George Soros (Trades, Portfolio), known for the unmatched success of his Quantum Fund, focuses on the theory of “reflexivity,” which is based on the premise that individual investor biases affect market transactions and the economy. The Hungarian hedge-fund investor added two technology positions during the first quarter: Lam Research Corp. (LRCX, Financial) and Snap Inc. (SNAP, Financial). Soros also eliminated his stakes in Amazon.com Inc. (AMZN, Financial) and Kohl’s Corp. (KSS, Financial).
Lam Research
Soros invested in 560,753 shares of Lam Research for an average price of $117.55. The guru increased his portfolio 2.02% with this transaction.
Lam Research, a California-based semiconductor equipment company, has a profitability rank of 8, suggesting good growth potential. The company’s profit margins are near a 10-year high and outperform over 87% of competitors.
Lam Research reported solid first-quarter results, with shipments, total revenues and diluted earnings outperforming prior-quarter values by 25%, 14% and 71% respectively. CEO Martin Anstice praised the company’s “broad competitive strength, with products and services increasingly enabling the success of [Lam Research’s] customers.” The company’s Piotroski F-score ranks a strong 7 out of 9, driven by consistent year-over-year gross margin growth since September 2015.
Snap
Soros added 1.65 million shares of Snap, the producer of one of the most popular social networking apps, Snapchat. The company’s share price averaged $22.16 during the quarter.
Snap reported a net loss of approximately $2.2 billion, driven by high research and development (R&D) and sales, general and administrative (SGA) expenses compared to respective values from first-quarter 2016. Despite this, the company increased its daily active users about 36% year over year and about 5.06% from the prior quarter. Net additional users for first-quarter 2017 increased 8 million, or 54%, from the prior quarter, driven by higher customer growth in Europe and North America.
Amazon.com
Soros closed his position in online retail giant Amazon. While the company’s share price averaged $833.50 during the quarter, Amazon trades at $967.61 as of May 16.
The online retailer has a profitability rank of 8 and a business predictability rank of 4.5 stars, suggesting good growth potential. Amazon has a Piotroski F-score of 7, driven by increasing gross margins, lower debt-to-asset ratios and higher asset turnover throughout the past six quarters.
Although the company has high profitability, Amazon.com is significantly overvalued. The company’s price-sales ratio of 3.31 is near a 10-year high and ranks lower than 88% than global competitors.
Kohl’s
Soros axed his stake in Kohl’s, selling 600,819 shares for an average price of $40.82.
As discussed in a previous article, Kohl’s reported a 3.2% year-over-year decline in company sales from April 2016 to April 2017. Like other brick-and-mortar stores, like Macy’s Inc. (M, Financial) and Sears Holdings Inc. (SHLD, Financial), Kohl’s is losing competitive power to off-price stores like Ross Stores Inc. (ROST, Financial) and TJX Companies Inc. (TJX, Financial). The company’s operating margin, which declined 9.70% per year on average over the past five years, is currently near a 10-year low of 6.33%.
Disclosure: No positions in the stocks mentioned.
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