Thursday, August 29, 2013

KEY LESSON: How George Soros Trades Stocks

William Meade is the President of Pure Alpha Research, he writes:
George Soros, one the greatest Hedge Fund Managers of our time, trades stocks very different than a mutual fund or hedge fund manager might today. Soros was trained in economics at the London School of Economics. His view on stocks is driven by his macro view. He is less interested in what a company does or anything about its financials or fundamentals.

Soros trades stocks in sectors he expects to perform within his macro view. When he likes a sector he usually purchases 2 stocks from it: First, the market leader usually the Largest Market Cap Company and the second stock he usually purchases is the cheapest, lowest priced stock in the sector. He does this because he believes that if the sector takes off, the cheapest most speculative stock will double or triple while the industry leading stock will just slowly go up over time.
I believe this is pretty accurate. I have been following Soros a long-time and Meade sums it up pretty well. Soros, for the most part, makes macro trades. Though, he does get a helping hand by sometimes getting the inside word on how government is going to edge macro economic trends.

There's a lesson here for traders familiar with Austrian Business Cycle Theory. As I outline in the EPJ Daily Alert, we can often get the jump on macro-economic trends because of our understanding of what causes ups and downs in the business cycle and in price inflation trends.

1 comment:

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