Soros makes major changes to hedge fund

The famed investor turned his portfolio inside out in the second quarter, with big buys and even bigger sells.

By TheStreet Staff Aug 16, 2011 10:51AM

By Frank Byrt, TheStreet


Legendary investor George Soros, 81, had a wild second quarter as his $5.6 billion hedge fund added 198 stocks and sold 348 in what turned out to be a wholesale reshuffling of his portfolio.


A few of the largest acquisitions for Soros Fund Management were Golar LNG Partners (GLNG), which operates a fleet of liquid-natural-gas carriers; computer giant International Business Machines (IBM); Semiconductor HOLDRs (SMH), an exchange-traded fund that invests in semiconductor makers; VMware (VMW), a provider of virtualization software for cloud-computing systems; and SandRidge Energy (SD), an oil and natural-gas company.


The fund closed out of its positions in Internet search engine Google (GOOG), at $68 million; luxury-goods maker Coach (COH), a $46 million position; gold miner Novagold Resources (NG), which was a $45 million stake; Power-One (PWER), a maker of power-conversion and power-management products, in what had been a $25 million stake; and a $25 million position in Tenet Healthcare (THC), an owner and operator of health care facilities. Those are just a few of the largest sell-offs.


The fund beefed up sector weightings in information technology by 5.5% and consumer discretionary by 4.2% and cut financials by 4.9%, including trimming its stakes in Citigroup (C) and Wells Fargo (WFC). Soros also cut back on a long-term favorite, the agricultural giant Monsanto (MON), as it reduced its stake by 2.6 million shares. That holding is now valued at $5.8 million.


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Some of the biggest additions to existing positions in the quarter was a doubling of shares of clothier Polo Ralph Lauren (RL), an increase to a $132 million stake, making it the fourth-largest holding, and a 16% increase in the shares of Motorola Solutions (MSI), which sells communications equipment, building its position to $261 million. It's now the fund's second-largest holding.


Adecoagro SA (AGRO) remains the fund's biggest holding with a value of $295 million at June 30, making up 5.4% of the portfolio. Adecoagro is an agricultural company in South America, with operations in Argentina, Brazil and Uruguay. Two weeks ago, it was reported that the funds managed by Soros had underperformed the market this year and last, losing 6% so far this year and rising only 2.5% last year.


In July, Soros, who is considered the originator of the hedge fund, stunned the industry by saying he will no longer manage outside investors' money. The firm will return less than $1 billion to investors and manage the remaining $24.5 billion.


Hedge funds that manage more than $100 million are required to disclose their equity holdings, options and convertible debt on a Form 13F filed to the Securities and Exchange Commission within 45 days of the end of a quarter. Funds aren't required to report short positions betting on declines.


Here are five additions to Soros Fund Management in the second quarter:


The fund initiated a $35 million stake in Golar LNG Partners (GLNG), which operates a fleet of liquid-natural-gas carriers. The company has pioneered a process for retrofitting LNG vessels into floating storage and regasification units that serve as offshore terminals.


Semiconductor HOLDRs (SMH) is an exchange-traded fund that invests in 18 semiconductor makers. The fund bought $20 million of its shares in the quarter. Morningstar analysts call it a "popular way for investors to get exposure to the semiconductor industry, and it does so at a relatively low cost. (It is) a concentrated, subsector-specific exchange traded fund should be treated as a complementary satellite holding to a diversified portfolio."


VMware (VMW) is a provider of virtualization software for server-operating systems. The fund bought $15 million of its shares. Last month, it reported that early-license renewals from major customers and demand for add-on products nearly tripled its second-quarter earnings. It posted a profit of $220 million, or 51 cents a share. Computer-data-storage vendor EMC Corp. (EMC) has majority control of VMware. The company is active in the fast-growing cloud-computing sector.

Soros bought a $15 million stake in SandRidge Energy (SD), an oil and natural-gas company. SandRidge also owns an oil-field-services business, a gas-marketing business, and various gas-gathering and treating facilities. Its exploration efforts are in the Permian Basin and mid-continent region of the central U.S.


Motorola Solutions (MSI) gets more than half its revenue from its public-safety business, which sells two-way radios to government agencies. The remainder comes from business sales of hand-held scanners, tablets and similar products that enable customers to manage inventories and supply chains.



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