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George Soros may be a lightning rod for political controversy, but everyone can agree that he’s a market and financial genius. He ran a hedge fund that maintained 33% annualized returns for over 30 years, and in 1992 he scored a $1 billion profit in just 24 hours with his famous short call against the Pound sterling.
He also has a knack for spotting future events in current trends. In recent years, Soros has made public predictions on the move to regulate internet giants Facebook and Google as public utilities, on the ‘bubble’ nature of cryptocurrency, and on the Democrats’ off-year victory in the 2018 elections. He has been right more often than he has been wrong – although the jury is still out on his pronouncement that Europe will spark the next economic downturn.
And for all of that, Soros eschews excitement. He has said, “If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing in boring.” The reason, of course, is that good investing in based on finding profitable returns and reliable dividends – and those stock are usually just plain staid. Soros has a positive genius for finding them, and reaping their gains.
Looking into Soros' basket of stocks, we’ve chosen three of the fund’s new holdings that TipRanks’ Stock Screener reveals as “strong buys.” Let’s take a closer look and see what Wall Street analysts have to say.
Activision Blizzard (ATVI)
We’ll start in the gaming segment of the entertainment sector, where Activision Blizzard is a major name. The California-based company owns a wide range of popular gaming titles, including ‘Call of Duty,’ ‘Guitar Hero,’ ‘World of Warcraft,’ and ‘Candy Crush.’ By market cap, at $48 billion, Activision is the largest game company in the American and European markets.
During the fourth quarter, Soros’ fund opened a new position in ATVI, purchasing 758,000 shares, which were worth over $45 million at the end of Q4.
Wall Street is also bullish on ATVI. Weighing in from Wedbush, analyst Michael Pachter put the stock on his firm’s Best Ideas list. In his note, Pachter wrote, “The cupboard at Activision is full, and we see great potential for the company’s release pipeline over the next three years… we expect tech giants Amazon and Google to compete aggressively with Sony and Microsoft to roll out cloud-based game streaming initiatives; this could have the double-edged benefit of expanding the market for games dramatically and of increasing competition for titles, which should benefit Activision’s margins over the medium term.”
Pachter backs his optimism with a Buy rating and a $76 price target, implying room for 24% growth on the upside. (To watch Pachter’s track record, click here)
5-star analyst Laura Martin, of Needham, agrees that ATVI has a clear path ahead. She writes, “What we like most about ATVI’s strategic position is that it owns all if its IP and manages large, global, super-fan communities. Additionally, it has diverse revenue streams with big moats based on hit franchises. Also, its outstanding shooter games attract global audiences, which maximizes revenue. Finally, we like ATVI’s focus on creating eSports competitions around its games, including the Overwatch League and Call of Duty League, as it attracts sponsorship revenue which represents a new source of revenue…”
Martin puts a $75 price target on ATVI, indicating her confidence in 20% growth, along with a Buy rating. (To watch Martin’s track record, click here)
Overall, ATVI’s Strong Buy consensus rating is based on 20 recent analyst reviews, including 16 Buys versus only 4 Holds. The stock is selling for $61.82 now; the average price target of $68.26 suggests a modest upside of 10.5%. (See Activision’s stock analysis at TipRanks)
Pioneer Natural Resources (PXD)
The next Soros acquisition we’re looking at comes from the energy industry. Pioneer is a Texas oil company operating in the Permian Basin in the western part of the state. The Permian has powered the oil boom in Texas over the last decade, and become one of the world’s largest oilfields. Pioneer’s share is significant – the company has over 1 billion barrels of proven recoverable reserves. Pioneer’s reserves are split three ways, with 53% being oil and the remainder a combination of natural gas and natural gas liquids.
Shares in PXD slipped in 2019, and are down so far this year, too, as low oil prices are putting headwinds on the industry. The Soros fund took advantage of the falling share price and picked up 75,000 shares of PXD in Q4. That stake was worth $11.353 million at year’s end.
The company is compensating for the lower market price of oil by raising production; in Q4, output reached 364,400 barrels per day, compared to 351,000 in Q3. At the same time, and reflecting the softness in prices, Q4 revenue was down 1.3% year-over-year, with the top line reported at $2.64 billion.
In better news, revenues were higher than expected, and beat the forecast by 6%. EPS was strong, too, and at $2.36 was significantly higher than the $2.12 expected. Quarterly earnings were double the year-ago figure.
Ryan Todd, writing from Piper Sandler, likes this stock, saying, “PXD delivered a substantial 4Q FCF beat driven by both operational execution and cost management. And with a FY20 outlook likely to be received as a relative ‘winner’ vs. those disclosed by peers thus far, we expect the shares to outperform the group…”
Todd gives PXD shares a Buy rating with a $205 price target. His target implies a robust upside of 49% for the stock. (To watch Todd’s track record, click here)
Jeanine Wai, of Barclays, also takes a bullish stance on PXD. She says the stock “checks all the boxes,” citing increased production and a well-engineered mix of drilling wells as reasons for optimism. She particularly likes the dividend, saying, “…management continues to enhance shareholder return, which the sector undoubtedly needs more of to attract investors.”
Wai’s Buy rating is supported by a $204 price target, indicative of a 50% upside. (To watch Wai’s track record, click here)
Pioneer has 8 Buy ratings and 2 Holds, overall, making this stock a Strong Buy on the analyst consensus. Shares sell for $134, and the average price target of $182.22 suggest that PXD has room for 36% upside growth. (See Pioneer stock analysis at TipRanks)
BellRing Brands, Inc. (BRBR)
Our third stock on the list is a new one – literally. BellRing started trading publicly last October, after it spun off of parent company Post. Chances are, you’ll recognize Post from its breakfast cereals – which include popular offerings such as Grape-Nuts, Raisin Bran, and Shredded Wheat. BellRing, now as an independent entity, encompasses Post’s active nutrition brands – a variety of protein shakes, powders, and bars. PowerBar is the most widely known of the new company’s brands.
So, BRBR is an interesting stock. It’s made a strong start in the markets, and has a successful niche product line. These are likely the factors behind Soros’ purchase of 300,000 shares. At the end of Q4, the quarter of purchase, those shares were worth $6.387 million.
The company reported fiscal Q4 earnings back in November, and showed revenue at $214.5 million, in line with the forecast. Net earnings were $26.7 million, up 1.1% from the previous year, when the company was a division f Post. In fiscal Q1, reported earlier this month, revenues rose to $244 million, with a gross profit of $91.3 million.
As a new stock, without much history, investors have to look to the product offerings for clues to future performance. And here, BellRing has a strong portfolio. The company’s ‘Premier Protein’ shakes increased sales by 45% in Q4, while the company is optimizing its ‘PowerBar’ offerings in North America to focus on the most successful flavors.
Jefferies analyst Robert Dickerson writes of BRBR, “We still foresee higher FY’20 EBTIDA relative to guidance. Given the strong Q1 start to the year, we’ve increased our EBITDA forecast to $209mm… BellRing should still grow revenues ~20% this year and EBITDA results can likely top guidance, all while the company remains well positioned in the fast-growth convenient nutrition category.”
Dickerson starts his coverage here with a Buy rating and a $27 price target, suggestive of a 27% upside potential. (To watch Dickerson’s track record, click here)
BellRing has attracted no fewer than 8 reviews in recent weeks – nothing gets attention on Wall Street like success. The Strong Buy consensus rating is based on 7 Buys and a single Hold. The average price target of $25.14 implies an upside potential of nearly 19% from the share price of $21.17. (See BellRing stock analysis at TipRanks)