George Soros Portfolio Update (Soros Fund Management 13F Filing) ~ market folly

Tuesday, August 25, 2009

George Soros Portfolio Update (Soros Fund Management 13F Filing)

This is the second quarter 2009 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out our series preface on hedge fund 13F filings.

Next up is George Soros' hedge fund firm, Soros Fund Management. Soros is one of the gurus we track on the blog due to his excellent track record and insightful macro take on things. His current take on the crisis and financial markets is laid out in his latest book, The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means. If you want to get a better sense as to how Soros formulates his investment theses, we highly recommend reading his first book, The Alchemy of Finance. This book is a staple in our recommended reading list and after you read it, you'll understand why.

Soros is well known for the outstanding returns generated with Jim Rogers at their now defunct Quantum Fund. (We've summed up Jim Rogers' portfolio and thoughts a few months back). Soros is a true global macro players and dabbles in currencies, equities, bonds, commodities, etc. So with that said, due note that the equity positions listed below are only a fraction of their portfolio overall. It has been an interesting time to be investing and trading as Soros noted in his thoughts on his portfolio from 2008. Last year, Soros Fund Management finished up 8% as he made money by betting correctly on the US Dollar and short term UK interest rates.

In our recent hedge fund coverage, we noted that Soros has likened credit default swaps to 'instruments of destruction,' which we thought was interesting. In terms of SEC filings, Soros' fund has filed 13G's on Exar, disclosing a new position and also on Extreme Networks (EXTR). The following were Soros Fund Management's long equity, note, and options holdings as of June 30th, 2009 as filed with the SEC. We have not detailed the changes to every single position in this update, but we have covered all the major moves. All holdings are common stock unless otherwise denoted.

Some New Positions (Brand new positions that they initiated in the last quarter):
The major additions: Petroleo Brasileiro (PBR-A), Autozone (AZO), Goldman Sachs (GS) Puts, Interoil (IOC), Monsanto (MON), Vale (VALE) Puts, BPZ Resources (BPZ), and Suncor (SU).

The rest of their new positions were less than 0.5% of their portfolio each: Verizon (VZ), Diodes (DIOD) Bonds, SPSS (SPSS) Bond, Sandridge Energy (SD), Exar (EXAR), Apache (APA) Calls, Pioneer Natural Resources (PXD), Lawson Software (LWSN) Bond, Blackboard (BBBB) Bond, Novagold (NG), CSX (CSX), Brigham Exploration (BEXP), Comcast (CMCSA), CA (CA), Constellation Energy (CEG), Focus Media (FMCN), Wabtec (WAB), Covanta (CVA) Calls, Ultrashort Financials (SKF), Berry Petroleum (BRY), Exco Resources (XCO), and Teradata (TDC) Calls.

Some Increased Positions (A few positions they already owned but added shares to)
Allied Nevada Gold (ANV): Increased by 4,242% (was previously 0.01% of their portfolio and is now boosted up to only 0.45% of their portfolio)
Covanta (CVA): Increased by 1,185.5% (was previously a 0.11% position for them and is now 1.89% of their portfolio)
AT&T (T): Increased by 691% (boosted from 0.05% of their portfolio up to 0.47% of their portfolio now)
Allegheny Energy (AYE): Increased by 259% (from 0.13% of their portfolio up to 0.55% of their portfolio)
Flextronics (FLEX) Bond: Increased by 141%
Plains Exploration (PXP): Increased by 81.8%
Tech Data (TECD) Bond: Increased by 77%
Hess (HES): Increased by 40%
RF Micro (RFMD) Bonds: Increased by 37.9%
LSI (LSI) Bonds: Increased by 19.4%

Some Reduced Positions (Some positions they sold some shares of)
Petroleo Brasileiro (PBR): Reduced by 68.9%
Potash (POT): Reduced by 65.2%
Macrovision (MVSN) Bonds: Reduced by 48.8%
Walgreen (WAG): Reduced by 22.7%

Removed Positions (Positions they sold out of completely)
Conoco Phillips (COP), Macys (M), Union Pacific (UNP), American Electric Power (AEP), Donnelley (RRD), Smucker (SJM), Kohls (KSS), Occidental Petroleum (OXY) Puts, iShares Mexico (EWW) Puts, and Arch Coal (ACI).

The rest of their sales were positions that were less than 0.25% of their portfolio each, including: Weyerhauser (WY), Coach (COH), Nabors (NBR), Public Service Enterprise (PEG), Crown Holdings (CCK), DPL (DPL), Emulex (ELX), PPL (PPL), Bluefly (BFLY), Frontier (FTO), Vishay (VSH), Northeast Utilities (NU), ICICI bank (IBN) Puts, Commercial Metals (CMC), Airgas (ARG), Formfactor (FORM), Vignette (VIGN), and Teradyne (TER).

Top 15 Holdings by percentage of long portfolio *(see note below regarding calculations)

  1. Petroleo Brasileiro (PBR): 9.58% of portfolio
  2. Hess (HES): 6.56% of portfolio
  3. LSI Corp (LSI) Bond: 5.85% of portfolio
  4. Linear Technology (LLTC) Bond: 5.2% of portfolio
  5. Petroleo Brasileiro (PBR-A): 4.68% of portfolio
  6. RF Micro Devices (RFMD) Bond: 4.42% of portfolio
  7. Potash (POT): 4.4% of portfolio
  8. Plains Exploration (PXP): 4.25% of portfolio
  9. Tech Data (TECD) Bond: 3.96% of portfolio
  10. RF Micro (RFMD) Bond 2nd set: 3.7% of portfolio
  11. Flextronics (FLEX) 1%10 Bond: 3.2% of portfolio
  12. Covanta (CVA): 1.9% of portfolio
  13. Autozone (AZO): 1.9% of portfolio
  14. Audiocodes (AUDC) 2% 24 Bond: 1.6% of portfolio
  15. Entergy (ETR): 1.6% of portfolio

Similar to Soros' Q1 2009 portfolio, their second quarter portfolio is heavily laden with convertible bonds. Seven out of their top 15 positions are in bonds, with LSI and Linear Technology their top picks in that regard. They boosed their Flextronics Bond position by 141%, their Tech Data Bond position by 77% and their LSI Bond position by around 20%. So, they were still liking those names over the course of the past quarter.

Turning to their equities moves, we see a few things worth pointing out. Notable sales include Soros completely dumping their shares of Conoco Phillips (COP). Additionally, they sold off a large portion of their Petroleo Brasileiro (PBR) shares for a second quarter in a row. Even after all their sales, their PBR stake is still their top holding. However, they did add to their A-shares position in Petroleo Brasileiro (PBR-A).

Soros also sold completely out of Macy's (M) and Union Pacific (UNP) which had previously been 1.94% and 1.08% positions for them respectively. Additionally, they reduced their Potash (POT) stake by 65% which we took note of because Soros Fund Management has typically been fond of the fertilizer play. They did boost their Hess (HES) position by 40% which was notable. The vast majority of other positions they added to were fairly small stakes last quarter and so their percentage increase is large on a quarter by quarter basis. However, these holdings are still only fractions of Soros' overall portfolio and not necessarily worth pointing out at this stage. The last major equity move we want to point out was their 1,185% boost in their Covanta (CVA) position. While it is only now a 1.89% portfolio position for them, CVA has been popping up in a few hedge fund portfolios that we've noticed so it might be worth keeping an eye on that one.

*Note regarding portfolio percentages: Assets from the collective holdings reported to the SEC via 13F filing were $4.19 billion this quarter compared to $4.5 billion last quarter, so a slight decrease. Please keep in mind that when we state "percentage of portfolio," we are referring to the percentage of assets reported on the 13F filing. Since these filings only report longs (and not shorts or cash positions), the percentages are skewed. In reality, the percentages are more watered down in their actual hedge fund portfolio. If you were to calculate percentage weightings in the actual hedge fund portfolio, they would obviously be different since you would divide position sizes by their total assets under management.

This is just one of the 40+ prominent funds that we'll be covering in our Q2 2009 hedge fund portfolio series. So far, we've already covered the holdings of Bill Ackman's Pershing Square Capital Management, David Einhorn's Greenlight Capital, Seth Klarman's Baupost Group, Dan Loeb's Third Point LLC, and Stephen Mandel's Lone Pine Capital. Check back each day as we cover prominent hedge fund portfolios.

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