Billionaire George Soros’s Long-Term Stock Picks

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In addition to using our database of quarterly 13F filings from hedge funds and other notable investors as a tool in researching investment strategies (the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year), we can also use it to track individual filers over time and identify stocks which they have owned for multiple quarters or even years.

In this way investors interested in using 13Fs as a potential source of initial investment ideas should have less concern over the age of filings (the most recently released ones disclose long equity positions in U.S. stocks as of the end of March). Here are five stocks which billionaire George Soros owned at least $20 million of in his most recent 13F and had also owned at the end of March 2011 (or see the full list of his most recent stock picks):

Emerging markets agriculture

The billionaire’s fund owned about 26 million shares of Adecoagro (NYSE: AGRO), a  South American agricultural company with $780 million market cap, over 250,000 shares traded per day on average, and a current stock price of over $6.30, meaning over $1 million in daily dollar volume.

The stock has fallen over 30% in the last year as profitability has been low, but Wall Street analysts expect performance to turn around. Their forecasts for 2014 have the stock trading at 9 times forward earnings estimates; many other agriculture related companies are also in value territory.

More of Soros’s favorite long term picks

Soros has recently cut his stake in Motorola Solutions (NYSE: MSI), but still closed March with 1.7 million shares in his portfolio. The company’s earnings grew by 22% in its last quarterly report compared to the first quarter of 2012, but revenue numbers were flat suggesting that future improvements on the bottom line might be limited. The sell-side is optimistic, however, as looking ahead to next year the forward Price/Earnings  (P/E) multiple is 14- at least close to where Motorola Solutions might be considered to have value potential- and the five-year Price/Earnings to Growth (PEG) ratio is just below 1.

In the first quarter of 2011, Soros had initiated a position in auto parts company Visteon (NYSE: VC); two years later it was still one of his stock picks with the 13F disclosing ownership of about 370,000 shares. Similar to Adecoagro and Motorola, Visteon is an analyst darling: due in part to high expectations for the auto industry as U.S. consumers replace their historically old auto fleet. Earnings per share are forecast to rise enough over the next several years that the PEG ratio comes in at 0.6. We’d be interested in comparing Visteon to other auto related companies.

According to the filing, the investing legend was selling Citigroup (NYSE: C) between January and March but still had about 540,000 shares in his portfolio. The bank can claim value status in terms of trading at a discount to the book value of its equity (the P/B ratio is 0.8) or if it meets analyst targets as the forward earnings multiple is only 9. Earnings have been doing well at Citigroup, going by recent reports, though we would note that some other megabanks trade at similar levels with respect to forward estimates.

Soros and his team have been long-term investors in Google (NASDAQ: GOOG), which became one of their largest stock positions by market value in Q1 2013. Google made our list of the ten most popular stocks among hedge funds in the first quarter of this year (check the full top ten list). Revenue grew by over 30% in the first quarter of 2013 versus a year earlier, with earnings growing by 16% as Google integrates its acquisition of Motorola Mobility Holdings and as the core advertising business continues to grow nicely.

Conclusion

Many of these picks are dependent on future earnings growth to justify their current valuations, but are generally worth investigating anyway.

Adecoagro’s recent performance worries us, but if the company can meet analyst expectations it would end up being a good value play and we’d at least be interested in watching for further results. Citi, similarly, is getting close to being a value stock although the same could be said of some other large banks. Google is a tougher call in our view as we’d have to disentangle the (more or less temporary) growth related to integration from organic improvements in advertising, but certainly its valuation on a forward basis does not seem to account for much growth.


This article is written by Matt Doiron and edited by Meena Krishnamsetty. Meena has long positions in Google and Citigroup. The Motley Fool recommends Google. The Motley Fool owns shares of Citigroup Inc and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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