We maintain a database of 13F filings from hedge funds and other notable investors. By pooling these filings, which disclose many of a fund’s long equity positions as of the end of the most recent quarter, we can research investment strategies. For example, on average the most popular small cap stocks among hedge funds earn an excess return of 18 percentage points per year (learn more about imitating hedge funds’ small cap picks. We can also compare filings for a selected filer over time. We took a look at George Soros’s most recent 13F (for the fourth quarter of 2012) and compared it to the one which he filed three months earlier. Read on for the five largest new positions and see more stock picks from George Soros.
The billionaire investor initiated a position of 4.1 million shares in Morgan Stanley (NYSE:MS) during the fourth quarter. Morgan Stanley has been struggling with profitability in recent quarters, and severely underperformed expectations at times. Fellow billionaire Dan Loeb’s Third Point was also buying Morgan Stanley last quarter, reporting a position of 7.8 million shares after not owning any of the stock at the end of September (find more stocks Loeb was buying). Wall Street analysts insist that the investment bank is a good value, with their expectations implying a forward P/E of 9 and a five-year PEG ratio of 0.6.
Find three more stocks Soros bought, including Ford:
Soros also liked Anadarko Petroleum Corporation (NYSE:APC), buying up almost 760,000 shares of the oil and gas company. 62 filers in our database reported a position in Anadarko, which made it the most popular energy stock among hedge funds (see more energy stocks hedge funds loved). Anadarko’s earnings multiples are in the teens- the trailing and forward P/Es are 17 and 15 respectively- but that represents a premium to the oil majors and the company’s revenue has actually been down. It might be worth looking at on the basis of its popularity but we are not particularly excited about the stock.
The 13F disclosed a new position of about 950,000 shares in Plains Exploration & Production Company (NYSE:PXP). The oil and gas company is an acquisition target as Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) plans to buy it and a related company. Many investors like to invest in merger arbitrage investments because the returns are uncorrelated with the stock market, though there are of course risks (read more about merger arbitrage strategies). Plains itself had expanded from natural gas to offshore oil assets earlier in 2012.
Ford Motor Company (NYSE:F) rounded out the five largest new positions that Soros reported owning at 3.1 million shares. Ford’s revenue edged up in the fourth quarter of 2012 versus a year earlier, and many value investors have been bullish on autos for several months. The market in general is quite pessimistic about Ford, as it trades at 9 times trailing earnings. The sell-side generally expects improvements on the bottom line with the result being that the five-year PEG ratio is a bit below 1. Appaloosa Management, managed by billionaire David Tepper, had over 11 million shares of Ford in its own portfolio at the beginning of January (check out more stocks Appaloosa owned).
Disclosure: I own no shares of any stocks mentioned in this article.
