Wisdom From Billionaire Druckenmiller and His Top Tech Picks

Billionaire Stanley Druckenmiller founded the asset manager Duquesne Capital in 1981. He closed the fund in 2010 despite having $12 billion of assets under management as he felt that he was unable to deliver adequate returns to his investors. He was also one of the managers of George Soros’ Quantum Fund and part of the Sterling short trade which ‘broke the Bank of England’. Duquesne Capital is regarded as one of the best hedge funds averaging an annual return of almost 30% and just having five down quarters in a period of 120 quarters.

Wisdom from Druckenmiller
I have this pasted on my desk
How difficult it is just to follow just 4 points pic.twitter.com/fk5t0AuY3f

— MacroValue (@pradeeepk) December 22, 2016

Stanley Druckenmiller has his own unique style of investing which involves in-depth research on a stock and sector and then making concentrated bets. He says that the most important thing to figure out is what makes a stock go up or down and central bank policies are a key factor behind stock market movements. Most analysts do not understand what makes a stock go up or down Druckenmiller does not use valuation to time the market as he believes that liquidity and technical analysis should be used for timing. Valuation only indicates how far the stock can go up or down after a catalyst changes the market direction.

In its latest 13F filing, Druckenmiller’s Duquesne Family Office disclosed an equity portfolio worth $1.13 billion as of the end of September. The sector that amassed the largest share was technology, which represented 29% of the portfolio, followed by Finance and Healthcare, which represented 22% and 21%, respectively. With this in mind, let’s take a look at Duquesne’s top technology picks, which include Alibaba Group Holding Ltd (NYSE:BABA), Broadcom Ltd (NASDAQ:AVGO), Activision Blizzard, Inc. (NASDAQ:ATVI), Amazon.com, Inc. (NASDAQ:AMZN), and Facebook Inc (NASDAQ:FB). 

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively the most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs.

 

Alibaba Group Holding Ltd (NYSE:BABA) represented the fourth-largest holding in Duquesne’s latest 13F filing, as the fund initiated a new position during the third quarter and held 470,600 shares worth $49.7 million at the end of September. Among other funds that bought shares of Alibaba Group Holding Ltd (NYSE:BABA) were Chase Coleman’s Tiger Global Management and Stephen Mandel’s Lone Pine Capital which bought more than 5 million shares each. The shares of Alibaba Group Holding Ltd (NYSE:BABA) have rallied by 13.7% in the last six months. The company has a leading presence in the e-commerce space in China and has also diversified into gaming, digital payments, and financial services. Its recent partnership with DreamWorks and Amblin Partners will grant it a competitive edge in China. The number of funds tracked by us long the stock increased by 35 to 104 during the third quarter.

Broadcom Ltd (NASDAQ:AVGO) was another new addition to Duquesne Family Office’s equity portfolio, as Stanley Druckenmiller acquired 201,900 shares valued at $34.8 million. Stephen Mandel’s Lone Pine Capital also initiated a new position and held 2.6 million shares worth $449 million at the end of the third quarter. Shares of Broadcom Ltd (NASDAQ:AVGO) has returned more than 22% over the last six months, outperforming NASDAQ which has gained 16%. In the third quarter, the semiconductor solutions provider’s revenue surged by 125% on the year to $4.13 billion. The stock has a dividend yield of 2.24% and a rating of buy from most analysts covering it. While the number of funds from our database bullish on Broadcom Ltd (NASDAQ:AVGO) increased by two to 76, the total value of their holdings declined to $8.26 billion from $8.33 billion during the third quarter.

During the third quarter, Duquesne initiated a stake in Activision Blizzard, Inc. (NASDAQ:ATVI), holding 748,700 shares worth $33 million at the end of September. Activision Blizzard, Inc. (NASDAQ:ATVI) was also a new position in the equity portfolio of Discovery Capital Management, which bought more than 2.94 million shares valued at $130 million during the third quarter. For its last quarter, the company posted revenue of $1.63 billion which beat analyst estimates of $1.57 billion. Activision Blizzard, Inc. (NASDAQ:ATVI)’s stock has a dividend yield of 0.71%  and is trading at a P/E ratio of 31. At the end of the third quarter, 64 funds from our database held shares of Activision Blizzard, Inc. (NASDAQ:ATVI) worth $4.24 billion in aggregate, versus 68 funds holding $4.1 billion worth of stock at the end of June quarter.

Amazon.com, Inc. (NASDAQ:AMZN) was represented in Druckenmiller’s portfolio by a stake containing 35,800 shares worth $29.9 million. Amazon.com, Inc. (NASDAQ:AMZN) has been a hot favorite amongst hedge funds so far this year. Other funds reporting a significant stake in the stock as of the end of the third quarter included Viking Global, Fisher Asset Management, Tiger Global Management and Lone Pine Capital. The world’s leading online retailer also has strong presence in the cloud computing segment. Amazon.com, Inc. (NASDAQ:AMZN) shares have outperformed NASDAQ by returning more than 14% over the last year and should do well following the holiday season. The e-commerce giant saw 150 funds tracked by us holding $20.79 billion worth of stock at the end of the third quarter, making it the most popular stock at the end of September.

Stanley Druckenmiller reduced its stake in Facebook Inc (NASDAQ:FB) by 79% to 187,894 shares worth $24 million during the third quarter. Andreas Halvorsen’s Viking Global also held 18.74 million shares of Facebook Inc (NASDAQ:FB) worth $2.4 billion at the end of September. Shares of this social media giant have successfully outperformed NASDAQ by returning 11.6% over the last year. Facebook Inc (NASDAQ:FB) was the second most popular stock among investors in our database. At the end of the third quarter, 149 funds held shares worth $16.27 billion in aggregate, amassing 4.7% of the company’s float.

Disclosure: None