George Soros Betting On PMC-Sierra Inc. (PMCS) Turnaround

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George Soros is piling up shares of PMC-Sierra Inc. (NASDAQ:PMCS) according to a 13G filed with the SEC. The public filing discloses that Soros Fund Management’s ownership of the semiconductor and software company has risen to 10.69 million shares, which account for 5.53% of its outstanding common stock. This marks an increase of nearly 4.63 million shares from the stake revealed in Soros’ most recent 13F filing for the reporting period of June 30.

George Soros

George Soros is one of the world’s best known hedge fund managers and one of the greatest investors of all time. His family office, Soros Fund Management, was founded back in 1969 and is currently managed by its Chief Investment Officer, Scott Bessent. Soros retired and returned capital to outside investors at the end of 2011, so he does not participate in the daily operations of the firm anymore, but he still remains involved in its decisions and stock picks. Soros’ investment firm is seen as one of the most successful and profitable in the hedge fund industry, having delivering an average annualized return of 20% since its inception until 2010. Interestingly, Soros’ recent coal bets in the form of investments in Peabody Energy Corporation (NYSE:BTU) and Arch Coal Inc. (NYSE:ACI) might seem puzzling for the masses, as he once called coal the “lethal bullet” for climate change. In the meantime, Soros Fund Management oversees a public equity portfolio with a market value of $10.75 billion as of June 30.

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We follow hedge funds like Soros Fund Management because our research has shown that their stock picks historically managed to generate alpha even though the filings are up to 45-days delayed. We used a 60-day delay in our back tests to be on the safe side and our research showed that the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Total Return Index by an average of 95 basis points per month between 1999 and 2012. After adjusting for risk, our calculations revealed that these stocks’ monthly alpha was 80 basis points. We have also been sharing and tracking the performance of these stocks since the end of August 2012, during which time they have returned 118%, outperforming the S&P 500 ETF by over 60 percentage points (see more details here).

PMC-Sierra Inc. (NASDAQ:PMCS) is a technology company that designs, develops, and supports semiconductor solutions for communications network infrastructure equipment worldwide. The company is driving innovation across three markets: storage, optical, and mobile networks. The company’s stock performance has been disastrous this year, as its shares are down by nearly 30% year-to-date. It is hard to believe that the stock was once trading above $255 per share, and this price level might still represent a mirage for some investors. Aside from George Soros, Eric Bannasch’s Cadian Capital and Ralph V. Whitworth’s Relational Investors are also heavily invested in PMC-Sierra, holding stakes of 29.68 million shares and 17.31 million shares, respectively.

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