3 Stock Moves George Soros Made: Should You Follow?

Every quarter, large money-managers have to disclose what they've bought and sold via "13F" filings. While Fools don't always (or even usually) follow what the big money does, we can often glean an idea or two by tracing their footsteps.

At 83, George Soros is still going strong. Source: Niccolò Caranti

George Soros, "the man that broke the Bank of England," has had one of the longest and best track records of any big name investor of the past half-century. Founded in 1969, Soros Fund Management averaged a whopping 20% annual rate of return from the time of its founding in 1969 to its closing to outside investors in 2011. With a current net worth of $27 billion, the 83 year-old Soros is still active in investing and philanthropy, having given away more than $8 billion over his lifetime. 

According to the most recent 13F, three interesting trades his fund made last quarter were buying shares of tech titan Intel  and oilfield services behemoth (and occasional public enemy #1) Halliburton , while selling a big chunk of his shares in struggling retailer J.C. Penney . What can we learn from this living legend's moves? Let's take a closer look.


Moving on from Penney too early, or too late?
Penney's struggles over the past year have led to many (myself included) calling for investors to flee. Soros sold some 6 million shares last quarter -- nearly one-third of his holdings in the company. Considering that Soros' position was opened in the second quarter last year, he moved quickly to reduce his risk. Penney shares fell 38% over Soros' holding period:

JCP Chart

JCP data by YCharts

The thing is, Penney's just-announced earnings show a glimmer of hope, with the company reporting positive free cash flow for the full quarter for the first time in more than two years. I can't stress enough how important this one metric is to Penney's future. As I've written in the past, its relationship with suppliers -- which supply much of Penney's inventory on credit -- would be in serious jeopardy without sufficient liquidity. 

Nonetheless, even this positive from the most recent quarter -- and what will probably be a decent run for the stock in the next few days -- doesn't hide the fact that sales are still more than 20% down from two years ago. It's one thing to be cash-flow positive in one quarter, and the biggest quarter of the year, at that, but it's not a guarantee of a return to growth, or even a promise of a full recovery, much less decent long-term returns for investors. 

Strange bedfellows?
Considering that Soros once said it was "the central focus of my life" to unseat George W. Bush from the presidency, finding $280 million worth of a company once led by former Vice President Dick Cheney in Soros' portfolio may be a bit of a surprise. But considering that Cheney left the company more than 14 years ago, and that Halliburton is a central company to the production of oil and natural gas all over the globe, it shouldn't be a shocker to see a canny investor like Soros adding another 2.6 million shares to the 2 million already held. 

Halliburton's leadership has made a commitment to return capital to shareholders. Last year alone, the company bought back some $4 billion in shares -- roughly 9% of shares outstanding -- while also increasing the dividend twice:

HAL Dividend Chart

HAL Dividend data by YCharts

These two actions, if repeated, as management indicates is the hope, offer strong potential for per-share growth, even if the business' growth remains relatively muted. From CEO Dave Lesar:

During 2013, we demonstrated our strong commitment to delivering superior shareholder returns. We repurchased approximately $4.4 billion, or 10%, of our outstanding shares of common stock. We also increased our dividend twice during the year for a total payout increase of 67% over the quarterly dividend rate in 2012. These actions reflect our continued confidence in the strength of our global business outlook.

In the U.S., both onshore and offshore drilling is expected to increase in 2014, and global energy demand is only set to increase as the world's middle class expands by several hundred million people over the next decade. Sounds like better than just muted prospects. 

Tech titan also returning value
Intel is similarly returning excess capital to investors:

INTC Dividend Chart

INTC Dividend data by YCharts

Since 2010, Intel has reduced shares outstanding by 10%, and also increased its dividend multiple times. The company does face some challenges, as is well known: Consumers are moving away from traditional PCs -- where Intel is the undisputed champ -- and toward mobile devices, where the company has just begun to gain some traction. However, Intel continues to invest heavily into R&D, and in the interim its fortress-like server business is still growing. This is a best-in-class business. 

And much like Halliburton, if management keeps returning cash to shareholders, and buying back shares, even slow total growth won't hurt investors, because per-share growth will still remain strong. 

Final thoughts: Don't follow blindly
Just as this article shouldn't be your sole reasoning for an investing decision, don't blindly follow Soros -- or any other investor -- into or out of any stock. All three of these companies feature risks to their business, as well as potential for upside. A good starting point is looking at what the best are doing, but that's not the place to finish. 

How would these companies fit in your portfolio? That's up to you to figure out.

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The article 3 Stock Moves George Soros Made: Should You Follow? originally appeared on Fool.com.

Jason Hall owns shares of Intel. The Motley Fool recommends Halliburton and Intel and owns shares of Intel. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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billgwatters

Intel burns tons of capital in stock buy backs in its' spasmodic and flailing attempts to project growth and profit. Truly pathetic.

April 18 2014 at 1:24 AM Report abuse rate up rate down Reply
billgwatters

Intel is spending millions to beef up their stock price with low volume buy backs prior to reporting a badly missed quarter. Their advances are the same old story of supposition and unrealistic expectation. They have "restructured" their financial reporting process to further buffer a failing business strategy. Look for intc to drop substantially by late spring.

April 08 2014 at 11:03 AM Report abuse rate up rate down Reply
billgwatters

How much does Intel pay for analyst upgrades ? They are in the process of jacking up INTC to around $27 so that when they report a significant miss this month their price will fall no lower than $25. For all the high powered indeciperable blah, blah, blah analysts and investors generally are quite gullible and naive. The PC market is already dead and you cannot bring the dead back to life. Their is no sustainable evidence to suggest otherwise.

April 07 2014 at 12:13 PM Report abuse rate up rate down Reply
billgwatters

Everyone hates a cheater. The problem with Intel's billions is that they are able to purchase public impression.
Intel is on the verge of reporting a terrible quarter. They typically spend billions in stock buy backs and proprietary analysts to jack up the price of their stock a couple of points prior to a crash caused by poor quarterly performance.
The question that should be answered is: will "The Street" and or "Motley Fool" be willing to be pounded by the poor suckers who listened to them and purchased Intel stock when performance over the last 10 years has really sucked. These guys (and gals) have their ( u know whats) stretched so far over the chopping block that they are willing to say anything to day trade a few bucks. They are the real idiots who mortgaged their children buy long on Intel years ago because they also believed some well paid analyst. Sit tight until the smoke and mirrors fizzle out after Intel's next quarterly report. INTC price target should be around $19

April 03 2014 at 1:33 PM Report abuse rate up rate down Reply
The Raymonds

Don't bother clicking on to these sites. All they want to do is sell you something that you will never use.

March 12 2014 at 11:25 AM Report abuse rate up rate down Reply