Will Soros’s focus on health and finance pay off?

Investment legend George Soros (pictured above) has gone big on health and finance in the September quarter.

The latest 13F filing to the US Securities and Exchange Commission by his company, Soros Fund Management, revealed that it has taken new positions in medical technology firm Hill-Rom [HRC], online financial services firm SoFi Technologies [SOFI], semiconductor maker Taiwan Semiconductor Manufacturing Company [TSM] and US banks JP Morgan [JPM] and Goldman Sachs [GS].

It also increased stakes in information provider IHS Markit [INFO]. Its exits included lift maker Otis Worldwide Corporation [OTIS], Twitter [TWTR], UiPath [PATH], and Zillow [Z]. It also pared back its stake in electric vehicle battery startup QuantumScape Corporation [QS].

 

The winners

Hill-Rom — Its share price soared by 36% between mid-July and 24 November. In its recent Q4 figures, it reported earnings of $0.80 per diluted share, up 27% compared to the same period last year. Its revenues came in at $798m, up 13% year-over-year.

The company has seen strong demand for its care team communications technology, cardiac monitoring devices and respiratory devices during the COVID-19 pandemic. Its flexible operating tables and smart beds, which can prevent patient injury and detect real-time problems such as incontinence or faster heart rate, have also performed well.

This beat is likely to continue in the years ahead with, reports Fortune Business Insights, the global medical devices industry set to reach a £440.5bn valuation by 2025, at a compound annual growth rate of 5.4%.

It’s a sector also ripe for consolidation as well as growth. Hill-Rom announced on 2 September that it had been bought by healthcare group Baxter International [BAX] for $156 per share in cash.

SoFi Technologies — Its share price has climbed around 33% from mid-August to the close on 24 November. The group, which began life as a student loan lender in 2011 — but now via its mobile app offers banking, personal loans, mortgages and investing — recently posted a 96% year-over-year growth in members to 2.9 million in its Q3 report. It also recorded a 35% rise in net revenues to $272m.

 

Its numbers have been hit by the student loan payment freeze during the pandemic, but this arrangement is set to end in January next year. Morgan Stanley said this will help SoFi’s student loan refinance business surge, with a 70% increase in originations in 2022. It also expects member numbers to hit 5.3 million over the next two years.

According to Market Screener, eight analysts have a consensus buy rating on the stock and an average target price of $25.71.

 

The losers

QuantumScape Corporation — Shares in QuantumScape reversed 75% between late December 2020 and the end of October this year. US president Joe Biden’s $1.2trn infrastructure bill, which includes billions of dollars set aside for building a nationwide network of charging stations, helped it regain some juice, rising 11.3% from the end of October to date. However, analysts, although excited by Quantum’s solid-state EV batteries which promise longer ranges, are running out of patience.

There are concerns that demand for the group’s technology is already priced into the stock, with additional fears about the long path towards commercialisation. The stock also recently suffered a downgrade from Morgan Stanley’s Adam Jonas, who cut it from buy to hold. He was mainly worried that, as reported by Yahoo Finance, “by the time this company brings its batteries to market, advancements in battery technology will make its offerings not as cutting edge as they are today”.

“by the  time this company brings its batteries to market, advancements in battery technology will make its offerings not as cutting edge as they are today” - Morgan Stanley's Adam Jonas, cutting his rating from Buy to Hold

 

According to Market Screener, the analyst consensus for the stock is a ‘hold’, with an average target price of $31.60.

Otis Worldwide — Its share price has reached another level this year, shuttling 36% higher between the middle of February and 24 November. It has been helped by strong figures, such as a 10.8% rise in Q3 net sales of $3.6bn. It expects full-year sales for 2021 to be up by around 12.3% to $14.3bn.

Analysts are bullish holding, according to Market Screener, an outperform rating and a $91.18 target price. That compares with $84.46 at the close on 24 November. Perhaps Soros has decided now is the time to get off and take some profit.

Twitter — Its share price fell by almost 34% between 23 July and 24 November. In its third quarter, it reported a 37% increase in revenues to $1.28bn, but a net loss of $537m. This followed an $809.5m settlement on allegations that it had misled investors about user growth.

UiPath — Shares in the automation software provider have dropped 38% since the end of May on valuation concerns.

Zillow — Shares in the online real estate group have plunged around 72% since mid-February. It has been hit by its decision to close its iBuying unit because, according to analysts, two-thirds of the houses it had bought to flip (sell quickly) had reduced in value.