Buffett Vs. Soros: Investment Strategies

In the short run, investment success can be accomplished in a myriad of ways. Speculators and day traders often deliver extraordinary high rates of return, sometimes within a few hours. Generating a superior rate of return consistently over a further time horizon, however, requires a masterful understanding of the market mechanisms and a definitive investment strategy. Two such market players fit the bill: Warren Buffett and George Soros.

Warren Buffett
Known as "the Oracle of Omaha," Warren Buffett made his first investment at the tender age of 11. In his early 20s, the young prodigy would study at Columbia University, under the father of value investing and his personal mentor, Benjamin Graham. Graham argued that every security had an intrinsic value that was independent of its market price, instilling in Buffett the knowledge with which he would build his conglomerate empire. Shortly after graduating he formed "Buffett Partnership" and never looked back. Over time, the firm evolved into "Berkshire Hathaway," with a market capitalization over $200 billion. Each stock share is valued at near $130,000, as Buffett refuses to perform a stock split on his company's ownership shares.

Warren Buffett is a value investor. He is constantly on the lookout for investment opportunities where he can exploit price imbalances over an extended time horizon.

Buffett is an arbitrageur who is known to instruct his followers to "be fearful when others are greedy, and be greedy when others are fearful." Much of his success can be attributed to Graham's three cardinal rules: invest with a margin of safety, profit from volatility and know yourself. As such, Warren Buffett has the ability to suppress his emotion and execute these rules in the face of economic fluctuations.

Top 5 Stocks George Soros and Warren Buffett Both Own

George Soros and Warren Buffett are two of the world’s most successful investors. While Buffett holds stocks for the long term, Soros is more likely to trade in and out of positions with greater frequency.

Both of their viewpoints overlap on eight stocks. The largest positions they hold in common are: Walmart (WMT), Kraft (KFT), DirecTV (DTV), DaVita (DVA) and Johnson & Johnson (JNJ).


Walmart (WMT)
Warren Buffett owns 46,708,142 shares of WMT, valued as $3.3 billion as of June 30, 2012, which accounts for 4.4% of his equity portfolio. George Soros owns 4,831,800 shares of WMT, valued as $337 million as of June 30, 2012, which accounts for 4.9% of his equity portfolio.

Walmart Stores Inc. is the world’s largest retailer. Walmart Inc. has a market cap of $243.99 billion; its shares were traded at around $72.59 with a P/E ratio of 15.4 and P/S ratio of 0.6. The dividend yield of Walmart stocks is 2.2%. Walmart Inc. had an annual average earnings growth of 11.3% over the past 10 years. GuruFocus rated Walmart the business predictability rank of 5-star.

Walmart in its second quarter reported earnings per share increased 10.1% from the previous quarter, and revenue increased 6.4%, with its fourth consecutive quarter of positive comp sales. Net sales at Walmart International grew 6.4%. The company raised and narrowed its full-year EPS guidance to a range of $4.83 to $4.93 from its previous range of $4.72 to $4.92.

Kraft (KFT)
Warren Buffett owns 58,826,390 shares of KFT, valued as $2.3 billion as of June 30, 2012, which accounts for 3.1% of his equity portfolio. George Soros owns 361,000 shares of KFT, valued as $14 million as of June 30, 2012, which accounts for 0.2% of his equity portfolio.

Kraft Foods Inc. is the largest branded food and beverage company headquartered in the U.S. Kraft Foods Inc. has a market cap of $74.3 billion; its shares were traded at around $41.9 with a P/E ratio of 17.5 and P/S ratio of 1.4. The dividend yield of Kraft Foods Inc. stocks is 2.8%. Kraft Foods Inc. had an annual average earnings growth of 0.4% over the past 10 years.

On August 14, Kraft’s board approved the spin-off of its North American grocery business and declared a pro-rata distribution of shares of its holding company, Kraft Foods Group Inc., to Kraft Foods Inc. common stock shareholders. The spin-off will be complete on October 1. On that date, shareholders of Kraft Foods Inc. will receive one share of Kraft Foods Group common stock for every three shares of Kraft Foods Inc. common stock they hold.

Buffett sold almost 20 million shares of his Kraft stake in the second quarter, but said on Bloomberg in July that he will wait to see what each new company sells for, and will need more information to decide which he would invest in.