In this article, we reviewed George Soros’ top 10 stock picks to see how the legendary investor’s stock-picking strategies performed in 2020 and what are the prospects for 2021. You can skip our detailed discussion of Soros Fund Management’s performance, George Soros’ theory of reflexivity and its relevance and go to George Soros’ Top 5 Stock Picks.
George Soros, 90, continues showing that age doesn’t matter when it comes to investing in stock markets because the legendary investor has generated robust returns in the pandemic year. Several of his top ten stock holdings have outperformed the broader market index by a wide margin. Soros Fund Management, which is not open to external investors, benefited from its aggressive portfolio adjustment strategies and investments in high-growth companies. For instance, after initiating a position in the second quarter, the firm sold out its DraftKings (NASDAQ: DKNG) position during the fourth quarter to capitalize on share price gains.
Ranked second best-performing hedge fund based on LCH data, Soros Fund Management has also been seeking to take advantage of the increasing demand for electric vehicles. The firm created a huge position in QuantumScape Corp in Q4, which is the manufacturer of solid-state lithium-metal batteries for electric vehicles. The firm also slashed more than half of its stake in The Hain Celestial Group, Inc. during the fourth quarter to capitalize on gains. The stock price of Hain Celestial jumped 63% in the last twelve months.
On the other hand, Soros Fund has converted its early investment in Palantir into publicly traded shares in September when the company listed on the New York Stock Exchange. Palantir is the second-largest stock holding of Soros Fund Management, according to the latest filing. Shares of the data-mining company saw a stunning rally during the fourth quarter. The firm also held a big position in several exchange-traded funds to diversify its portfolio and reduce the risk of volatility.
Soros Fund Management’s 13F stock portfolio value increased to $4.6 billion at the end of the fourth quarter, up $886 million from the previous quarter, and increased substantially from $3.09 billion at the beginning of 2020. The family office fund has been holding large positions in a few equities and small positions in a large number of equities.
The firm has created 54 new positions during the fourth quarter and added to its 22 existing positions. On the other hand, Soros Fund Management sold out 41 stocks and reduced its positions in 31 stocks during the fourth quarter to adjust the portfolio according to market trends. The firm has significantly increased its positions in the finance sector, which accounts for about 35% of the overall portfolio at the end of the fourth quarter. The communications sector holds the second-largest weightage while information technology is ranked third.
The Man Who Broke The Bank of England
Soros famously “broke the Bank of England” with his short sale of $10 billion worth of pounds sterling. Before the famous “Black Wednesday” crisis of 1992, Soros started shorting the currency based on his belief that the United Kingdom would not be able to keep the currency price above the minimum required limits enforced by the European Exchange Rate Mechanism. Just a few days before the Black Wednesday, Soros’ Quantum Fund started flooding the market with pound sterling, causing the price to decline further. On Sept. 16, 1992, the Bank of England declared that the U.K. would leave the European ERM. George Soros reportedly made about $1 billion in profits that day.
George Soros doesn’t like to hold stocks for a long-term. Unlike Warren Buffett and Tom Russo, Soros seeks to generate gains from short-term price movements. The average time held for the top ten stocks stands around just 2.50 quarters and the average time held for the top 20 positions is around 3.10 quarters.
The legendary investor George Soros has managed investors’ money from 1969 to 2011. George Soros’ Quantum Group of Funds, a family of funds investing mainly in public equity, foreign exchange, fixed income markets worldwide as well as commodity markets, had unmatched success in the past decades. The fund has generated an average 20% annual rate of return since its inception to fiscal 2010.
A “Failed Philosopher” Makes a Comeback
A student of Austrian philosopher Karl Popper, Soros is known for his “General Theory of Reflexivity” which says investors base their decisions on the perceptions of reality instead of reality itself. This creates a self-fulfilling prophecy, with perceptions and speculations affecting the events in reality, thereby reinforcing the initial perceptions.
George Soros is an author of several books and essays. His 1987 book “The Alchemy of Finance” got a lot of attention worldwide. Even though his initial theories failed to make a dent, Soros’ ideas and theories soared to fame as the world’s economy experienced recessions and his theory about “feedback loops” proved to be prescient and correct in several aspects. Here’s what Soros said in one of his essays:
“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.”
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 reviewing stock market investing tycoon George Soros’ top 10 stock picks for 2021 to determine whether these stocks would help the family office to extend its record of generating strong returns into the new year.
Ranking 10th on the list of George Soros’ top 10 stock picks is Hain Celestial. George Soros’ stock-picking strategy worked so far in the case of the United Kingdom-based packaged foods and meats company Hain Celestial Group Inc (NASDAQ: HAIN). The legendary investor has initiated a position in Hain Celestial during the second quarter and sold out more than half of the stake during the fourth quarter to capitalize on a stunning share price rally. Shares of Hain Celestial grew 66% in the last twelve months.
Despite selling 52% of the position in Hain Celestial in Q4, the firm still holds more than 2 million shares of packaged foods and meats company. Hain Celestial stock price is up 8% so far in 2021. The company has generated $528.42 million in the latest quarter while adjusted EBITDA hit $66 million. Moreover, the company expects more improvement in its margins going forward.
The family office fund’s strategy of holding a position in SelectQuote (NYSE: SLQT) is working because shares of the insurance broker rose 41% so far in 2021. The firm had created a position in SelectQuote during the second quarter of 2020 by purchasing 5.5 million shares. SLQT ranks 9th on the list of George Soros’ top 10 stock picks.
In a Q3 investor letter, Argosy Investors highlighted few stocks including SelectQuote. Here is what Argosy Investors stated:
“I sold SelectQuote (SLQT) after owning the stock for less than 3 months, which is highly unusual for us. What I found strange in evaluating the business the more I looked at it was after decades of being in business the company still did not generate significant cash flows despite reported GAAP profits. For a company that essentially acts as an agent or lead generator to insurance companies, they should have been generating far more cash than they were and I elected to sell and admit our mistake.
This is one of those instances where despite its small impact on the portfolio, the rapid upward trajectory of the market places some pressure on all investors to quickly identify attractive investments. This phenomenon also applies to positions we own which have appreciated significantly. It is tempting to believe that rapid upward price moves in some of our positions are validations of our investment thesis, but our “great” investment idea may simply be swept up in some form of a speculative mania.”
Gaming company Activision is one of George Soros’ top 10 stock picks. Soros Fund Management is bullish on the video gaming company Activision Blizzard, Inc. (NASDAQ: ATVI). Despite a more than 60% share price rally in 2020. The legendary investor still shows confidence in Activision Blizzard as his firm increased its position in ATVI by 18% during the fourth quarter to 1.29 million shares.
Giverny Capital, which returned 19.64% for the second quarter of 2020, presented the bullish outlook for Activision Blizzard in a Q2 investor letter. Here is what Giverny Capital stated:
“Activision is a leading maker of complex, highly interactive video games, including World of Warcraft and Call of Duty. We’ve followed the company for years (and owned it personally) and believe it is well positioned to win increasing hours of consumer attention. But Activision has struggled to come up with hit games in recent years. It relies heavily on new iterations of Call of Duty, plus the mobile game Candy Crush. A highly interactive multi-player game can cost upwards of $100 million to create. We’re not sure work-from-home is conducive to this kind of large-scale engineering and animation work.
Activision clearly benefits from the pandemic as people stay at home, but this won’t last forever. As Activision caught a tailwind this spring, we opted to exit the business. At best, we were premature. The stock has risen about 20% since we sold it as the stay-at-home theme strengthens.”
7. iShares MSCI Emerging Markets ETF (EEM)
Ranking 7th on our list of George Soros’ top 10 stock picks is iShares MSCI Emerging Markets. Soros Fund Management’s strategy also worked in the case of iShares MSCI Emerging Markets ETF. This is because the price of MSCI Emerging Markets ETF rallied 16% in the last three months and outperformed the broader market index so far in 2021. iShares MSCI Emerging Markets ETF is an exchange-traded fund that invests in public equity markets of the global emerging regions. It invests in stocks of companies operating across diversified sectors. Soros initiated a position in MSCI Emerging Markets ETF during the fourth quarter, accounting for 2.45% of the portfolio.
6. iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD)
George Soros looks optimistic about the fundamentals of iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) in 2021. The firm increased its position by 18% during the fourth quarter in LQD. iShares iBoxx $ Investment Grade Corporate Bond ETF is managed by BlackRock Fund Advisors and the fund invests in the fixed income markets of the global developed markets region.
To see the rest of the stock picks by George Soros, go to George Soros’ Top 5 Stock Picks