In this article, we examined the 10 best stocks to buy now according to billionaire George Soros.
Legendary investor George Soros, 90, continues making big gains from stock market investing, thanks to his aggressive portfolio management strategy and a keen eye on market cycles. His hedge fund saw unmatched success in the past five decades, with an average return of 33% from 1970 to 2020. Soros Fund Management, which is now a family office fund and closed for external investors, generated a 23% return during the pandemic year, driven by big bets on high-growth stocks. According to Bloomberg, Soros Fund Management saw the last year’s market crash as a buying opportunity, putting $4 billion into stocks and other financial securities. He had substantially lifted his stake in the hard-hit financial sector because Soros always believes in investing in the unexpected. The financial sector represents 30% of the Soros Fund Management portfolio.
His 13F is also heavily focused on high growth sectors from communications, information technology, and consumer discretionary. Billionaire Gorge Soros, who has a net worth of around $8.6 billion, likes to buy stocks and assets when others are skeptical. His strategy of buying on the dip and pouring funds into stocks that offer reliable returns helped in making impressive returns. Born in Hungary and studied at the London School of Economics, Soros is famous for his bet against the Pound Sterling in 1992, earning him the name ‘the man who broke the Bank of England’. He made $1 billion in profits in a single day from his short bet.
At the end of the first quarter of 2021, Soros Fund Management’s 13F portfolio is valued around $5.3 billion. The family office fund initiated 137 new positions and added to his 30 existing positions, with communications remained the favorite area of investment. The legendary investor raised his communications sector weighting to 27% of the overall portfolio compared to 21% of the weighting in the final quarter of 2020. This sector performed really well last year and extended that momentum into 2021 despite the fact that growth stocks have underperformed in the past couple of months. The communications sector is up 16% since the beginning of this year.
The billionaire investor also saw the dip in consumer discretionary stocks as an attractive entry point during the first quarter. He lifted the stake in the consumer discretionary sector to 18% of the overall portfolio weighting from 11% in the previous quarter. Soros raised his position in the world’s largest e-commerce giant Amazon.com Inc (NASDAQ: AMZN) by 1136%. Shares of Amazon remained under pressure throughout the first quarter amid investors’ concerns over the post-pandemic situation. However, Soros has different thoughts. Amazon.com Inc (NASDAQ: AMZN) was the fourth largest stock holding of Soros Fund Management portfolio at the end of the first quarter. Unlike Warren Buffett, George Soros believes in taking advantage of the market movements. He doesn’t like to hold positions in companies for the long-term to attain dividends and share price gains. The average time held for his top ten positions is around 2.80 quarters.
George Soros is also an author. In 1987, he launched a book “The Alchemy of Finance,” which got investors’ and economists’ attention worldwide. Here’s what Soros said in one of his essays about his theories:
“With my theories largely ignored by academia, I began to regard myself as a failed philosopher – I even gave a lecture entitled ‘A Failed Philosopher Tries Again.’
All that changed as a result of the financial crisis of 2008. My understanding of reflexivity enabled me both to anticipate the crisis and to deal with it when it finally struck (Soros, 2008, 2009). When the fallout of the crisis spread from the USA to Europe and around the world it enabled me to explain and predict events better than most others (Soros, 2012). The crisis put in stark relief the failings of orthodox economic theory (Soros, 2010). As people have realized how badly traditional economics has failed, interest in reflexivity has grown.”
George Soros of Soros Fund Management
While George Soros’ reputation remains intact, the same can’t be said of the hedge fund industry as a whole, as its reputation has been tarnished in the last decade during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 88 percentage points since March 2017. Between March 2017 and February 5th 2021 our monthly newsletter’s stock picks returned 187.5%, vs. 75.8% for the SPY. Our stock picks outperformed the market by more than 111 percentage points. (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Let’s start digging into billionaire George Soros top 10 stock picks. We used Soros’ 13F portfolio for the first quarter of 2021 for this analysis.
Best Stocks to Buy Now According to Billionaire George Soros
10. Baidu, Inc. (NASDAQ: BIDU)
Number of Hedge Fund Holders: 89
Soros Fund Management initiated a big position in the Chinese internet company Baidu, Inc. (NASDAQ: BIDU) during the first quarter by purchasing 353,795 shares valued at around $76.9 million. It is the tenth-largest stock holding of Soros Fund Management, accounting for 1.44% of the overall portfolio. Shares of Baidu, Inc. (NASDAQ: BIDU) experienced massive price collapse during the first quarter due to regulatory issues and concerns over the post-pandemic situation. The stock ranks 10th in our list of the best stocks to buy according to billionaire George Soros.
Like Amazon.com Inc (NASDAQ: AMZN), Alphabet Inc. (NASDAQ: GOOG), VICI Properties (NYSE: VICI) and Activision Blizzard, Inc. (NASDAQ: ATVI), Baidu, Inc. (NASDAQ: BIDU) is one of the best stocks to buy based on George Soros’ Q1 portfolio.
Horos Asset Management, an investment management firm, mentioned a few stocks including Baidu, Inc. (NASDAQ: BIDU) in the first quarter investor letter. Here is what Horos Asset Management stated:
“We have also fully exited our stake in Baidu, Inc. (NASDAQ: BIDU), following their outstanding performance during the period and their lower relative upside potential compared to other investment alternatives, which we will discuss below.
The Chinese technology platform company Baidu, Inc. (NASDAQ: BIDU) has also been held in the portfolios managed by Alejandro, Miguel and myself for several years. During this period, we have seen very high volatility in its share price, which we have taken advantage of to make significant rebalancing moves in our position (in fact, we even sold our entire position once, when we thought the stock’s upside potential was exhausted). After several years of instability, market sentiment turned very positive, putting an end to the historical advertising problems in the healthcare sector, the divestments in O2O (Online-to-Offline) businesses that continued to weigh on the company’s margins, the IPO of part of the iQiyi streaming business (which hid Baidu’s underlying cash generation capacity) and the tough competition from other industry giants such as Tencent and Alibaba, as well as the entry of new players with disruptive business models (ByteDance). At the same time, the company’s recent commitment to electric vehicles contributed even more to this change of narrative. Baidu’s share price rose almost fourfold from the March 2020 lows to all-time highs and reached a valuation where the margin of safety, in our view, was too narrow.”
9. Upstart Holdings, Inc. (NASDAQ: UPST)
Number of Hedge Fund Holders: 13
Shares of a cloud-based artificial intelligence (AI) lending platform Upstart Holdings, Inc. (NASDAQ: UPST) rallied by 300% since the beginning of this year, driven by bullish analysts calls and strong future fundamentals. Soros Fund Management first initiated a position in Upstart Holdings, Inc. (NASDAQ: UPST) during the fourth quarter and left its position unchanged in the first quarter. The firm held 600,208 shares of Upstart Holdings, Inc. (NASDAQ: UPST), according to the latest quarterly filings. The stock ranks 9th in our list of the best stocks to buy according to billionaire George Soros.
Like Amazon.com Inc (NASDAQ: AMZN), Alphabet Inc. (NASDAQ: GOOG), Baidu, Inc. (NASDAQ: BIDU), VICI Properties (NYSE: VICI) and Activision Blizzard, Inc. (NASDAQ: ATVI), Upstart Holdings, Inc. (NASDAQ: UPST) is one of the best stocks to buy based on George Soros’ Q1 portfolio.
Alger, an investment management firm, said in the first quarter investor letter that Upstart Holdings, Inc. (NASDAQ: UPST) was the top contributor to its Q1 performance. Here is what Alger stated:
“Upstart Holdings, Inc. (NASDAQ: UPST), Inc. was among the top contributors to performance during the first quarter of 2021. Upstart operates a cloud-based artificial intelligence (Al) lending platform. The platform aggregates consumer demand for loans and connects it to the company’s network of Al-enabled bank partners. The technology connects consumers, banks and institutional investors through a shared Al lending platform. Upstart was incorporated in 2012 and is headquartered in San Mateo, California. The stock price increased after the company’s December IPO due to anticipation that the company will see increasing demand for its services, a result of needing to seek lenders after having accumulated large amounts of deposits, in part from Americans receiving stimulus checks.”
8. VICI Properties Inc. (NYSE: VICI)
Number of Hedge Fund Holders: 41
Soros Fund Management lifted its stake in VICI Properties (NYSE: VICI) by 8% in the first quarter of 2021 to 3.2 million shares valued at around 92.8 million, accounting for 1.74% of the overall portfolio. The family office fund benefited from its VICI Properties (NYSE: VICI) stake because shares of the real estate investment trust soared 24% year to date, enlarging twelve-month gains to 43%. The stock ranks 8th in our list of the best stocks to buy according to billionaire George Soros.
VICI Properties (NYSE: VICI) investors should be aware of an increase in activity from the world’s largest hedge funds of late. VICI Properties was in 41 hedge funds’ portfolios at the end of the first quarter of 2021 compared to 38 positions in the previous quarter. The all-time high for this statistic is 59.
7. Activision Blizzard, Inc. (NASDAQ: ATVI)
Number of Hedge Fund Holders: 76
The gaming company Activision Blizzard, Inc. (NASDAQ: ATVI) is among the favorite stocks of billionaire George Soros. During the first quarter, his firm raised its stake in Activision Blizzard, Inc. (NASDAQ: ATVI) by 11% to 2.53% of the overall portfolio. It is the seventh-largest stock holding of Soros Fund Management. This year, shares of Activision Blizzard, Inc. (NASDAQ: ATVI) underperformed compared to the broader market index following a sharp surge in the fourth quarter. The stock ranks 7th in our list of the best stocks to buy according to billionaire George Soros.
Like Amazon.com Inc (NASDAQ: AMZN), Alphabet Inc. (NASDAQ: GOOG), Baidu, Inc. (NASDAQ: BIDU) and VICI Properties (NYSE: VICI), Activision Blizzard, Inc. (NASDAQ: ATVI) is one of the best stocks to buy based on George Soros’ Q1 portfolio.
Cooper Investors, an investment management firm, highlighted a few stocks including Activision Blizzard, Inc. (NASDAQ: ATVI) in the first quarter investor letter. Here is what Cooper Investors stated:
“The portfolio established a position in video game publisher Activision Blizzard. As a watchlist company we have followed Activision for several years. As a reminder the role of the watchlist is to allow us to focus on a select group of companies where we seek to observe important signals around either value latency, industry trends or management behaviour that portend attractive investment propositions.
Technology can often play a disruptive role in content, however video games are a clear beneficiary of technology, both in terms of more immersive and realistic gaming experiences as well as the monetisation opportunities this creates.
In order to benefit from these trends, video game publishers must be owners of unique IP. Activision Blizzard fits this bill perfectly boasting a portfolio which includes franchises such as Call of Duty, World of Warcraft and Diablo just to name a few.
The business is run by CEO Bobby Kotick, who together with Chairman Brian Kelly purchased the foundation assets for the company for US$400k in the early 1990s. Today Activision has a market capitalization of over US$70bn. Over the last few years Bobby and his management team have refocused resources onto their best IP, with the goal of capitalizing on the aforementioned industry tailwinds.
We saw the benefits of this in 2020 with the release of Call of Duty Mobile and Free-to-Play versions (with in game micro transactions) complimenting the traditional core console game. Engagement increased materially and due to the very favorable economics of content publishing, Operating Income more than doubled for the Call of Duty Franchise. Even adjusting for the impact of lockdowns, this is a phenomenal outcome.
Activision Blizzard, Inc. (NASDAQ: ATVI) has 3-4 key pieces of IP with which they plan to repeat this playbook over the next couple of years. If they can replicate the success of Call of Duty, even in part, we see material upside to the free cash flow power of the business. Further, revenue sources are broadening which will move the profile away from a traditional lumpy annual release cycle of the old video game model towards one of a more recurring nature. This will transition Activision from a publishing to a services business, likely attracting a higher multiple than the current mid-low 20x FCF which is broadly in line with the market. To summarise, we see significant value latency and a pathway to double digit returns over the medium term.”
6. Alphabet Inc. (NASDAQ: GOOG)
Number of Hedge Fund Holders: 159
Soros Fund Management seeks to capitalize on the improving fundamentals of Google parent Alphabet Inc. (NASDAQ: GOOG). The family office fund raised its stake in Google by 252% to 69,005 shares, accounting for 2.67% of the overall portfolio. Shares of Alphabet Inc. (NASDAQ: GOOG) soared close to 36% year to date amid hopes over improving ad revenue. The stock ranks 6th in our list of the best stocks to buy according to billionaire George Soros.
Artisan Partners, a high value-added investment management firm, expressed strong confidence in Alphabet Inc. (NASDAQ: GOOG) in the first-quarter investor letter. Here is what Artisan Partners stated:
“Large-cap tech companies have been resilient through the pandemic—Alphabet among them. A top contributor, Alphabet’s Play Store and Google Cloud are in demand as businesses accelerate online activity which, along with strong YouTube user growth, is helping stabilize temporarily weaker search ad revenue trends. Through the lens of our disciplined bottom-up research process, we view Alphabet Inc. (NASDAQ: GOOG) as one of the best businesses in the world, capable of expanding revenues at a rapid rate for years to come, with a bullet proof balance sheet and an average asking price. It’s a name we’ve owned since 2012 and for which we continue to have high hopes regarding future prospects.”
5. QuantumScape Corporation (NYSE: QS)
Number of Hedge Fund Holders: 29
Electric vehicle battery maker QuantumScape Corporation (NYSE: QS) is the fifth-largest stock holding of Soros fund Management. The firm held 3.3 million shares of QuantumScape at the end of the first quarter, representing 2.78% of the overall portfolio. Shares of QuantumScape fell sharply by 40% year to date.
Baron Funds, an asset management firm, highlighted a few stocks including QuantumScape Corporation in an investor letter. Here is what Baron Funds stated:
“QuantumScape Corporation is an early-stage developer of solid-state battery technology for electric vehicles aimed at improving key aspects of batteries, including safety, charging times, energy density, and cost. The company went public via a SPAC in November. After rapid appreciation, the stock came under pressure when the company raised additional capital to help accelerate its commercialization process. We exited our small position, as described below.
We sold QuantumScape Corporation, an early-stage solid-state electric vehicle battery innovator, because it was an undersized position with an ambitious valuation. We will continue to monitor QuantumScape’s developments and may revisit the company as an investment at a future point in time.”
4. ViacomCBS Inc. (NASDAQ: VIAC)
Number of Hedge Fund Holders: 89
The media and entertainment company ViacomCBS Inc. (NASDAQ: VIAC) is the newcomer in Soros’ portfolio. His firm bought 4.3 million shares of ViacomCBS during the first quarter valued at around $194 million, accounting for 3.64% of the entire portfolio. Following a stunning rally in the first quarter, shares of Viacom plunged sharply last month. The company offers a dividend yield of 2.30% and its quarterly dividend is around $0.24 per share.
ViacomCBS experienced a significant increase in hedge fund activity during the first quarter. The number of hedge fund positions increased to 89 from 44 in the previous quarter.
3. Amazon.com, Inc. (NASDAQ: AMZN)
Number of Hedge Fund Holders: 243
Soros Fund Management increased its stake in the world’s largest e-commerce platform by 1136% to 4% of the overall portfolio, according to the latest filings. Shares of Amazon are under pressure since the beginning of this year due to investors’ concerns over slower revenue growth in the post-pandemic environment.
Polen Capital, an investment management firm, highlighted a few stocks including Amazon in the first quarter investor letter. Here is what Polen Capital stated:
“We purchased Amazon in February 2021, which accounts for 5% of the Portfolio’s weighting. For most of the last decade, Amazon did not meet our guardrails. We also did not have enough visibility into future free cash flow margins to indicate that the company would sustainably meet our guardrails and, relatedly, if valuation supported the double-digit annualized returns we seek. We now believe we have that visibility.
In 2008, almost all of Amazon’s revenue and operating profits came from its e-commerce business. Amazon Prime and Amazon Web Services (AWS) were new and relatively small back then. The company had roughly 5% operating profit margins overall, entirely from the e-commerce business. In 2009, the company began harvesting its retail business profits to accelerate investment in its distribution and logistics infrastructure globally and very heavily build out and scale AWS data centers. The company’s return on equity began to decline at that time and turned negative for three full years from mid-2012 to mid-2015 (margins and free cash flow declined similarly). So, beginning in 2010 and continuing to mid-2018, Amazon’s business was outside our guardrails. We chose to stick to our guardrails and not own Amazon.
Amazon’s profit drivers have changed quite dramatically over the years. Starting in the back half of 2018, Amazon came back above our hurdles. Revenue generation overcame ongoing heavy investments in areas such as delivery infrastructure, data center infrastructure, and shipping.
Our research suggests that today, after considering cost allocation, Amazon’s underlying profit drivers from higher-margin AWS and Advertising could grow much faster than its low-margin e-commerce business (excluding Prime), its historical driver of revenues and operating profits.
Amazon Prime, AWS, and Advertising together account for only about 20% of revenue today, but we believe over 150% of operating profits. Looking forward, growth higher-margin businesses means Amazon’s total margins and profit dollars could rise quite dramatically.
It is important to note that Amazon proved to be an exception to our guardrails. Based on our experience, very few companies that remain outside our guardrails for an extended period operate from a position of competitive strength but rather, from a position of competitive pressure. Today, we feel we have better visibility into the future earnings growth and margins from AWS and Advertising and believe these could drive 30%+ annual earnings growth for the next five years. Even with significant P/E multiple compression, we would still expect double-digit investment returns.”
2. D.R. Horton, Inc. (NYSE: DHI)
Number of Hedge Fund Holders: 50
Soros Fund Management raised its stake in D.R. Horton, Inc. (NYSE: DHI) by 19% to 4.4 million shares valued at $392 million. It the second-largest stock holding of Soros portfolio, according to the latest filings. Shares of DHI soared 34% year to date, enlarging the twelve-month gains to 72%. In addition to shares price gains, the company offers a dividend yield of 0.86%.
The best stock pickers were taking a less optimistic view. The number of long hedge fund positions went down by 14 to 50 at the end of the first quarter compared to 64 positions in the previous quarter.
1. Liberty Broadband Corporation (NASDAQ: LBRDK)
Number of Hedge Fund Holders: 70
The communications company Liberty Broadband Corporation (NASDAQ: LBRDK) is the largest stock holding of Soros Fund Management despite 20% stake sale in the first quarter. The family office portfolio held 4.2 million shares of Liberty at the end of the first quarter, accounting for 11.83% of the overall portfolio. Shares of Liberty Broadband underperformed this year compared to the broader market index.
Alphyn Capital Management, an investment management firm, mentioned Liberty Broadband Corporation in the first quarter investor letter. Here is what Alphyn Capital Management stated:
“Liberty Broadband completed its merger with GCI, thereby collapsing one layer of the double discount to Charter Communications, presenting a good opportunity to trim that position as well.”
You can also take a peek at 10 Best Small-Cap Stocks to Buy According to Billionaire Mario Gabelli and 10 Best Stocks that will Benefit from Biden’s $6 Trillion Plan.
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Disclosure: None. 10 Best Stocks to Buy Now According to Billionaire George Soros is originally published on insider Monkey.
