Tuesday, November 17, 2009

George Soros Reveals Stake in Ford (F), Adds to Walmart (WMT), Cuts Position in Petrobras (PBR)

It's that time of quarter - when the whales of investing have to reveal what they are doing on the long side to the SEC (they can still keep secret their shorts).  There are a lot of websites that will be looking at these disclosures in the next 48 hours so we'll just focus on a few.  When I did some "Googling" on George Soros last night I was taken aback how controversial a figure this guy is; there are more stories about his politics than investing.   I could care less about his politics, he is a smart guy who uhhh... admittedly plays the gray side of the rule book at times, but Goldman Sachs (GS) is worshiped for the same behavior.

The big news with George Soros this quarter is his revelation of a stake in Ford (F).  I've been very torn on this name because it has the benefit of being the only US car maker who did not go through bankruptcy, and actually has a competent CEO (who came from Boeing).  So that already sets them apart from what the other 2 domestics have had the past decade.  The company seems to be getting good will from the American people due to the fact they did not resort to handouts from the taxpayer.  On the other hand, General Motors and Chrysler were able to wrangle some very competitive concessions from the UAW (union) due to their bankruptcy while Ford is now facing a major issue on that front.  Due to their relative success, the union does not want to give the same deal to Ford.

So what we have here is the same issue that has been happening in the airline industry... and a reason why no one can stay profitable for long, and we see bankruptcies year after year.  One of the players in the industry goes bankrupt, gets major concessions, is able to walk away from much of their debt and then re-enters the competitive landscape meaner and leaner.  They can charge lower prices, which in turns causes pressure to all the other airlines.  Hence that tends to push other airlines into bankruptcy and the whole cycle keeps repeating.  As I assess Ford, I wonder... if their cost structure is now higher than GM or Chrysler... and they did not get their debt (partly) wiped away, are they really in a better position in the long run?  If you use the airline example the answer is no.   Hence this is a tough one, but George Soros appears to be a believer.

On a side note, hat tip to Ken Heebner of CGM Funds who also has been an early believer in the Ford story.  The stock is now at a 2 year high. (double top?)

A quick look at some of Soros' major moves as of Sep 30, 2009:
  • Billionaire investor George Soros' hedge fund reported holdings of $6.2 billion during the third quarter, an increase of $2 billion, after taking a stake in automaker Ford and boosting his holdings in communications services stocks.
  • According to a regulatory filing on Monday Soros Fund Management took a 7.3 million stake in Ford Motor Co (F) during the third quarter that is valued at $53 million. (Amazingly Ford still has a $30B market cap despite trading in the $8 range)  The fund bought at an average of $7.21, gaining $11 million through today, and ranking Soros the automaker’s 38th largest investor, with 0.2 percent of common shares outstanding, according to Bloomberg data.
  • He also raised his stake in retailer Wal Mart (WMT) Stores to 1.1 million shares valued at $54.8 million. The fund had cut back on its position in the retail giant in the previous, quarter to 89,710 shares.
  • Soros cut his stake in Petroleo Brasileiro SA (PBR), or Petrobras, to 7.4 million shares from 9.8 million shares.
Soros was also active in the telecom space, mini oligarchs:
  • Soros also raised his holdings of AT&T (T) to 4.2 million shares at the end of the third quarter, from 791,000, while he raised his stake in Verizon (VZ) to 4.6 million shares, from 594,853 in the second quarter.
And more exposure in two of our "dominant 4" financials, true blue oligarchs:
  • Additionally, the fund boosted its financial sector holdings, betting on two of the largest commercial banking giants - Bank of America Corp. (BAC) and JPMorgan Chase & Co. (JPM)
  • Soros purchased 224,100 shares of Bank of America and 67,800 shares of JPMorgan. The fund now owns 271,900 shares of Bank of America, valued at $4.60 million, and 73,700 shares of JPMorgan, valued at $3.2 million, as of Sept. 30.  

Soros Top 10 Holdings by value are:
  • Petrobras (PBR) $340M
  • Hess (HES) $277M
  • Potash (POT) $266M
  • SPDR Gold Trust (GLD) $242M
  • Another Petrobras position $231M
  • Plains Exploration & Production (PXP) $169M
  • Verizon (VZ) $138M
  • AT&T (T) $114M
  • Interoil (IOC) $11M
  • DirectTV (DTV) $110M
Soros obviously is a believer in the commodity trade.

      [Oct 26, 2009: George Soros Interview with Financial times - October 2009]
      [Jul 9, 2009: WSJ - Latest Picks from John Paulson and George Soros]
      [Apr 7, 2009: George Soros on Yahoo Tech Ticker]
      [Mar 31, 2009: UK Times: George Soros Sees Global Meltdown]
      [Feb 23, 2009: George Soros - This is the End of the Free Market Era; Situation Similar to Disintegration of Soviet Union]
      [Feb 18, 2009: George Soros Increases Stakes in Potash & Petrobas]
      [Jan 28, 2009: Roubini & Soros on Bad Bank]
      [Apr 9, 2008: Soros Believes Global Subprime Costs to Reach $1 Trillion]
      [Jan 22, 2008: Soros Says World Faces Worst Financial Crisis Since World War II]

      No positions in names mentioned other than a non related gold stake

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