Billionaire George Soros is best known for his success as a global macro investor, particularly in currency instruments, but his hedge fund Soros Fund Management is also heavily invested in equities (see a history of the fund’s stock picks). In mid August the fund filed its quarterly 13F with the SEC, disclosing many of its long equity positions as of the end of June. While many investors argue that the information in 13Fs isn’t recent enough to be of any use, we’ve actually found that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year (learn more about our small cap strategy) with our own portfolio following this strategy having beaten the market by 33 percentage points in the last 11 months.
Of course, we can also look at George Soros’s stock picks and treat them as free initial investment ideas. To refine them further we can also look for stocks which Warren Buffett’s holding company Berkshire Hathaway reported owning in its own filing (find Buffett’s favorite stocks), as Berkshire has been a successful investor over the long term. Read on for our quick take on five stocks which both Berkshire and Soros’s hedge fund reported owning in their most recent 13Fs.
Both of these investors owned Wal-Mart Stores, Inc. (NYSE:WMT) at the end of the second quarter, with Berkshire Hathaway having more than $3.7 billion invested in the big-box discount retailer. After what had apparently been a terrible start to its fiscal year, Wal-Mart Stores, Inc. (NYSE:WMT) has at least experienced some degree of growth in its first couple quarters compared to a year ago. The trailing P/E of 14 shows that markets expect weak numbers from the company going forward. We would note that Wal-Mart Stores, Inc. (NYSE:WMT)’s beta is only 0.3, demonstrating a lack of dependence on overall economic conditions.
Another top Buffett pick which was also present in Soros Fund Management’s portfolio is DIRECTV (NASDAQ:DTV). The satellite TV company is also trading in value territory, with trailing and forward P/Es of 12 and 10 respectively; clearly, it is another business where investors are highly skeptical of the future. Sales have been up nicely, but these funds have been consumed by higher costs resulting in small decreases in operating income last quarter compared to Q2 2012. The EV/EBITDA multiple of 6.5x is also fairly low, possibly due to concerns about competition from cable companies in the premium market.