Some investors achieve legendary status, rising far above their peers on a combination of luck and success. Perhaps no one exemplifies this more than George Soros, the Holocaust survivor who, after the war, earned a doctorate from the London School of Economics and went into the banking industry to make his mark.
He was wildly successful. The hedge fund he founded, Soros Fund Management, earned an average annualized return of 33% from 1970 to 2020, making it the most successful hedge fund in history. Soros’s biggest single success came on September 16, 1992, when he ‘broke the Bank of England.’ He had taken a short position on the pound sterling, leveraged to $10 billion, and when the pound fell in response to changing politics, he personally made $1 billion in a single day.
Soros hasn’t always been right in his financial calls, but he’s right more often than he’s wrong. He’s also well-known for his bon mots when it comes to talking about trading. “It’s not whether you’re right or wrong,” Soros has been quoted saying, “but how much money you make when you’re right and how much you lose when you’re wrong.”
Bearing this in mind, we decided to look at Soros Fund Management's recent activity for inspiration. Running three stocks the fund picked up during Q1 through TipRanks’ database, we found out that the analyst community is also on board, as each sports a “Strong Buy” consensus rating.
Farfetch, Ltd. (FTCH)
We’ll start with an online retail stock, Farfetch, a company specializing in the sale of luxury goods and brands. Farfetch is a truly international company, founded in Portugal, headquartered in London, and boasting offices in New York and LA, Tokyo and Shanghai, and Brazil. Like many tech-oriented companies, Farfetch has been running at a loss – but in Q1 of this year, the company made an abrupt turnaround to profitability.
The 1Q21 earnings report showed an after-tax profit of $516.7 million, compared to a year-ago quarterly loss of $79.2 million. The company disclosed that this gross profit included a one-time $660 million non-cash benefit “arising from lower share price impact on items held at fair value and remeasurements.” Total revenues from operations was reported at $485 million, up 46% year-over-year, and higher than the $457 million analysts had expected. One key metric, the gross merchandise value of orders processed over the company’s platform, rose 49% year-over-year, to $915.6 million.
Farfetch’s success grows from a strong user base. The company boasts more than 3 million active customers, and operations in 190 countries. Sellers on the platform have made available over 1,300 luxury brands. Even after a pullback in share value during the first half of 2021, the stock is still up an impressive 234% in the last 12 months.
Among FTCH's fans is Soros. In his most recent disclosure, Soros revealed that his fund purchased 125,000 shares of FTCH, a holding now valued more than $5.5 million.
Turning to the analyst community, Credit Suisse's 5-star analyst Stephen Ju rates FTCH an Outperform (i.e. Buy) along with a $78 price target. Investors stand to pocket ~88% gain should the analyst's thesis play out. (To watch Ju’s track record, click here)
“We have a favorable view toward the company maintaining the adjusted EBITDA guidance as Farfetch will reinvest the higher top line contributions toward customer acquisition – supporting long term adoption rates. We model ~700k new customers for 2021, ~600k for 2022 and beginning in 2023 our expectations are also unchanged at ~1.2 million to 1.5 million,” Ju opined.
The analyst summed up, "Our investment thesis points remain: 1) large $300 billion addressable market remains fragmented and underpenetrated, 2) relative protection from competition from larger cap online competitors, 3) exposure to rising adoption of luxury goods in APAC as well as emerging markets."
Most analysts back Ju's confident take on the online fashion firm, as TipRanks analytics showcase FTCH as a Strong Buy. Based on 8 analysts polled in the last 3 months, 6 rate the stock a Buy, while 2 give it a Hold. The 12-month average price target stands at $60.63, marking ~37% upside from current levels. (See FTCH stock analysis on TipRanks)
The next stock we’re looking at, Coursera, is a MOOC company – a massive open online course provider. This niche leverages the size and reach of the internet to make a wide range of top-line university courses available to the masses.
Coursera is a leader in the field, and since its founding in 2012 it has made available more than 4,000 courses from over 200 universities, in more than 30 degree programs, and at lower cost than in-person classes. Through Coursera, students can take classes at such top-level schools as Imperial College London, University of Illinois Urbana-Champaign, University of Michigan, and Johns Hopkins. The company boasts that over 77 million students have used its services.
While the company is 9 years old, it is new to the public markets; Coursera held its IPO at the end of March this year. It made 15.73 million shares available on the NYSE, at an opening price of $33. This was the high end of the initial pricing range, which has been set between $30 and $33. Overall, the IPO raised $519 million, before expenses.
At the beginning of May, Coursera released its first quarterly report since going public. The report showed $88.4 million in total revenue, a 64% gain year-over-year. The company’s gross profit, at $49.5 million, was up 71% from the year-ago quarter.
George Soros saw an opportunity in this IPO, and his fund picked up 105,000 shares of the company. This new position is valued at ~$4 million at current share prices.
Among the bulls is 5-star analyst Ryan MacDonald, of Needham, who lays out a clear, upbeat case for Coursera shares.
“Given the increasing role of automation, the widening skills gap, and the shift to online learning, we believe Coursera's comprehensive platform will help it gain share in a large TAM that we size between $47B-$50.6B. While the COVID-driven tailwind to registered learner growth in FY20 creates a difficult consumer segment comp in FY21, we believe Coursera's efficient GTM motion and shift towards higher value enterprise and degrees offerings can drive durable 25%+ growth and gross margin expansion,” MacDonald noted.
To this end, MacDonald rates COUR shares a Buy and his $56 price target indicates confidence in a 47% upside over the next 12 months. (To watch MacDonald’s track record, click here)
In its short time on the stock exchange, COUR has picked up 14 analyst reviews, with a breakdown of 12 Buys to 2 Holds to back the Strong Buy consensus rating. Shares are trading for $38 and their $54.67 average price target implies a one-year upside of 44%. (See COUR stock analysis on TipRanks)
Sotera Health (SHC)
Last up on our list of new positions from George Soros is Sotera Health, a holding company whose subsidiaries offer a range of advisory services, lab testing, and sterilization services in the healthcare industry. Sotera’s businesses cate to more than 5,800 health industry customers in over 50 countries. The company boasts 13 labs capable of carrying out more than 800 tests, and 50 sterilization facilities. Sotera’s customer base includes 75 of the top 100 medical device makers and 8 of the top 10 pharmaceutical companies.
SHC shares went public on November 24 of last year, in an IPO that sold 53.6 million shares and raised $1.2 billion. The capital raised was used to pay down existing debt. The company has been working assiduously to bring down debt levels, and in the 1Q21 report stated that it had a total debt of $1.87 billion and available cash of $108 million.
Net revenue in Q1 was $212 million, up 13% from the year before. Net income showed a strong gain, turning around from a 1-cent per share loss a year ago to a 4 cent EPS profit.
In Q1, Soros took a new position in Sotera, buying 179,274 shares in the stock. At current share prices, this holding is worth over $4.3 million.
Tycho Peterson, 5-star analyst with JPMorgan, likes SHC, and rates the stock an Overweight (i.e. Buy). His price target of $35 suggests an upside of 45% from current trading levels. (To watch Peterson’s track record, click here)
Backing his stance, Peterson writes, “1Q results were generally strong, and although guidance remains unchanged, it should provide a pathway to upside for the balance of 2021, as we continue to be fans of the company’s diversified operating platform, sticky multi-year contracts, an efficient pricing strategy and high regulatory oversight, altogether supporting its wide competitive moat, with FCF to support de-leveraging…”
Overall, the Street in unanimous in its outlook on Sotera shares; the stock has 8 recent positive reviews supporting its Strong Buy analyst consensus rating. The shares are trading for $24.06 and their average price target of $31.75 implies a one-year upside of ~32%. (See SHC stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.