Three stocks these two masters of finance own in common are: Kraft (KFT), Sanofi-Aventis (NYSE:SNY) and Wells Fargo (NYSE:WFC).
George Soros owns 330,600 shares of KFT, valued as $11 million as of Sept. 30, 2011, which accounts for 0.19% of his equity portfolio. He owned the stock briefly in 2007 and sold out in 2009, then bought 125,400 shares in the second quarter of 2010 at about $30 per share, which he sold down over the year as the price went up. In the third quarter, he added 322,400 shares at about $35 per share.
Warren Buffett owns 89,746,708 shares of KFT, valued as $3 billion as of Sept. 30, 2011, which accounts for 5.1% of his equity portfolio. He bought in the second quarter of 2007, the same quarter as George Soros, but bought much more — 69,583,800 shares at an average price of $33.50. By the first quarter of 2008, he had accumulated 130,272,500 shares and has since reduced his stake to 89,746,708 shares, including a sell of 9,720,916 shares in the third quarter of 2011 at about $34.62.
Kraft Foods Inc. is the largest branded food and beverage company headquartered in the U.S. and has a presence in 170 countries. Kraft Foods Inc. Cl A has a market cap of $62.57 billion; its shares were traded at around $35.43 with a P/E ratio of 16.3 and P/S ratio of 1.3. The dividend yield of Kraft Foods Inc. Cl A stocks is 3.3%. Kraft Foods Inc. Cl A had an annual average earnings growth of 2.3% over the past five years.
Kraft’s board of directors plans to split Kraft into two separate companies — a Global Snacks Business and a North American Grocery Business — through a tax-free spin-off of its North American Grocery Business by the end of 2012. For now it reports as one entity. In the third quarter the company’s net revenues grew 11.5% to $13.2 billion, with gains in all geographic regions, led by Kraft Foods Development Markets, which gained 20.3% year over year. The only one of its segments to produce lowered revenue was its U.S. beverages business, which declined 9.9%.
The two new separate businesses will each focus on what they do best. North American Grocery, with annual revenues of approximately $16 billion and market-leading positions in about 80% of its categories, including four “billion-dollar” brands. Global Snacks will have annual revenues of approximately $32 billion and will derive more than 42% of its sales from developing markets, 36% from Western Europe and 22% from North America.
"I'm confident this is the best way to stage our businesses for long-term success, the best way for shareholders to value each business and the best way to ensure a bright future for our people," Kraft CEO Irene Rosenfeld commented at a September 7 conference.
Shortly after the announcement, Buffett, Kraft’s biggest shareholder, told CNBC, “I'm fine with it and I told [Rosenfeld] I'm fine with it."
In November 15, both Citigroup (NYSE:C) and UBS (NYSE:UBS) raised their EPS estimates for Kraft Foods.
George Soros owns 201,400 shares of SNY, valued as $7 million as of Sept. 30, 2011, which accounts for 0.11% of his equity portfolio. Warren Buffett owns 4,063,675 shares of SNY, valued as $133 million as of Sept. 30, 2011, which accounts for 0.23% of his equity portfolio. He has been accumulating the stock since the second quarter of 2006, though the price has decreased, from $47 at his first purchase to $32.50 at his last purchase in the second quarter 2010. A mere 4% of Berkshire Hathaway (BRK.A)(BRK.B) is invested in Europe.
Sanofi-Aventis is a global pharmaceutical company that produces life-extending drugs and vaccines, as well as integrated healthcare solutions primarily in Europe and the United States. Based in Paris, France, it is the largest pharmaceutical drug company in Europe by revenue. It was formed when Sanofi-Synthelabo merged with Aventis in 2005.
Sanofi-Aventis Ads has a market cap of $88.49 billion; its shares were traded at around $33.75 with a P/E ratio of 8.5 and P/S ratio of 2.1. The dividend yield of Sanofi-Aventis Ads stocks is 4%. Sanofi-Aventis Ads had an annual average earnings growth of 8.8% over the past 5 years.
Like most drug manufacturers, Sanofi-Aventis faces the imminent reality of losing the patents to several of its drugs, including bestselling drug Plavix in 2013. To mitigate the financial effects, however, the company has expanded its generics business, which it remained Zentiva, in spring of 2011. Zentive is now the third-largest generics operation in Europe with a product portfolio of more than 350 medicines.
Sanofi-Aventis has further plans to generate growth from 2012-2015, which encompasses growth platforms such as recent acquisition Genzyme and increased sales in emerging markets from 29% in 2010 to 38% to 40% of sales in 2015. In R&D, it expects to have 19 potential products launched in the same time period. Tight cost control and sales targets in spite of austerity measures in the EU are also goals. The company is aiming for 5% EPS growth per year over 2012-2015, and a dividend payout of 50% by 2014, compared to 35% for 2012.
Wells Fargo (NYSE:WFC)
George Soros owns 104,600 shares of WFC, valued as $3 million as of Sept. 30, 2011, which accounts for 0.04% of his equity portfolio. Warren Buffett owns 361,369,808 shares of WFC, valued as $8.7 million as of Sept. 30, 2011, which accounts for 14.8% of his equity portfolio. Buffett has owned Wells Fargo stock since at least 1990 and it is his third-largest holding, below Coke and IBM.
Wells Fargo & Company is a diversified financial services company providing banking, insurance, investments, mortgage and consumer finance services through stores, its Internet site and other distribution channels across North America as well as internationally. Wells Fargo & Co. has a market cap of $132.52 billion; its shares were traded at around $25.1 with a P/E ratio of 9.3 and P/S ratio of 1.4. The dividend yield of Wells Fargo & Co. stocks is 1.9%. Wells Fargo & Co. had an annual average earnings growth of 5.4% over the past 10 years.
Buffett’s 1990 shareholder letter where he discusses his Wells Fargo purchase reads like a scene from 2008. “Month by month the foolish loan decisions of once well-regarded banks were put on display. As one huge loss after another was unveiled…” He continued: “Aided by their flight from bank stocks, we purchased our 10% interest in Wells Fargo for $290 million, less than five times after-tax earnings, and less than three times pre-tax earnings.”
Wells Fargo’s revenue has amply recovered from the credit crisis that decreased its by only about $2 billion from 2007 to 2008, and made $98 billion in 2009, up from $51.7 billion in 2008. Return on assets inched up to 1.2% in the third quarter from 1.0% in the second quarter, and net margins, gross margins and operating margins all expanded as well in the third quarter.
What remains to recover is the bank’s dividend. Wells cut its dividend, as did many banks, from 34 cents to 5 cents in March 2009 in an effort to retain $5 billion annually. Prior to 2009, it had increased dividends for 20 consecutive years. In March of 2011 the bank increased its dividend to 12 cents per share after the Fed reviewed its capital plan.
Buffett expressed optimism regarding a lucrative dividend increase in the near future in his 2010 shareholder letter, saying, “At some point, probably soon, the Fed’s restrictions will cease. Wells Fargo can then reinstate the rational dividend policy that its owners deserve. At that time, we would expect our annual dividends from just this one security to increase by several hundreds of millions of dollars annually.”
In total, Buffett and Soros own these stocks in common as well: DirecTV (DTV), CVS (NYSE:CVS), IBM (NYSE:IBM), Visa (NYSE:V), MasterCard (NYSE:MA) and General Dynamics (NYSE:GD).
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