One of the most successful financiers in history, George Soros employs more of a speculative macro than value philosophy toward investing. His self-developed market theory, known as “reflexivity,” is composed of “a set of ideas that seeks to explain how a feedback mechanism can skew how participants in a market value assets on that market.”
Nonetheless, Soros places some degree of emphasis on the fundamentals of his investments. These are the stocks in his portfolio that are trading for less than the average price George Soros paid for them: Tyco International Ltd. (NYSE:TYC), Skyworks Solutions (NASDAQ:SWKS), Molycorp Inc. (MCP) and Constant Contact Inc. (NASDAQ:CTCT).
Soros closed down his Quantum Fund in 2011 to avoid new regulations that require large hedge funds to register with the Securities and Exchange Commission (SEC). He then opened a new hedge fund, Soros Fund Management, which he still has a hand in managing.
The new fund’s portfolio totals $6.2 billion in value, contains 160 stocks and had a 53% third-quarter turnover.
Tyco International Ltd. (NYSE:TYC)
With an 11 percent market share, Tyco is the world’s largest exclusively fire protection and security company. It has more than three million companies as clients in almost 50 countries.
The company’s stock dropped sharply on Sept. 28 when it completed the spinoff of the ADT Corporation and Tyco Flow Control International, its wholly owned subsidiaries, and cut back its fourth quarter guidance.
Due to an inability to collect on some aged receivables related to Chinese security contracts, the company reduced its fourth quarter Fire & Security segment revenue from approximately $2.75 billion to $2.5 billion. For the same reason, it also reduced its expected operating margin from 13.5% to 11.2% to 12%, and reported several other reductions.
After the spinoff, Tyco significantly re-ordered its business. In the past five years, its revenue has been declining at an annual rate of 8.3%, EBITDA at 4% and book value at 13.5%. Tyco has a P/E of 29.4, P/B of 2.8 and P/S of 1.3.
Skyworks Solutions (NASDAQ:SWKS)
Skyworks Solutions’ price has declined 23.7% since Soros bought 225,000 shares in the third quarter for $28 per share on average. It trades for $20.45 on Tuesday. The stock is down almost 23% in the past six months.
SWKS data by GuruFocus.com
Skyworks is an analog semiconductor company, headquartered in Massachusetts with facilities across Asia, Europe and North America.
The company’s stock experienced a significant decline on Sept. 20, the day it announced fourth quarter earnings at the high end of its range. It said it anticipated $420 million in revenue, at the high end of its guidance range of $415 to $420 million, and non-GAAP diluted earnings per share of $0.52, above guidance of $0.50 and $0.51.
On Nov. 1 it announced official fourth quarter results including $421 million in revenue, an 8 percent sequential increase, and $0.53 in non-GAAP EPS. The company said it is capitalizing on “interrelated macro trends” such as social networking, cloud-based content and audio and video streaming in smartphones, tablets, untrabooks and e-readers and supporting network infrastructure.
In the past five years, the company has grown revenue at an annual rate of 13%, EBITDA at a rate of 35.6%, free cash flow at a rate of 33% and book value at a rate of 15.2%. The company has a P/E of 20.1, P/B of 2.1 and P/S of 2.8.
Molycorp Inc. (MCP)
Molycorp’s stock price has decreased 22.4% since he bought 80,000 shares in the third quarter for an average price of $15 per share. It trades for $10.72 on Tuesday, after its stock fell almost 59% over the past year.
MCP data by GuruFocus.com
Molycorp describes itself as “the only U.S.-based company that is fully integrated across the rare earth mine-to-magnets supply chain,” with offices in the U.S., Europe and Japan. It produces rare earths and metals that are used in clean energy technologies, fiber optics, lasers, hard disk drives, defense applications, water treatment technology and other technologies, among others.
The company’s stock price has been declining since early in 2011, when it reached as high as almost $75. In the third quarter, the company’s revenue increased 49% year over year to $205.6 million, and net loss fell to $15.45 million, compared to net income of $45.1 million a year previously.
Our production ramp up continues to build to Phase 1 levels at Mountain Pass, and we remain on target for full Phase 1 operations in the fourth quarter," said Molycorp president and CEO Mark Smith. "As we execute our global vertical integration plan, we will continue to see solid revenue from our Molycorp Canada operations, and we will increasingly realize the benefits of Project Phoenix and the ramping of our production volumes. This should result in higher sales and gross margins, and both improved and sustainable bottom-line performance, due to our low-cost production and our access to markets that require high value, specialty-engineered materials."
The company’s cash in the third quarter declined to about $524.5 million from $629.92 million a year previously. Long-term liabilities and debt increased to $1.41 billion, from about $243 million a year previously.
Constant Contact Inc. (NASDAQ:CTCT)
Constant Contact’s stock price has declined 21.4% since Soros purchased 450,000 shares in the third quarter for about $18.50 on average. It trades for $14.48 on Tuesday, after declining almost 36% over the past year.
CTCT data by GuruFocus.com
Constant Contact is a suite of online market and email dispersion tools, that services more than half a million small businesses, non-profits and associations worldwide.
The company’s revenue in the third quarter increased 17% year over year to $63.8 million, with GAAP net income increasing to $6.6 million, from $5.4 million a year previously. The company underperformed its expectations in new customer additions and conversion of trailers into paying customers. The decline new customers forced the company to lower its outlook for the fourth quarter.
"We have a strong brand and are the trusted marketing provider to more than half a million small businesses. Our opportunity is expansive and we continue to invest to drive the transformation of Constant Contact into a multi-product company. This evolution will take a bit longer than we had envisioned," Gail Goodman, chief executive officer of Constant Contact. "Looking ahead, we are focused on growing our email business while testing, iterating and scaling our newer offerings."
Constant Contact has a P/E of 17.6, P/B of 2.3 and P/S of 1.9.
See George Soros’ portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of George Soros.