Billionaire Stanley Druckenmiller has technically closed Duquesne Capital to investors, but the investment manager (who had been one of George Soros’s portfolio managers, as well as running his own fund) still issues 13F filings and so investors can still track some of his activity. We have compared Druckenmiller’s filing for the third quarter of 2012 to the one from the end of June to identify new positions that he moved into during this period. Read on for our quick take on the five largest new holdings reported on the 13F or see the full list of Druckenmiller’s stock picks.
Exxon Mobil Corporation (NYSE:XOM) was Druckenmiller’s largest 13F holding by market value, even though he had not owned any shares at the beginning of July. Oil majors are generally trading cheaply, and while market leader Exxon Mobil carries a premium to many of them its forward P/E multiple is still fairly low at 11. Fellow billionaire Ken Fisher’s Fisher Asset Management was also buying Exxon Mobil during the third quarter (check out more stocks Fisher has been buying). While earnings were down slightly last quarter versus a year earlier, we’d consider Exxon Mobil a potential value stock as it’s not much more expensive than (for example) BP but is likely a more stable long-term investment.
Another oil major that was new to the portfolio was Chevron Corporation (NYSE:CVX), with Druckenmiller owning about 760,000 shares. Chevron trades at 9 times earnings- on either a trailing or a forward basis- so it is a bit cheaper than Exxon Mobil though it isn’t as much of a market leader. We’d also note that Chevron’s revenue was down 10% in the third quarter compared to the same period in 2011, which contributed to a 33% decline in net income. We don’t think that the oil and gas company will continue declining much, but it’s quite possible that it’s worth it to pay the small P/E premium for Exxon Mobil instead.
Druckenmiller also liked Target Corporation (NYSE:TGT), reporting a position of 1.2 million shares in the discount retailer. In its most recent fiscal quarter, Target experienced a double-digit earnings growth rate compared to the same period in the previous year, and as might be expected the stock’s beta is relatively low at 0.5. At a market capitalization of $40 billion, it’s another cheap looking stock at 14 times trailing earnings. Since the company is currently growing nicely despite competition from peers like Walmart and Amazon, we’d expect that trend to continue and so it might be a good value play as well.
Google Inc (NASDAQ:GOOG) was another new pick. Google’s earnings have been down as the acquisition of Motorola Mobility Holdings is yet to pay off in terms of the bottom line, but it’s generally expected both by analysts and by the market that growth will resume next year (the stock trades at 22 times trailing earnings). Billionaire- and Tiger Cub- Stephen Mandel’s Lone Pine Capital cut its stake in Google during the third quarter but still reported owning 1.1 million shares, making it the second largest position by market value in the fund’s 13F portfolio (find more of Mandel’s favorite stocks). We think it’s a good idea to wait for more developments from Google before making a long-term decision on the stock.
Druckenmiller also added 1.2 million shares of Time Warner Inc. (NYSE:TWX) to his portfolio. The entertainment company’s business has been about flat, but it too seems to have considerable growth expectations: it carries trailing and forward P/E multiples of 17 and 13, respectively. If Time Warner does hit its earnings targets for next year then it might well turn out to be a good buy, but since that would be such an improvement over what the company has done on a trailing basis- and at the moment the growth rates do not look good- we’d avoid the stock.
