating margin of 16.3 and 6.2% relative to 42.9 and 2.9% for CNW, when growth in considered, CNW is stronger: R has a price-to-earnings over growth (PEG) reading of 1.04 relative to 0.88 for CNW. The PEG for CNW suggests that growth prospects may be depressing other levels. Overall, a wait-and-see approach may be most appropriate in this sector, or a diversification approach may work as well.
