Soros Fund Management LLC recently disclosed its portfolio updates for the fourth quarter of 2020, which ended on Dec. 31.
Founded by George Soros (Trades, Portfolio) in 1969, Soros Fund Management is the primary advisor for the Quantum Group of Funds. After helping define the modern hedge fund, the firm converted to a family office in 2011, becoming closed to outside investors and avoiding new regulatory oversight. Soros' investing principles are based on his theory of "reflexivity," which holds that individual investor biases affect both market transactions and the economy. This results in chaotic financial markets and the mispricing of assets, providing value opportunities for the careful investor.
Based on its investing criteria, the firm's top stock buys for the quarter were QuantumScape Corp. (QS, Financial) and the BTC iShares MSCI Emerging Markets ETF (EEM, Financial), while its most notable sells were DraftKings Inc. (DKNG, Financial) and The Hain Celestial Group Inc. (HAIN, Financial).
QuantumScape
The firm established a new holding of 3,315,063 shares in QuantumScape (QS, Financial), impacting the equity portfolio by 6.03%. During the quarter, shares traded for an average price of $72.07.
QuantumScape is a leading developer and producer of solid-state lithium-metal batteries for the electric vehicle market, and it currently has the only such battery with automotive original equipment manufacturer validation in the U.S. It is headquartered in San Jose, California.
On Feb. 23, shares of QuantumScape traded around $55.46 for a market cap of $20.19 billion. Since it was taken public by a special purpose acquisition company at the end of November 2020, the stock price has gained 49%.
The company will file its first-ever official earnings report with the Securities and Exchange Commission as a publicly traded company following the first quarter of 2021. In its last shareholder letter as a private company for the fourth quarter of 2020, the company reported a net loss per share of $2.41 and a liquidity position of over $1 billion following the $730 million proceeds from its public debut and the $388 million brought in by its own Series F Convertible Preferred Stock Tranche liability offerings.
BTC iShares MSCI Emerging Markets ETF
The firm also took up a 2,512,200-share stake in the BTC iShares MSCI Emerging Markets ETF (EEM, Financial), which had a 2.80% impact on the equity portfolio. Shares traded for an average price of $47.75 during the quarter.
The BTC iShares MSCI Emerging Markets ETF is an exchange-traded fund run by Blackrock Inc. (BLK) that seeks to track an index of large- and mid-cap equities from emerging markets. As of Dec. 1, it had 1,220 holdings.
On Feb. 23, shares of the ETF traded around $56.09 for a market cap of $30.64 billion. The ETF has gained 35% over the past 12 months.
DraftKings
The firm sold out of its 2,363,380-share investment in DraftKings (DKNG, Financial), impacting the equity portfolio by -3.85%. During the quarter, shares traded for an average price of $47.39.
Based in Boston, DraftKings is an online gaming company that develops and operates applications for sports betting and fantasy sports contests in the U.S.
On Feb. 23, shares of DraftKings traded around $60.27 for a market cap of $23.61 billion. The stock has gained 208% since it went public in April of 2020.
The company has a financial strength rating of 8 out of 10. Following its initial public offering, the company had no debt, having successfully paid off what it owed as of the end of 2019. The operating margin of -148.52% and net margin of -147.94% indicate the company is not yet profitable.
The Hain Celestial Group
The firm reduced its stake in Hain Celestial Group (HAIN, Financial) by 2,316,574 shares, or 52.75%, for a remaining holding of 2,075,179 shares. The trade had a -2.20% impact on the equity portfolio. Shares traded for an average price of $36.38 during the quarter.
Hain Celestial is a food and personal care products company based in Lake Success, New York. Its focus is on "a healthier way of life" and its brand names include Terra, Celestial Seasonings, Earth's Best, Jason and Alba Botanica.
On Feb. 23, shares of Hain Celestial traded around $42.01 for a market cap of $4.20 billion. According to the GuruFocus Value chart, the stock is significantly overvalued.
The company has a financial strength rating of 6 out of 10 and a profitability rating of 6 out of 10. The Piotroski F-Score of 7 out of 9 and Altman Z-Score of 4.73 indicate the company has a healthy financial situation. The return on invested capital surpassed the weighted average cost of capital for the most recent full fiscal year, indicating a turn to profitability.
Portfolio overview
At the end of the quarter, Soros Fund Management held shares of 104 stocks in an equity portfolio valued at $4.64 billion. The firm established 38 new positions, sold out of 33 stocks and added to or reduced several other positions for a turnover of 22%.
The top holdings were Liberty Broadband Corp. (LBRDK, Financial) with 18.03% of the equity portfolio, Palantir Technologies Inc. (PLTR, Financial) with 9.37% and the PowerShares QQQ Trust Ser 1 ETF (QQQ, Financial) with 7.63%. In terms of sector weighting, the firm was most invested in communication services, consumer cyclical and technology.
Disclosure: Author owns no shares in any of the stocks mentioned. The mention of stocks in this article does not at any point constitute an investment recommendation. Portfolio updates reflect only common stock positions as per the regulatory filings for the quarter in question and may not include changes made after the quarter ended.
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