Billionaire Stanley Druckenmiller’s Newest Stock Picks

DUQUESNE CAPITALStanley Druckenmiller is a legendary investor. He founded Duquesne Capital in 1981 and for some time balanced his management of the fund with being a portfolio manager for George Soros. Druckenmiller shut down Duquesne Capital in 2010, but he continues to manage money as a family office. We have gone through his 13F filings for the second quarter of 2012 and compared it to the filing for the previous quarter, and here are some macro themes that we have noticed in Druckenmiller’s recent activity:

Housing. There has been some speculation that the housing market in the U.S. has bottomed, and Druckenmiller appears to be buying into that hard. He added 3.3 million shares of Lennar (NYSE:LEN) and 4.7 million shares of D.R. Horton (NYSE: DHI), two large homebuilders which each carry a market cap of about $6 billion. So far this year both stocks are up over 40% and have been increasing steadily even as the broader market has tried to regain its highs from the spring. The forward P/E ratios for these stocks are now 22 for Lennar and 20 for D.R. Horton. For Druckenmiller to get into these stock in the second quarter indicates that he felt not only that the housing market was turning around but also implies that he is now bullish on the U.S. in macro terms. The data here might be mixed, but investors who are long housing should take comfort in the fact that such a successful name agrees with them.

Cutting back on restaurants. Two of Druckenmiller’s top five positions from the first quarter’s 13F- McDonalds and Starbucks- were slashed to zero. The fund’s top position, Yum Brands, was cut by about 40%. Out of the four restaurant stocks that were present in the top five slots in Druckenmiller’s portfolio- a heavy commitment to one industry- the only one which was added to over the course of the second quarter was growth monster Chipotle (NYSE:CMG). This one may have been a miss: Chipotle is down over 20% since the end of June as the market revises its growth expectations from “very high” to “high.” Yum Brands, McDonalds, and Chipotle all made our list of the ten most popular restaurant stocks among hedge funds for the first quarter, but we think that it might be a good idea for current investors to follow Druckenmiller in backing out of the industry.

Healthcare. This one was mostly unchanged from the previous quarter, but with the initiation of a 1.2 million share position in Eli Lilly (NYSE:LLY) Druckenmiller now has four of his top ten positions in the healthcare sector. Normally healthcare is treated as a more defensive play, but with the addition of the homebuilders that clearly can’t be what Duquesne is thinking here. Eli Lilly and fellow holding Elan are drug manufacturers specializing in neuroscience, so our guess is that the group is making a growth investment in those two and value-based investments in giants Merck and Pfizer, each of which trades at less than 12 times forward earnings and pays a dividend yield of at least 3.7%.

Cigarettes. Altria Group (NYSE:MO) is another traditionally defensive company, with a beta of 0.4, but in this case we think it’s pretty easy to see why Druckenmiller likes the stock to the tune of 3.4 million shares and the top spot in its portfolio: it is a value and income machine. Altria trades at 16 times trailing earnings and has posted good growth in revenue and earnings in recent quarters, and at current prices the dividend yield is 4.7%. With a market capitalization of $72 billion and a strong position in the cigarette market, the company is a stable long-term investment.

There was a sharp shift in Duquesne’s portfolio as it sold out of restaurants and moved into homebuilders, two industry plays that investors would be wise to note. Druckenmiller also bolstered his investment in neuroscience drugs and kept his growth investments balanced with steady positions in Merck, Pfizer, and Altria Group.

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Reign of Terror: The 10 Most Ruthless Politicians in History

On the Move: The 10 Fastest Growing Businesses in 2015

Fast Money: The 10 Highest Paying Fast Food Restaurants

Mixing It Up: The 14 Best Music Mashups of 2014

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!