In a panel discussion in Vienna Sunday, billionaire investor guru George Soros said he believes that, “We are on the verge of economic collapse, let’s say, in Greece, but it could easily spread,” Bloomberg reports.
He also said that European nations leaving the euro is “probably inevitable,” although the process had not begun yet.
The euro zone’s deficit deepened in April to $5.1 billion euros ($7.3 billion) the European Central Bank said on June 20, 2011. The deficit for the trailing twelve months worsened to $52.3 billion euros from 12.4 billion euros the previous year. It is currently weakened by member state Greece, a country in deep debt. “Both the future of the country and financial stability of Europe are at stake,” if Greece does not solve its problems and avoid default, said Commissioner Olli Rehn in a statement on Tuesday.
Soros is famous for generating an average annual return of over 30% while running the Quantum Fund. He is also an expert at currency speculation, making a massive bet in 1992 against the British pound, from which he earned a $1 billion profit.
While Soros believes the sky is falling in the euro zone, he has many European stocks in his portfolio that he still views as profitable investments. The largest are:
Adecoagro SA (AGRO)
Adecoagro S.A. operates as an agricultural company in South America, and owns nearly 40 large farms in Argentina, Brazil and Uruguay. Adecoagro S.A. has a market cap of $1.33 billion; its shares were traded at around $11.49 with and P/S ratio of 3.1.
Adecoagro is the largest European holding of George Soros’ fund; the Luxembourg-based company is 5.7% of his portfolio. Soros has been a leading investor in the company since 2002 and owns 27,158,693 shares. At its IPO in January, the company raised $314.3 million, selling 28.6 million shares at $11 each.
In 2010, the company ‘s gross sales rose to $429,267 million compared to $313,603 million the previous year. Earnings increased for each of its sectors as well: sugar and ethanol, grains and oilseeds, crushed sugarcane, farming planted area, and sugarcane plantation area.
Luxembourg has relatively low taxes and fewer regulations, and is the home of many large companies’ headquarters.
Ensco PLC (ESV)
Ensco International plc, formerly ENSCO International Incorporated, is a provider of offshore contract drilling services to the international oil and gas industry. Ensco Plc has a market cap of $7.39 billion; its shares were traded at around $51.52 with a P/E ratio of 16.6 and P/S ratio of 4.4. The dividend yield of Ensco Plc stocks is 2.7%. Ensco Plc had an annual average earnings growth of 19.2% over the past 10 years. GuruFocus rated Ensco Plc the business predictability rank of 4.5-star.
Esco Plc, Soros’ third largest international holding, is based in the UK. He owns 109,500 shares and last bought 94,100 in the first quarter of 2011 for about $54.40 each. He has owned the stock since the first quarter 2010, just about the time that the Deepwater oil spill occurred and the stock dropped over $10.
The company moved its headquarters to the UK from Houston, partially for tax reasons. US oil companies can pay tax rates up to 34% to 38%, compared to an estimated 18% to 22% for companies overseas.
Ensco has begun drilling in the Gulf of Mexico under the first permit issued after the moratoria against drilling were lifted. The company lost $57 million in 2010, but generated free cash flow of $363 in 2009.
Bob Rodriguez has over 22% of his portfolio in two oil stocks, the second largest of which is Ensco at over 11% of his portfolio.
David Einhorn also likes this stock. In his 2010 letter, he wrote, “Ensco plc (ESV) is an offshore contract oil drilling company operating a large fleet of shallow-water jack-up rigs and a small but new fleet of deep water rigs. The Deepwater Horizon oil spill and resulting 6-month drilling moratorium in the Gulf of Mexico caused significant share price declines throughout the sector. ESV was not involved in the horrible accident, which should not materially impact the company’s long-term potential. ESV has approximately $7 per share in net cash and a tangible book value of $37.50 per share. The shallow water drilling business, which is unaffected by the drilling moratorium, generates $4.00 per share in unlevered mid-cycle earnings and $8.00 per share in peak earnings.
At the Partnerships’ average cost of $39.41 per share, we appear to be getting the shallow water fleet at a low value and the deepwater fleet (in which ESV has thus far invested over $15 per share to build and should add $2.00 and $4.00 to mid-cycle and peak EPS respectively) for free. ESV shares ended the quarter at $39.28 each.”
He added, “In the fourth quarter ESV shares advanced from $44.73 to $53.38 as higher oil prices (thanks again Mr. Bernanke) and increased drilling budgets in the oil and gas industry led to expectations that rig rates and utilization would increase in 2011.”
Vodafone Group Plc (VOD)
Vodafone AirTouch Plc is the world's largest international mobile communications firm. Based in Newbury, UK, it has operations in Germany, Italy, Spain, the UK, Turkey, India, the republic of South Africa and dozens of other countries worldwide. Vodafone Group Plc has a market cap of $135.67 billion; its shares were traded at around $26.46 with and P/S ratio of 1.9. The dividend yield of Vodafone Group Plc stocks is 7.3%.
Telecommunications comprise only 1.5% of Soros’ portfolio. He has been selling the stock for the last four quarters, as the stock price has gone up over the last year. The stock has risen 18.7% over the last year and declined 1.1% year to date.
In July, Vodafone is raising its minimum call charge for mobiles and landlines from 21p to 25p, or 66%, and 10p to 12p, or 22%, for texts on pay-as-you-go phones.
Vodafone generated net cash flow of £6.2 billion, an increase from a net loss of £226 million in 2009. Cash and cash equivalents are £6.2 billion, also increased from £4.3 billion in 2009. Vodafone had five straight quarters of revenue growth, with the strongest growth being in global markets.
Accenture Plc (ACN)
Accenture Plc is the world’s second largest technology consulting and outsourcing organization, with operations in 48 countries. Accenture Plc has a market cap of $37.52 billion; its shares were traded at around $57.79 with a P/E ratio of 18.3 and P/S ratio of 1.6. The dividend yield of Accenture Plc stocks is 1.6%. Accenture had an annual average earnings growth of 16.2% over the past 10 years. GuruFocus rated Accenture the business predictability rank of 3-star.
Soros has owned shares of the Dublin-based business since the third quarter of 2009, when he paid just $35 per share. In the first quarter of 2011 he sold 24,200 shares for $51.50 per share, and now owns a total of 90,800 shares. Accenture stock has risen 50.18% over the last year. At $59.65 per share, it is now trading just under its 52-week high of $60.81.
Accenture will become a part of the S&P 500 after the close of trading on July 5, replacing Marshall & Illsey Corp., which Bank of Montreal (BMO) will acquire.
Accenture has had strong and consistent free cash flow over the last 10 years. In 2009, it generated $2.9 billion and $2.86 billion. It has total liabilities and debt of $9.6 billion and cash of $9.6 billion.
For more of George Soros' international stocks, click here.