Below we conclude our look at the Stan Druckenmiller Portfolio: Top 5 Stock Picks. For our methodology and a more comprehensive list of the investor’s stock picks, please see Stan Druckenmiller Portfolio: Top 10 Stock Picks.
5. T-Mobile US, Inc. (NASDAQ:TMUS)
Value of Duquesne Capital‘s 13F Position: $96.5 Million
Number of Hedge Fund Shareholders: 101
After selling off a quarter of his T-Mobile US, Inc. (NASDAQ:TMUS) holding during Q2, Druckenmiller was adding to the position in Q3, raising it by 7% to 719,017 shares. Hedge fund ownership of T-Mobile has remained steady for over two years, with the stock hovering around the 30 most popular stocks among hedge funds throughout that time. Warren Buffett’s Berkshire Hathaway owns the largest TMUS position as of September 30 after Andreas Halvorsen’s Viking Global slashed its large holding by 64% during Q3.
T-Mobile US, Inc. (NASDAQ:TMUS) is one of the rare large-cap stocks having a banner year, being up by 31% year-to-date as its costly integration with Sprint near its conclusion and the fruits of that deal begin to sweeten. The company anticipates achieving free cash flow of $2 billion in the fourth quarter, which would be an 80% year-over-year increase. If it can continue to generate that kind of money, while simultaneously subtracting the $3.8 billion in merger-related expenses it’s racked up over the last year, the company could be generating as much as $12 billion in free cash flow next year.
T-Mobile US, Inc. (NASDAQ:TMUS) is prepared to aggressively redeploy its growing wealth to shareholders, telling investors that it plans to send $60 billion their way between 2023 and 2025. It’s gotten a head start on that initiative this year, announcing that it will buy back $3 billion worth of its shares by the end of this year and $14 billion worth by next September. Given that about half its shares are held by Deutsche Telekom AG and Softbank and are essentially off the market, that buyback initiative could have an even more significant impact on the company’s share price than it otherwise might.
4. Chevron Corporation (NYSE:CVX)
Value of Duquesne Capital‘s 13F Position: $99.2 Million
Number of Hedge Fund Shareholders: 68
Druckenmiller cut his stake in Chevron Corporation (NYSE:CVX) by 17% during Q3, one of only two positions in his top ten whose size was lowered during the quarter. His family office owned 690,295 CVX shares on September 30. Hedge fund ownership of CVX has risen during five of the last six quarters to hit an all-time high on September 30.
Chevron Corporation (NYSE:CVX) is another stock that’s done well this year, gaining 46%, so it’s not too surprising to see Druckenmiller do some profit taking from the holding. CVX shares have gained 20% in Q4 alone, bolstered by OPEC’s decision to cut production by 2 million barrels per day in light of oil prices that have been weakened by demand concerns. Chevron’s free cash flow ballooned to $29 billion during the first nine months of 2022, more than double what it earned during the corresponding period of 2021.
The Carillon Eagle Growth & Income Fund discussed the strong performance of Chevron Corporation (NYSE:CVX) and the broader energy industry in its Q1 2022 investor letter:
”Along with the spike in oil prices, energy stocks performed best during the quarter, followed by more defensive and countercyclical sectors like utilities and consumer staples. Chevron (NYSE:CVX) traded higher with global energy prices. The war in Ukraine prompted fears over a shortage in supply, resulting in higher commodity prices.”
3. Amazon.com, Inc. (NASDAQ:AMZN)
Value of Duquesne Capital‘s 13F Position: $102 Million
Number of Hedge Fund Shareholders: 271
Amazon.com, Inc. (NASDAQ:AMZN) was another new addition to Druckenmiller’s 13F portfolio during Q3, with the money manager taking advantage of weakness in the stock to build a position of 906,250 shares. Amazon shares have lost 48% of their value over the last year and have continued to sink in Q4, dropping another 17%. The stock ranks as the second-most popular among hedge funds as of September 30.
It could be said that Druckenmiller traded Microsoft primarily for another AI and cloud powerhouse in Amazon.com, Inc. (NASDAQ:AMZN), as he sold off about $120 million worth of MSFT shares and spent most of those proceedings building a large Amazon position. While Microsoft’s shares have struggled this year, Amazon’s have performed even worse, losing nearly half their value. That clearly made them an intriguing buy-low candidate for Druckenmiller.
Investors have fled Amazon shares due in part to the company’s plunge from profitability in 2021 back to a loss in 2022. Weakening demand this year, coupled with the company’s exuberant growth initiatives during the pandemic boom lead to some overcapacity that Amazon is now in the process of correcting. The company is slashing as many as 20,000 jobs in a bid to return to profitability in 2023. Behind the ecommerce churn is the behemoth Amazon Web Services, which continues to grow at a strong pace and provide an anchor for the company’s results.
Lakehouse Capital believes Amazon.com, Inc. (NASDAQ:AMZN)’s valuation is the most attractive it’s been since the financial crisis, as the fund shared in its October 2022 monthly letter:
“The Fund’s largest position, Amazon.com, Inc. (NASDAQ:AMZN), reported a solid quarterly result with net sales increasing 15% year over year (19% in constant currency terms) to $127 billion. However, the business isn’t without its challenges and the company is seeing increasing macro pressures across both retail and Amazon Web Services (AWS), which resulted in guidance for the fourth quarter coming in below prior expectations. As has been the case for the last several quarters, profitability also remains under pressure due not only to external macro factors, such as elevated shipping and fuel costs, but also lower productivity and efficiency costs as a result of some overcapacity on the back of its recent investment cycle. While this does create some near term uncertainty, we continue to believe Amazon is well positioned to manage these issues and remains on track to deliver significant profit improvements over the next twelve months.
Aside from e-commerce, the two other most critical segments, AWS and advertising, grew 28% and 30% year-on-year, respectively. While AWS’ growth remains healthy, especially considering its scale, it was a noticeable slowdown from the 33% growth delivered last quarter. Management attributed the deceleration to the fact that they are seeing an increasing number of customers who want to control their cloud computing costs as the economy slows, and the company is proactively helping them move to lower storage tiers or instance levels, while also leveraging its own AWS Graviton chips. In our view, the current pressures Amazon is facing are largely macro-driven and not fundamental. We believe they will prove manageable with time and that the long term risk/reward is very compelling at these levels. As such, we remain patient holders and also note that the valuation is currently the most attractive it has been since the GFC at 5x trailing gross profit.”
2. Eli Lilly and Company (NYSE:LLY)
Value of Duquesne Capital‘s 13F Position: $157 Million
Number of Hedge Fund Shareholders: 75
Druckenmiller’s stake in Eli Lilly and Company (NYSE:LLY) was raised by 64% during Q3, hitting 484,895 shares by the end of the quarter. The investing icon first added LLY to his family office’s 13F portfolio during Q2, a quarter in which there was a huge jump in hedge fund ownership of the stock. The number of funds long LLY ticked up again during Q3, pushing to a new all-time high.
The bigger push into Eli Lilly and Company (NYSE:LLY) is paying off for Druckenmiller, as the stock has gained 14% in Q4 to push its year-to-date gains to 36%. Eli Lilly’s current growth isn’t particularly exciting, as the company grew revenue by just 2% to $6.9 billion during Q3. It’s the company’s pipeline of upcoming therapies that has investors like Druckenmiller pouring into the stock, with four potential product launches lined up for 2023. Eli Lilly also has some promising growth prospects among its current crop of treatments, including diabetes medicine Mounjaro, which has blockbuster potential.
The ClearBridge Global Growth Strategy believes investors are undervaluing the market potential that Eli Lilly and Company (NYSE:LLY)’s diabetes drugs like Mounjaro have, as it discussed in its Q3 2022 investor letter:
“In the U.S., we initiated a position in pharmaceutical maker Eli Lilly (NYSE:LLY) as it brings out new drug candidates for diabetes and Alzheimer’s disease. New drugs impact diabetes but have also demonstrated significant weight loss for patients who are overweight and have other co-morbidity issues as a result. Lilly is one of the two key players in diabetes care and we believe the potential market opportunity is much higher than the consensus forecasts as we are seeing evidence of accelerating adoption.”
1. Coupang, Inc. (NYSE:CPNG)
Value of Duquesne Capital‘s 13F Position: $324 Million
Number of Hedge Fund Shareholders: 36
Stanley Druckenmiller’s top stock pick for the seventh-straight quarter is Coupang, Inc. (NYSE:CPNG), which his family office owns 19.4 million shares of. At 18.4%, Druckenmiller’s firm has more than twice the 13F exposure to Coupang as it has to any other stock. It’s also the most exposure it’s had to the stock since the fourth quarter of 2021.
Hedge funds as a whole have been hanging in there with Coupang despite its unmitigated struggles since going public in March 2021, as CPNG shares have lost 59% of their value. The value of Druckenmiller’s CPNG holding is down by nearly $200 million since Q1 2021, despite his family office now owning nearly twice as many shares as it did then.
Coupang, Inc. (NYSE:CPNG) has rallied quite a bit from its 2022 low point, gaining 93% since May 9, and that could be just the beginning for the fast-growing South Korean e-commerce company. Coupang is not only growing customers at a steady rate (7% in Q3), but boosting the revenue derived from each customer at an even greater rate (19%). The company is still losing money, but its margins are improving quickly, which could push it to profitability before long.
Baron Funds is bullish on Coupang, Inc. (NYSE:CPNG)’s ability to consolidate the fragmented South Korean e-commerce market in several important categories, as the fund discussed in its Q3 2022 investor letter:
“Coupang, Inc. (NYSE:CPNG), the largest e-commerce platform in South Korea, contributed after reporting a sizable beat on second quarter earnings and raising annual EBITDA guidance. Upside was concentrated in e-commerce, where Coupang is now driving sequential margin expansion while maintaining a growth rate that is triple that of the industry average, lending credence to the investment case that Coupang will consolidate the fragmented e-commerce industry in Korea across both general merchandise and grocery, with healthy long-term margins to follow.”
For more of the latest stock picks worth considering for your portfolio, check out 10 Growth Stocks with Upside Potential and the 14 Best Agriculture Stocks To Buy Now.
Disclosure: None.
