In this article, we discuss the 10 best stocks to buy according to Stanley Druckenmiller. If you want to skip our detailed analysis of these stocks, go directly to the 5 Best Stocks to Buy According to Stanley Druckenmiller.
Growth investors have been scrambling to shield their portfolios from risk as the Fed prepares to raise interest rates in a bid to tame inflation. These growth-heavy portfolios, like that of Stanley Druckenmiller of Duquesne Capital, are a by-product of the financial stability of the past decade and the strides that tech-led disruption has made at the marketplace during the time. Druckenmiller manages a small portfolio consisting of just 49 stocks with the top holdings concentrated in the technology and basic materials sectors.
Latest 13F filings show that Druckenmiller, whose personal net worth is close to $7 billion, has been busy dumping high growth names from his portfolio to prepare for the interest rate hike. Overall, his fund sold out of 15 stocks between October and December, made additional purchases in 10, and reduced holdings in 12 equities. It also made new purchases in 15 stocks. The top ten holdings of the fund comprise 72% of the total portfolio. During the fourth quarter, the portfolio value of the fund dropped by around $250 million.
Some of the top stocks in the portfolio of Duquesne Capital at the end of December 2021 included Alphabet Inc. (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), and Amazon.com, Inc. (NASDAQ:AMZN), among others discussed in detail below.
Our Methodology
The stocks were picked from the fourth quarter regulatory filings of Duquesne Capital. The hedge fund sentiment around each stock was calculated using the data of 867 hedge funds tracked by Insider Monkey.
Best Stocks to Buy According to Stanley Druckenmiller
10. T-Mobile US, Inc. (NASDAQ:TMUS)
Number of Hedge Fund Holders: 89
T-Mobile US, Inc. (NASDAQ:TMUS) provides mobile communication services. It is one of the top communications stocks on Wall Street. Among the hedge funds being tracked by Insider Monkey, Greenwich-based investment firm Viking Global is a leading shareholder in T-Mobile US, Inc. (NASDAQ:TMUS) with 10.2 million shares worth more than $1.3 billion.
T-Mobile US, Inc. (NASDAQ:TMUS) has featured in the Duquesne portfolio since the second quarter of 2020. At the end of the fourth quarter of 2021, the fund owned 796,303 shares of T-Mobile US, Inc. (NASDAQ:TMUS) worth $92 million, representing 3.34% of the portfolio. The fund decreased its stake in the company by 7% during the fourth quarter compared to filings for the third.
Just like Alphabet Inc. (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), and Amazon.com, Inc. (NASDAQ:AMZN), T-Mobile US, Inc. (NASDAQ:TMUS) is one of the stocks on the radar of elite investors.
9. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders: 51
Chevron Corporation (NYSE:CVX) is a California-based oil and gas firm. Since 2012, the firm has featured in the Duquesne portfolio for only two quarters. At the end of December 2021, the fund owned 824,440 shares of Chevron Corporation (NYSE:CVX) worth $96.7 million, representing 3.5% of the portfolio.
Hedge funds have been loading up on Chevron Corporation (NYSE:CVX) stock as energy prices climb. At the end of the third quarter of 2021, 51 hedge funds in the database of Insider Monkey held stakes worth $4.4 billion in Chevron Corporation (NYSE:CVX), up from 50 in the preceding quarter worth $4.2 billion.
In its Q1 2021 investor letter, ClearBridge Investments highlighted a few stocks and Chevron Corporation (NYSE:CVX) was one of them. Here is what the fund said:
“While reducing in health care and consumer staples, we increased our exposure to high-quality names in economically sensitive areas of the market. We added to low-cost, high-quality energy names, (including) Chevron Corporation (NYSE:CVX). We are positive on the company’s strong balance sheets, competitive positions and exposure to an economic recovery.”
8. Booking Holdings Inc. (NASDAQ:BKNG)
Number of Hedge Fund Holders: 96
Booking Holdings Inc. (NASDAQ:BKNG) provides online reservation services related to travel. Elite hedge funds hold large stakes in the company. At the end of the third quarter of 2021, 96 hedge funds in the database of Insider Monkey held stakes worth $8.4 billion in Booking Holdings Inc. (NASDAQ:BKNG), compared to 100 in the previous quarter worth $6.9 billion.
Booking Holdings Inc. (NASDAQ:BKNG) has featured in the Druckenmiller portfolio, with the exception of one quarter, since the second quarter of 2020. At the end of December 2021, Duquesne Capital owned 42,917 shares of Booking Holdings Inc. (NASDAQ:BKNG) worth close to $103 million, representing 3.73% of the portfolio. Compared to filings for the third quarter, the fund decreased its stake in the company by 2% between October and December.
In its Q2 2021 investor letter, Nelson Capital Management, an asset management firm, highlighted a few stocks and Booking Holdings Inc. (NASDAQ:BKNG) was one of them. Here is what the fund said:
“In the consumer discretionary sector, we trimmed pandemic winners in favor of companies we believe will outperform in a recovery period. Pent-up travel demand is another investment theme we believe will flourish, prompting us to buy a position in Booking Holdings (tkr: BKNG, see Featured Equity).”
7. Carvana Co. (NYSE:CVNA)
Number of Hedge Fund Holders: 58
Carvana Co. (NYSE:CVNA) owns and runs an ecommerce platform for used cars. Druckenmiller has steadily built up a large stake in the company since the third quarter of 2020. At the end of December 2021, Duquesne Capital owned 522,127 shares of Carvana Co. (NYSE:CVNA) worth $121 million, representing 4.38% of the portfolio. The fund increased its stake in the firm by 281% quarter-over-quarter during the fourth quarter.
Carvana Co. (NYSE:CVNA) has also attracted the interest of other hedge fund managers. At the end of the third quarter of 2021, 58 hedge funds in the database of Insider Monkey held stakes worth $8.3 billion in Carvana Co. (NYSE:CVNA), compared to 63 in the preceding quarter worth $8.9 billion.
In its Q1 2021 investor letter, Steel City Capital LP, an asset management firm, highlighted a few stocks and Carvana Co. (NYSE:CVNA) was one of them. Here is what the fund said:
“Carvana’s (CVNA) 4Q’20 results weren’t particularly great. EBITDA was negative ($70) million, a stark turnaround on a sequential basis from a first-ever EBITDA profit of $21 million in 3Q’20. The culprit was a steep drop off in retail unit GPU ($1,265 vs. $1,857) and wholesale unit GPU ($358 vs. $1,113) as some of the COVID-driven aberrations in the used car market began to abate.
The company’s presentation of EBITDA (calculated “bottom up”) is dubious, as it commingles non-operating items including mark-to-market changes in its retained securitization portfolio. With the exception of 1Q’20, when ABS markets were going haywire, this line item provided a tailwind throughout 2020, including a gain of $5 million in 4Q’20. Also on the non-operating self-help front, management released a reserve for vehicle service contract cancellations in 4Q’20, adding another $7 million to EBITDA, and boosting “Other” GPU by $96.
Putting it all together, I put operating EBITDA closer to negative ($82) million vs. the $70 million printed by the company. This is a larger loss than 4Q’19 (calculated on a similar operating basis) despite the company selling 43% more retail units y/y!
Management didn’t provide formal guidance for 2021, but did offer guardrails for how to think about the year. Retail unit growth is expected to accelerate from last year’s 37%, with total revenue tracking in-line with retail unit growth. Total revenue per retail unit was $22,885 last year, meaning the company thinks it can hold this metric relatively flat throughout the year. Management also noted it expects some softening in retail ASPs throughout the year (“I think the gains that we saw in ASP in the back half of the year, we expect to moderate a little bit in 20216 “), with the implication being “Other” revenue – including financing – will serve as an offset.
Why look at total revenue per retail unit? The company guides to total GPU, which itself is an apples-and-oranges mix of total gross profit divided by only retail units. As for total GPU, management called out expectations for “mid- $3,000s” in FY21. Putting the pieces together, $3,500 of total GPU divided by $22,885 of total revenue per retail unit implies gross margin of 15.3% for the year, roughly 100 bps of pickup vs. last year’s 14.2%.
On the EBITDA front, management guided to continuing cost leverage but still a “small EBITDA margin loss” in FY’21. Splitting the difference between last year’s negative 4.6% EBITDA margin and breakeven gives us something in the realm of a 2.5% EBITDA margin loss for FY’21. So, 200 bps of total improvement, 100 bps of which we know is coming from GPU margin. The other 100 bps, therefore, must come from SG&A.
Applying a negative 2.5% margin to $22,885 of total revenue per retail unit implies about $575 of negative EBITDA per unit sold. This also allows us to back into implied cash SG&A per unit of $4,075, which is 17.8%, and 100 bps better than last year’s 18.8%.
The unknown variable is..” (read the entire letter here)
6. Palo Alto Networks, Inc. (NYSE:PANW)
Number of Hedge Fund Holders: 73
Palo Alto Networks, Inc. (NYSE:PANW) provides cybersecurity solutions. It is one of the favorite cybersecurity stocks in the finance world. Among the hedge funds being tracked by Insider Monkey, London-based firm Generation Investment Management is a leading shareholder in Palo Alto Networks, Inc. (NYSE:PANW) with 1.6 million shares worth more than $773 million.
Latest filings show that Duquesne Capital owned 229,500 shares of Palo Alto Networks, Inc. (NYSE:PANW) at the end of the fourth quarter of 2021 worth $127 million, representing 4.63% of the portfolio. The fund decreased its stake in the firm by 43% during the fourth quarter compared to filings for the third quarter.
In addition to Alphabet Inc. (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), and Amazon.com, Inc. (NASDAQ:AMZN), Palo Alto Networks, Inc. (NYSE:PANW) is one of the stocks that growth investors are buying.
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Disclosure. None. 10 Best Stocks to Buy According to Stanley Druckenmiller is originally published on Insider Monkey.
