George Soros’ Favorite Tech Stock
Soroush is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
As you’ve probably already heard, George Soros is known as “The Man Who Broke the Bank of England," due to his short sale of the pound-sterling en route to a billion dollar profit in 1992. What you may also know is that aside from having freakishly good money managing skills – Soros Fund Management currently oversees $6.8 billion in assets – he is also quite the quote machine, as seen here.
Now, while some investors may have the time and energy to endlessly scan their stock screeners, others don’t. Regarding the latter, it may prove profitable to follow some of the world’s most successful money managers (here’s our Top 10 if you’re curious), but please don’t treat hedge fund holdings as a laundry list of investment picks. It almost all cases, its better to do your own research, while using 13F filings as a starting place for analysis. Below is one stock that is loved by Soros, and it may just turn out to be a lucrative addition to your portfolio.
Micron Technology (NASDAQ: MU)
Comprising over 12 percent of Soros’ total holdings, Micron Technology is the magnate’s top dog, though it has been relatively flat year-to-date. MU is a company that focuses on manufacturing memory chips used in computer systems and portable devices – a market that is currently valued in the $40 billion range. Traditionally a maker of dynamic random access memory (aka DRAM), the company recently teamed up with Samsung in a quest to lead an industry-wide transition to stackable memory. Known as the hybrid-cube approach, this method should help chips supply data at a quicker rate. If this turns out to be the future of the memory chip industry, Micron is in the perfect position to catch a major piece of this economic tailwind.
From an investment standpoint, shares of MU are currently trading at modest forward P/E (10.5X) and PEG (0.8) ratios, and the company’s P/CF (3.0X) ratio is below its own 5-year historical average (4.2X), despite the fact that it showed strong growth in this area. Specifically, Micron has grown its operating cash flow at a 48 percent clip per annum since the recession. This compares favorably to Sandisk (NASDAQ: SNDK) at 16.0%, Seagate Technology (NASDAQ: STX) at -16.7%, and Spansion (NYSE: CODE) at -21.8%. More importantly, MU trades at a lower P/CF ratio than SNDK (11.5X), STX (5.3X) and CODE (7.7X).
Last week, it was also announced that Micron would purchase the Japanese Elpida Memory for $2.5 billion; it is expected that this move will increase the company’s manufacturing capacity by 50 percent. The move will double MU’s share of the DRAM market to around 25 percent, giving it a much-needed boost in the mobile data arena as well. Interestingly, Micron also becomes a supplier to Apple (NASDAQ: AAPL) with this move, and we’ve already discussed the ridiculous potential of the iPhone in China. All in all, company execs are obviously calling this move a definite win, as the acquisitive benefits should boost the company’s bottom line and cash hoard by the summer of next year. There are few moves that have the power to completely transform a company; this is one of them.
Looking to the Street’s estimates, analysts are forecasting a 2013 EPS of $0.25 a share, which could push this stock above $10 by next summer. MU currently trades in the $6 range. WealthLift’s Sentiment Index rates this stock as a moderate buy at the moment, with 66.67 percent of the community’s users placing an “overperform” rating on the stock.
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Fool blogger Jake Mann doesn't own shares in any of the companies mentioned above. The Motley Fool owns shares of Apple. Motley Fool newsletter services recommend Apple. 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.If you have questions about this post or the Fool’s blog network, click here for information.
