As noted in part one, legendary investors Warren Buffett (Trades, Portfolio) and George Soros (Trades, Portfolio) have opposing views on how to approach investing. Buffett primarily takes big stakes in quality companies he expects to do well over at least five years’ time and holds them “forever.” Soros instead will speculate on companies based on short-term events and bet on trends.
But sometimes the twain meet. In the first quarter, they held a number of stocks in common, like Goldman Sachs, IBM and MasterCard. In a second-quarter twist, Soros sold out of many of these stocks, keeping a like mind with Buffett on only eight.
The exodus may also suggest a wariness of the markets on the part of Soros. His fund sold nearly 79% of its holding of the S&P 500 (SPY, Financial) ETF, which was its biggest chop in two years. Soros invested in the U.S. stock benchmark ETF in the first quarter of 2014 and enjoyed its run up from the low $180s to the mid-$200s today.
The investor in macroeconomic trends also in the second quarter reduced his exposure to basic materials, consumer defensive, communications services, energy, industrials and technology. Increases in other sectors were marginal.
By contrast, Buffett has held three of his five top holdings – Wells Fargo & Co. (WFC, Financial), Coca-Cola (KO, Financial) and American Express (AXP, Financial) – for more than six years.
Both the investors have unique relationships to their funds. Soros’ $30 billion family office Soros Fund Management is led by Chief Investment Officer Dawn Fitzpatrick. Buffett’s Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial) portfolio employs two managers in addition to Buffett, Ted Weschler and Todd Combs. Berkshire rarely discloses which stock buys and sells belong to the two deputy investors.
Some of the stocks Berkshire and Soros Fund Management both retained in the second quarter were: Apple (AAPL, Financial), Mondelez (MDLZ, Financial) and Monsanto (MON, Financial).
Buffett has weighted 12% of his portfolio in Apple, which includes a $123.6 million boost in the second quarter.
Soros has periodically bought and sold Apple over the years at appreciating share prices. He increased his position 21.4% to 1,700 shares or 0.01% of the portfolio in the recent quarter.
Apple’s Aug. 1 earnings announcement pushed the stock up almost $10 per share in one day. The company saw services revenue hit an all-time record as well as 7% revenue growth overall, marking its third year of revenue increase.
In addition to the iPhone 8, Apple plans release of several new products and services in the back half of the year: an iOS 11 upgrade bringing hundreds of updates to iPhone and iPad, an intelligent home music speaker and an iMac Pro.
For its upcoming fiscal fourth quarter, Apple forecasts revenue in a range of $49 billion and $52 billion with gross margin between 37.5% and 38%. The numbers compare to $46.9 billion in revenue and 38% gross margin in the prior-year quarter.
Soros holds 1.4 million shares of Mondelez after a 9.3% increase in the second quarter, which it makes it 1.3% of his portfolio.
Buffett eliminated 92% of his Mondelez holding four years ago and retains 578,000 shares, which amounts to 0.02% of his portfolio.
Mondelez shares are off 8% year to date after tumbling last week when Buffett announced on CNBC that Kraft Heinz Co. would not acquire the snack food company. Buffett controls the largest percentage of Kraft Heinz shares and shares decision-making with private equity firm 3G Capital.
In the second quarter, Mondelez revenue fell in every geographic segment except Latin America, where it grew 0.6%. North American revenues saw the steepest decline at 8.5%. Net earnings rose 7.3% to $498 million while diluted EPS reached 32 cents with a 10.3% increase. Gross profit margin slid to 38.8%, down 110 basis points.
For the year, it expects non-GAAP organic net revenue to increase at least 1%, with double-digit adjusted EPS growth on a constant-currency basis. It also forecasts around $2 billion in free cash flow.
Like many of his stocks, Soros wove in and out of Monsanto for more than six years. He nearly tripled the position in the June quarter, making it 0.33% of his 186-stock portfolio.
Buffett has a $951.8 million stake in Monsanto that he bought in the fourth quarter, has not changed and that represents 1.8% of his portfolio.
The fertilizer and seed company’s shares are up 8.9% year to date as the company awaits a merger with Bayer Aktiengesellschaft that will pay $128 per share in cash for Monsanto shareholders. Monsanto’s shareowners approved the deal on Dec. 13, but the company reported on Aug. 22 that the European Commission launched a Phase II investigation into it on concerns that the combination may limit competition in the field of pesticides, seeds and traits.
Bayer said it hopes to work with the commission to obtain approval by the end of the year.
