George Soros, a billionaire investor, author, and philanthropist, founded his company Soros Fund Management in 1970. Based on data gathered from financial accountability engine TipRanks, the fund generated an average annual rate of return of 7.21 percent. His firm invests mostly in the Technology sector, followed by Services and Consumer Goods. Since the end of the last quarter, the fund generated an impressive 9.73 percent return for investors. Let’s take a closer look at Soros’ Q3 investments in Netflix, Inc. (NFLX), Alphabet Inc (GOOGL), and Amazon.com, Inc. (AMZN).
Soros initiated a position in video streaming giant Netflix in the third quarter, adding $13.05 million shares worth of the company, which made it 0.34% of his total holdings. Q3 was off to a rocky start for Netflix, as indicated in their Q2 earnings report, marked by slowing domestic and international subscriber growth, way below company guidance. Many investors feared that Netflix could not adequately keep up with rising competition from the likes of Amazon and Hulu. In order to remain relevant, many analysts stated that Netflix should focus on what it does best, original content, in order to remain attractive to new users. As a result, many expected the company to significantly increase its content spending. However, increased spending combined with declining member growth signified a potentially higher rate of cash burn, a big turn-off for investors. All hope was not lost, as analysts stated that if Netflix leverages its strengths and focuses on its partnerships with Comcast (CMCSA) and Disney (DIS), the company could get back on track for growth.
It seems that Soros’ confidence in the company literally and figuratively paid off. Following its recent earnings release, the stock is currently trading at about $120, almost 19 percent higher since the end of Q3. Netflix paid attention to their shortcomings and implemented various changes in order to get back on track. In addition to successful original content rollouts such as “Stranger Things," the company took a closer look at how to increase internationally, addressing language barriers, licensing rights, and differing income levels. Netflix blew investors out of the water this quarter, exceeding its subscriber growth guidance.
Soros increased his stake in Amazon in Q3 by a remarkable 215.15%. He now owns $33.08 million worth of shares, making up 0.83% of his total holdings. Analysts and investors had nothing but praise for the e-commerce giant over the third quarter, commending an increase in Prime customers. According to research, Prime customers spend an average of 4X as much as non-Prime members on Amazon, so this growth will result in continued revenue gains. The company has also experienced tremendous success in its cloud platform AWS, making it a major player in not only e-commerce but also the cloud. The company released its Q2 earnings in Q3 where it continued to impress investors with better than expected earnings, expanding margins, high order volume, reaccelerating revenue growth, and growing profit margins for AWS. The company has also focused much of its attention in Q3 to continue to optimize its shipping capabilities and expand its distribution network. This in turn reduces per unit fulfillment costs. Over the course of the third quarter, the stock increased 15%.
Many investors believe that any weakness in share price for Amazon represents a compelling entry point due to continued quarter-after-quarter growth. The company experienced a record Black Friday and Cyber Monday for its Amazon devices such as the Echo, Fire TV, and Alexa, among others. Soros’ significant increase in Amazon holdings represent his confidence in the company and belief in continued innovation and growth.
Soros also initiated a position in Alphabet Inc, adding $9.7 worth of shares to his portfolio representing 0.25% of his total holdings. Because Q3 started shortly after the Brexit, the stock took a nosedive to its 52-week low of about $681 amid concerns including currency fluctuation and the impact it would have on its international business, particularly in the UK. However, the stock bounced back 13% last quarter with investors focusing more on good news from the company, such as continuous innovation in mobile and desktop search, general product improvements, and increasing YouTube engagement. The company also implemented tighter expense controls across all sectors and experienced ad growth in both mobile and desktop. Additionally, the company acquired API management platform Apigee, allowing it to compete with the likes of Oracle and IBM as company’s switch from traditional IT to the cloud.
Although the stock is currently down 4% since the end of the third quarter, is it still up significantly from the start of Q3.