George Soros had been an extremely successful hedge fund manager for over 20 years before gaining fame (or infamy, depending on your taste in brandy) for taking a $10 billion short position against the British pound in 1992. He is said to have "broken the Bank of England", and is believed to be the first person to earn a billion dollars in a single day. (Find out more about this epic trade in The Greatest Currency Trades Ever Made.)
In recent years, Soros has evolved into more of a philanthropist/activist/philosopher, but he remains the Chairman of Soros Fund Management, which is active in stocks, bonds, commodities and derivatives trading. And thanks to the mandatory 13F filing requirements of the SEC, investors can get a quarterly peek into where Soros & Co. are positioning their funds. Today we'll look at the most recent filing to see what positions have been beefed up and which have been whittled down.
The Investing Philosophy
Soros has been outspoken on his long-term economic views for decades. He feels that financial markets are unstable by nature, and that the main goal of public policy should be to stabilize markets rather than promote over-leverage and facilitate bubbles. Soros likes to scan wide, using macro analysis to find trends, and then invest hard and heavy when he feels conviction. He is a keen student of geopolitical affairs, globalization, and currency fluctuations, but has also admitted to using "animal instincts" when placing his bets. (For related reading, check out Top-Down Analysis: Finding The Right Stocks And Sectors.)
Soros had been prophesying the bursting of a global "super bubble" as early as 1987, discussing it at length in several publications, most notably in his May 2008 book The New Paradigm for Financial Markets. In his words, "I have a record of crying wolf ... [After] the boy cried wolf three times... the wolf really came".
Recent Additions & Largest Positions
According to his fund's latest filings with the SEC (as of March 31), Soros has been adding to his already large overweight positions in the oil & gas sector. His largest stock holding remains Brazilian oil giant Petrobras, which trades in the U.S. via an American Depositary Receipt (ADR) with the ticker symbol PBR. Petrobras is a vertically integrated oil company, participating in exploration, production, refining and retailing of crude oil and gas.
Soros' funds also added to positions in Canadian energy producer Suncor Energy (NYSE:SU), and Houston-based oil & natural gas producer Petrohawk Energy (NYSE:HK). All told, Soros has about 30% of his long investments the oil & gas space - more than twice the weighting of the S&P 500 index.
Smaller positions that saw buying during the first quarter include Apple Inc. (Nasdaq:AAPL), Goodyear Tire & Rubber (NYSE:GT), Lawson Software (Nasdaq:LWSN), CVS Caremark (NYSE:CVS) and DirecTV (Nasdaq:DTV).
Gold Remains on Top
Precious metal remains the number-one overall holding, as Soros has nearly 10% of his assets invested the SPDR Gold Trust ETF (GLD). He also owns call options which could increase his ownership stake in the coming months.
Even though Soros has stated publicly that gold could fall prey to bubble mania, he remains invested because of his general lack of faith in the global economic recovery and efforts undertaken by the world's largest economies to support currencies like the dollar and euro. The large gold position is further evidence of Soros' willingness to take a large bet in what could be a risky trade. He feels he will know when to get out, so why not make some profit on the mania before the bubble bursts? (Looking for a hedge? Check out A Beginner's Guide To Precious Metals.)
Financial Stock Rotation, Dipping into Consumer Waters
While Soros sold out of his large Citigroup holding during the first quarter - dumping over 94 million shares of the megabank - positions were built up in JPMorgan Chase & Co. (NYSE:JPM), U.S. Bancorp (NYSE:USB) and PNC Financial Services (NYSE:PNC).
And while consumer stocks remain the lowest weighted sector in Soros' holdings, there are some proverbial toes dipping back into the water, with recent additions to stocks such as Wal-Mart (NYSE:WMT), Best Buy Co. (NYSE:BBY), Amazon (Nasdaq:AMZN) and True Religion Apparel (Nasdaq:TRLG).
The Bottom Line
Keep in mind that not every bet George Soros makes - or any other hedge fund manager for that matter - is made public to the SEC. Only "long" investments need to be reported, so we can't be sure how much hedging and shorting might be going on behind the scenes. But the overall trend that Soros seems to be following is one of weaker currencies, higher inflation and higher energy prices. It's not the cheeriest of outlooks, but the beauty of investing is that you can profit from any outcome if you have conviction behind your vision - and the stomach to see it through. (Find out more in George Soros: The Philosophy Of An Elite Investor.)
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