As we finishing up updating gurus’ portfolios as of the end of the first quarter, we look deeper into the portfolios of Gurus. The first one we turn into is one of influential investors, billionaire George Soros. Here we discuss his international holdings. George Soros owns a large number of international stocks. Many of them are new positions to his portfolio. For the complete list, go to Soros’ International Stocks. In this article we discuss the top five of Soros’ international picks.
Adecoagro (AGRO, Financial) – Luxemburg Based Farmland Company
According to their website, “Adecoagro is currently one of the leading companies in the production of food and renewable energy in South America. Present in Argentina, Brazil and Uruguay, our main activities include the production of grains, rice, oilseed, dairy products, sugar, ethanol, coffee, cotton and cattle meat. Since its creation in 2002, the company´s growth was based on the implementation of a sustainable efficient production model, working on its own land and managing risk through diversification.”
Adecoagro SA, a farmland venture in South America that’s backed by billionaire George Soros, plans to raise as much as $429 million in an initial public offering in the U.S. as food prices surge. As much as 21.4 million new and 7.14 million existing shares will be offered for $13 to $15 each. The company’s main shareholders include Pampas Humedas LLC, an affiliate of Soros’s Soros Fund Management LLC, which owns about 34 percent and will reduce its stake to about 21 percent after the offering.
Soros Fund owns about 27 million shares of AGRO, which is about 4.36% of Soros’ equity portfolio.
Interoil Corp. (IOC, Financial) – Australia Based Oil Company
George Soros owns more than 4 million shares of IOC, which accounts for 3.6% of his equity portfolio as of March 31. George Soros initiated the position in the second quarter of 2009, and kept buying more. He added his positions in the Sep. 30, 2010 quarter by 18.5%, again in the Dec. 31, 2010 quarter by 10.23%. Only reduced slightly in the first quarter of this year. GuruFocus estimates that his average cost is about $43, and at the current price, he is up about 30% with this investment.
Soros also owns 500,000 shares of IOC call option. It is not clear when the option expires.
Interoil Corp is a vertically integrated energy company whose primary focus is Papua New Guinea and the surrounding region. Interoil Corp. has a market cap of $3 billion; its shares were traded at around $70.11 with a P/E ratio of 93.5 and P/S ratio of 4.3.
InterOil recorded a consolidated net profit for the quarter ended March 31, 2011 of $0.7 million. The operating segments of Corporate, Midstream Refining and Downstream collectively derived a net profit for the quarter of $21.2 million, while the development segments of Upstream and Midstream Liquefaction had a net loss of $20.5 million. This record profit was mainly due to an improvement in gross margins achieved by our Refining and Downstream segments and higher foreign exchange gains compared to the same period of 2010 resulting from better rates achieved from banks on conversion of the PGK sales revenue into USD for repayment of our crude purchase working capital facility. InterOil closed the first quarter of 2011 with cash, cash equivalents and cash restricted totaling $274.5 million.
Teva Pharmaceutical Industries Ltd. (TEVA, Financial) – Israel Based Pharmaceutical Company
Soros Fund initiated the position in Teva in the third quarter of 2010. The fund added slightly in the fourth quarter, and reduced the position by 15% in the first quarter. Soros is about breakeven with the position, according to our estimates.
Teva was the only non-financial stock bought by Bruce Berkowitz in the last quarter. He has since sold out the position. Teva is also in the portfolios of Tiger Cubs such as John Griffin’s Blueridge Capital, and Less Ainslie’s Maverick Capital. Teva is also a decent sized position of Leon Cooperman of Omega Advisors. The company generates $3 billion in free cash flow, priced at 8 times earnings and has good growth price, said Leon Cooperman.
This is what our columnist Steven Kiel wrote about Teva: “Teva finished 2010 with about $1.25 billion in cash and has the option of buying back shares. They also have plans to pursue additional acquisitions. I find it difficult to value pharmaceuticals because of the unpredictability of their coming drugs. I like that Teva has a strong pipeline, but I don’t know how you estimate revenue three to five years out when these drugs aren’t even for sale yet. That being said, you can combine predictions on their current drugs coupled with some faith in their management. As I mentioned above, I think the rosiest value is about $100. That’s if all goes according to management’s plan, which surely doesn’t take into account the revenue loss risks from Copaxone. On the other hand, even if you assumed Copaxone’s market share and revenue is cut in half, which I think is the other extreme, shares should still be north of $65. If shares are currently below $48 and the worst case scenario is a stock price of $65, you have a very comfortable margin of safety. Don’t’ forget to throw in a 1.8% dividend yield as well.”
Weatherford International (WFT, Financial) – Swiss Based Oil Equipment Company
Soros Fund started its position in WFT in the first quarter of 2009, when WFT stock price was at multi-year lows. He then traded in and out of the position during the past two years. As of 3/31/2011, he owns about 3.5 million shares at about 20% gain. WFT is about 1% of Soros Fund portfolio.
Weatherford International is one of the world's providers of equipment and services used for the drilling, completion and production of oil and natural gas wells. Weatherford Intl. Ltd. has a market cap of $14.34 billion; its shares were traded at around $19.32 with a P/E ratio of 32.2 and P/S ratio of 1.4. Weatherford Intl. Ltd. had an annual average earnings growth of 11.9% over the past 10 years.
Consolidated revenues of Weatherford increased $525 million, or 23%, in the first quarter of 2011 as compared to the first quarter of 2010. This increase outpaced the 21% increase in average rig count over the comparable period. North America revenue increased $472 million, or 53%, in the first quarter of 2011 compared to the same quarter of the prior year. International revenues increased $53 million, or 4%, in the first quarter of 2011 as compared to the first quarter of 2010.
WFT is also in the portfolio of oilman T. Boone Pickens. He started the position in 2009, and has been adding to the positions.
PetroBras (PBR, Financial) – Brazil Based Oil Company
Soros Fund owns 1.1 million shares of Brazil based oil company PetroBras, which is about 0.5% of his portfolio. Soros bought into PBR in the second quarter of 2008, when the oil price was at its highest. As the price crashed, he bought more PetroBras shares at much lower lost. PetroBras became his largest position by the first quarter of 2009. He then gradually reduced the position as the stock price climbed, and sold out in the first quarter of 2010. He bought in the position again in the fourth quarter of 2010.
Petrobras has an ambition to grow into one of the top five integrated oil companies in the world. It already produces nearly two million barrels per day and boasts more than 11 billion barrels of reserves after making some of the largest finds in the world off the Brazilian coast. The government has also granted the company exploration rights in regions that could have billions more in reserves.
The current P/E ratio of 8 is in the ball park of all other oil giants like EXXON Mobil (XOM), and Chevron (CVX). But the price/book ratio of PBR is much lower than the others. It is interesting that the market thinks the oil reserve of PetroBras worth less than others.
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George Soros owns another 46 international stocks from China, Australia, and European countries. To see the complete list, go to Soros’ International Stocks. To find out more about international investing ideas, please read Where to Find Value Ideas for International Stocks.
With GuruFocus Premium Membership you can dig into the portfolios of Gurus. You can find out the most undervalued stocks, the highest yield stocks and many others about Gurus’ portfolios. If you are not a premium member, we invite you for a 7-day free trial.
Adecoagro (AGRO, Financial) – Luxemburg Based Farmland Company
According to their website, “Adecoagro is currently one of the leading companies in the production of food and renewable energy in South America. Present in Argentina, Brazil and Uruguay, our main activities include the production of grains, rice, oilseed, dairy products, sugar, ethanol, coffee, cotton and cattle meat. Since its creation in 2002, the company´s growth was based on the implementation of a sustainable efficient production model, working on its own land and managing risk through diversification.”
Adecoagro SA, a farmland venture in South America that’s backed by billionaire George Soros, plans to raise as much as $429 million in an initial public offering in the U.S. as food prices surge. As much as 21.4 million new and 7.14 million existing shares will be offered for $13 to $15 each. The company’s main shareholders include Pampas Humedas LLC, an affiliate of Soros’s Soros Fund Management LLC, which owns about 34 percent and will reduce its stake to about 21 percent after the offering.
Soros Fund owns about 27 million shares of AGRO, which is about 4.36% of Soros’ equity portfolio.
Interoil Corp. (IOC, Financial) – Australia Based Oil Company
George Soros owns more than 4 million shares of IOC, which accounts for 3.6% of his equity portfolio as of March 31. George Soros initiated the position in the second quarter of 2009, and kept buying more. He added his positions in the Sep. 30, 2010 quarter by 18.5%, again in the Dec. 31, 2010 quarter by 10.23%. Only reduced slightly in the first quarter of this year. GuruFocus estimates that his average cost is about $43, and at the current price, he is up about 30% with this investment.
Soros also owns 500,000 shares of IOC call option. It is not clear when the option expires.
Interoil Corp is a vertically integrated energy company whose primary focus is Papua New Guinea and the surrounding region. Interoil Corp. has a market cap of $3 billion; its shares were traded at around $70.11 with a P/E ratio of 93.5 and P/S ratio of 4.3.
InterOil recorded a consolidated net profit for the quarter ended March 31, 2011 of $0.7 million. The operating segments of Corporate, Midstream Refining and Downstream collectively derived a net profit for the quarter of $21.2 million, while the development segments of Upstream and Midstream Liquefaction had a net loss of $20.5 million. This record profit was mainly due to an improvement in gross margins achieved by our Refining and Downstream segments and higher foreign exchange gains compared to the same period of 2010 resulting from better rates achieved from banks on conversion of the PGK sales revenue into USD for repayment of our crude purchase working capital facility. InterOil closed the first quarter of 2011 with cash, cash equivalents and cash restricted totaling $274.5 million.
Teva Pharmaceutical Industries Ltd. (TEVA, Financial) – Israel Based Pharmaceutical Company
Soros Fund initiated the position in Teva in the third quarter of 2010. The fund added slightly in the fourth quarter, and reduced the position by 15% in the first quarter. Soros is about breakeven with the position, according to our estimates.
Teva was the only non-financial stock bought by Bruce Berkowitz in the last quarter. He has since sold out the position. Teva is also in the portfolios of Tiger Cubs such as John Griffin’s Blueridge Capital, and Less Ainslie’s Maverick Capital. Teva is also a decent sized position of Leon Cooperman of Omega Advisors. The company generates $3 billion in free cash flow, priced at 8 times earnings and has good growth price, said Leon Cooperman.
This is what our columnist Steven Kiel wrote about Teva: “Teva finished 2010 with about $1.25 billion in cash and has the option of buying back shares. They also have plans to pursue additional acquisitions. I find it difficult to value pharmaceuticals because of the unpredictability of their coming drugs. I like that Teva has a strong pipeline, but I don’t know how you estimate revenue three to five years out when these drugs aren’t even for sale yet. That being said, you can combine predictions on their current drugs coupled with some faith in their management. As I mentioned above, I think the rosiest value is about $100. That’s if all goes according to management’s plan, which surely doesn’t take into account the revenue loss risks from Copaxone. On the other hand, even if you assumed Copaxone’s market share and revenue is cut in half, which I think is the other extreme, shares should still be north of $65. If shares are currently below $48 and the worst case scenario is a stock price of $65, you have a very comfortable margin of safety. Don’t’ forget to throw in a 1.8% dividend yield as well.”
Weatherford International (WFT, Financial) – Swiss Based Oil Equipment Company
Soros Fund started its position in WFT in the first quarter of 2009, when WFT stock price was at multi-year lows. He then traded in and out of the position during the past two years. As of 3/31/2011, he owns about 3.5 million shares at about 20% gain. WFT is about 1% of Soros Fund portfolio.
Weatherford International is one of the world's providers of equipment and services used for the drilling, completion and production of oil and natural gas wells. Weatherford Intl. Ltd. has a market cap of $14.34 billion; its shares were traded at around $19.32 with a P/E ratio of 32.2 and P/S ratio of 1.4. Weatherford Intl. Ltd. had an annual average earnings growth of 11.9% over the past 10 years.
Consolidated revenues of Weatherford increased $525 million, or 23%, in the first quarter of 2011 as compared to the first quarter of 2010. This increase outpaced the 21% increase in average rig count over the comparable period. North America revenue increased $472 million, or 53%, in the first quarter of 2011 compared to the same quarter of the prior year. International revenues increased $53 million, or 4%, in the first quarter of 2011 as compared to the first quarter of 2010.
WFT is also in the portfolio of oilman T. Boone Pickens. He started the position in 2009, and has been adding to the positions.
PetroBras (PBR, Financial) – Brazil Based Oil Company
Soros Fund owns 1.1 million shares of Brazil based oil company PetroBras, which is about 0.5% of his portfolio. Soros bought into PBR in the second quarter of 2008, when the oil price was at its highest. As the price crashed, he bought more PetroBras shares at much lower lost. PetroBras became his largest position by the first quarter of 2009. He then gradually reduced the position as the stock price climbed, and sold out in the first quarter of 2010. He bought in the position again in the fourth quarter of 2010.
Petrobras has an ambition to grow into one of the top five integrated oil companies in the world. It already produces nearly two million barrels per day and boasts more than 11 billion barrels of reserves after making some of the largest finds in the world off the Brazilian coast. The government has also granted the company exploration rights in regions that could have billions more in reserves.
The current P/E ratio of 8 is in the ball park of all other oil giants like EXXON Mobil (XOM), and Chevron (CVX). But the price/book ratio of PBR is much lower than the others. It is interesting that the market thinks the oil reserve of PetroBras worth less than others.
***
George Soros owns another 46 international stocks from China, Australia, and European countries. To see the complete list, go to Soros’ International Stocks. To find out more about international investing ideas, please read Where to Find Value Ideas for International Stocks.
With GuruFocus Premium Membership you can dig into the portfolios of Gurus. You can find out the most undervalued stocks, the highest yield stocks and many others about Gurus’ portfolios. If you are not a premium member, we invite you for a 7-day free trial.
