In this article, we discuss 10 new stock picks of billionaire Stanley Druckenmiller.
Policymakers in the United States have been charting a course of action over the past few months that is adequate enough to fight inflation without pushing the economy towards a recession. Stanley Druckenmiller, the chief of Duquesne Capital, has lauded the moves that the Fed has made in this regard. In a recent interview with news platform CNBC, the investor praised the decision of the central bank to drop forward guidance, noting that this would allow the market to “follow the data” and make the right decisions.
Druckenmiller also highlighted that as the Fed stopped buying treasury bonds and mortgage-backed securities, the bond market could act as a “useful economic signal” once again. Federal Reserve Chief Jerome Powell in January indicated that the central bank would end an asset-purchasing program in March and also hike interest rates. Druckenmiller has been warning of a market slowdown for months, last doing so in November 2021 while underlining that the “bubble” had creeped into many sectors of the market.
The latest moves of the famed investor shed more light on his overall economic outlook as the Fed prepares to raise interest rates. Some of the top stocks in the portfolio of Duquesne Capital at the end of December 2021 included Snap Inc. (NYSE:SNAP), Lockheed Martin Corporation (NYSE:LMT), and Sunrun Inc. (NASDAQ:RUN), among others discussed in detail below.
Our Methodology
These were picked from the investment portfolio of Duquesne Capital at the end of the fourth quarter of 2021. Only those companies that were new additions to the portfolio in the fourth quarter, compared to filings for the third, feature on the list.
Data from around 900 elite hedge funds tracked by Insider Monkey in the third quarter of 2021 was used to identify the number of hedge funds that hold stakes in each firm.
Stan Druckenmiller
New Stock Picks of Billionaire Stanley Druckenmiller
10. Ollie’s Bargain Outlet Holdings, Inc. (NASDAQ:OLLI)
Number of Hedge Fund Holders: 18
Ollie’s Bargain Outlet Holdings, Inc. owns and runs general merchandise stores. Latest filings show that Duquesne Capital opened a new position in the company during the fourth quarter of 2021, consisting of 158,200 shares worth more than $8 million, representing 0.29% of the total portfolio.
Ollie’s Bargain Outlet Holdings, Inc. also has the backing of other elite hedge funds. Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Ollie’s Bargain Outlet Holdings, Inc., with 296,420 shares worth more than $15 million.
Just like Snap Inc., Lockheed Martin Corporation, and Sunrun Inc., Ollie’s Bargain Outlet Holdings, Inc. is one of the stocks that hedge funds are buying.
In its Q3 2021 investor letter, Harding Loevner, an asset management firm, highlighted a few stocks and Ollie’s Bargain Outlet Holdings, Inc. was one of them. Here is what the fund said:
“Ollie’s Bargain Outlet, a US-based discount retailer, detracted. The company reported a 21% year-over-year decline in revenue compared to a very strong quarter a year ago, when the first wave of US government stimulus checks led to a burst of consumer spending.”
9. TaskUs, Inc. (NASDAQ:TASK)
Number of Hedge Fund Holders: 18
TaskUs, Inc. (NASDAQ:TASK) is a Texas-based firm that provides outsourcing services. Top hedge funds hold large stakes in the company. At the end of the third quarter of 2021, 18 hedge funds in the database of Insider Monkey held stakes worth $230 million in TaskUs, Inc., compared to 20 in the previous quarter worth $77 million.
Regulatory filings show that TaskUs, Inc. was a new addition to the Duquesne portfolio between October and December 2021. The fund owns a stake in the firm consisting of 181,000 shares worth $9.7 million, representing 0.35% of the portfolio.
In its Q4 2021 investor letter, Alger, an asset management firm, highlighted a few stocks and TaskUs, Inc. was one of them. Here is what the fund said:
“TaskUs is a modern customer care company that manages digital customer experience exclusively for highly innovative “technology Disruptor” clients. The company’s services include managing end-consumers’’ needs for its clients, such as sales, after sales-support, complaint management, trust and safety and transaction processing. It also provides content security and operations services driven by artificial intelligence.
The stock underperformed in the final three months of 2021 despite the company providing a strong third quarter earnings report. We think the underperformance resulted from the company issuing 25% year-over-year earnings growth guidance for fiscal year 2022, which implies a meaningful deceleration. Additionally, an agreement preventing certain insiders from selling shares expires in the middle of January. The company’s shares, furthermore, have significant ownership by hedge funds, making them subject to year-end rebalancing. Despite the recent weakness, we think the fiscal year 2022 guidance is extremely conservative and the company is currently well positioned for future upward revisions to its earnings estimates.”
8. Compass, Inc. (NYSE:COMP)
Number of Hedge Fund Holders: 23
Compass, Inc. (NYSE:COMP) provides real estate brokerage services. Securities filings show that Druckenmiller bought a new stake in the company during the fourth quarter of 2021. This stake comprises 399,100 shares worth $3.6 million, representing 0.13% of the portfolio.
There is positive hedge fund sentiment around Compass, Inc.. At the end of the third quarter of 2021, 25 hedge funds in the database of Insider Monkey held stakes worth $708.3 million in Compass, Inc., up from 23 in the previous quarter worth $708.4 million.
In its Q3 2021 investor letter, Artisan Partners, an asset management firm, highlighted a few stocks and Compass, Inc. was one of them. Here is what the fund said:
“We added several new GardenSM positions in Q3 including Compass. Compass is a real estate brokerage firm which provides its agents with a proprietary, end-to-end cloud-based platform. The company helps address the needs of buying and selling homes from client prospecting to closing, which includes customer relationship management, AI-driven prospecting, marketing (digital, social, email, video, print, signage, lead generation), market analysis and collaboration tools. The platform also uses machine learning, artificial intelligence and other advanced data analytics strategies to draw insights across the platform, allowing agents to be more efficient and informed in their selling efforts. We believe this technology advantage is key to the company continuing to disrupt and capture real estate commission market share. We have been impressed with the company’s ability to capture 4% market share since it was founded in 2012 (vs. Redfin, founded in 2002, holding a 1% market share). The company’s profit cycle can also be boosted by adding on additional services such as title insurance referral and escrow services, real estate marketing, home renovation referrals, home insurance and home warranty referrals—all of which we believe have a significantly larger addressable market than commissions (~7X).”
7. Guidewire Software, Inc. (NYSE:GWRE)
Number of Hedge Fund Holders: 26
Guidewire Software, Inc. (NYSE:GWRE) provides software products for the insurance industry. The company has many admirers in the finance world. Among the hedge funds being tracked by Insider Monkey, California-based investment firm Stockbridge Partners is a leading shareholder in Guidewire Software, Inc., with 4.7 million shares worth more than $538 million.
Latest data reveals that Druckenmiller opened a new position in Guidewire Software, Inc. between October and December 2021. The company had last featured in the Duquesne portfolio during the second quarter of 2020. The latest stake comprises 88,250 shares worth $10 million, representing 0.36% of the portfolio.
In its Q1 2021 investor letter, Wasatch Global Investors, an asset management firm, highlighted a few stocks and Guidewire Software, Inc. was one of them. Here is what the fund said:
“Guidewire Software, Inc. (GWRE) was another large detractor. The company provides enterprise software for the property and casualty insurance industry. The software supports collaborative workflow, cooperation with external partners and rule-based decision making—all of which characterize modern underwriting and claims operations. Guidewire’s InsuranceSuite platform allows insurance-industry customers to manage claims, policies and billing functions. Other modules can be added to assist in data management, analytics and digital engagement. We believe Guidewire will eventually be well-positioned to benefit as insurance companies increasingly replace their core (usually on-premises) legacy software with centralized, cloud-based offerings. In the shortterm, however, Guidewire has seen some challenges with its move to the cloud. We think these challenges, along with the broad correction among technology names, accounted for the stock-price decline.”
6. Cazoo Group Ltd (NYSE:CZOO)
Number of Hedge Fund Holders: 32
Cazoo Group Ltd (NYSE:CZOO) operates as an online car retailer. The firm comprised just 0.03% of the Duquesne portfolio at the end of the fourth quarter of 2021. The stake consists of 140,100 shares worth $845,000.
Other hedge fund managers are also bullish on Cazoo Group Ltd. At the end of the third quarter of 2021, 32 hedge funds in the database of Insider Monkey held stakes worth $312 million in Cazoo Group Ltd.
In addition to Snap Inc., Lockheed Martin Corporation, and Sunrun Inc., Cazoo Group Ltd is one of the stocks that institutional investors are flocking to.
5. Ingersoll Rand Inc. (NYSE:IR)
Number of Hedge Fund Holders: 33
Ingersoll Rand Inc. (NYSE:IR) operates in the industrial machinery sector. Top hedge funds hold large stakes in the company. Among the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Viking Global is a leading shareholder in Ingersoll Rand Inc., with 3.6 million shares worth more than $183 million.
Latest filings show that Duquesne Capital owned 333,295 shares of Ingersoll Rand Inc. at the end of the fourth quarter of 2021, worth over $20 million, representing 0.74% of the portfolio.
In its Q3 2021 investor letter, Artisan Partners, an asset management firm, highlighted a few stocks and Ingersoll Rand Inc. was one of them. Here is what the fund said:
“We also added to Ingersoll Rand Inc.. Ingersoll Rand is a global market leader with a broad range of mission-critical flow creation technologies (pumps, compressors, etc.) for industrial and medical applications. Over the past several years, a new management team has repositioned Ingersoll Rand Inc. toward less cyclical, more profitable businesses, which are supported by a stronger culture of employee engagement and continuous improvement. More recently, the company’s top-line growth has accelerated as the pandemic fades, and margins are benefiting from cost synergies achieved in its merger integration with Gardner Denver (with further runway ahead). This has boosted cash flows and enabled management to resume its successful bolt-on acquisition strategy, acquiring Seepex GmbH, a global leader in positive displacement pumps for end markets such as water, wastewater, food and beverage and chemicals, in Q2. With an increasingly visible organic and acquisition-driven growth capability, characteristics the market appears to be undervaluing, we added to our position at an attractive discount to our PMV estimate.”
4. Opendoor Technologies Inc. (NASDAQ:OPEN)
Number of Hedge Fund Holders: 35
Opendoor Technologies Inc. (NASDAQ:OPEN) owns and runs a digital real estate platform. Securities filings reveal that Druckenmiller opened a new position in the company during the fourth quarter of 2021. The stake comprises 233,000 shares worth $3.4 million, representing 0.12% of the portfolio.
Opendoor Technologies Inc. has many admirers on Wall Street. At the end of the third quarter of 2021, 35 hedge funds in the database of Insider Monkey held stakes worth $1.7 billion in Opendoor Technologies Inc., the same as in the preceding quarter worth $765 million.
In its Q1 2021 investor letter, Baron Fund, an asset management firm, highlighted a few stocks and Opendoor Technologies Inc. was one of them. Here is what the fund said:
“The sales of Opendoor Technologies Inc. was a trim for position-sizing purposes after orders-of-magnitude type stock returns over the last year for these investments. We continue to believe the company is a disruptive innovator with open-ended long-term opportunities.”
3. Sunrun Inc. (NASDAQ:RUN)
Number of Hedge Fund Holders: 37
Sunrun Inc. develops and installs residential solar energy systems. It is one of the top solar stocks in the finance world. Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Tiger Global Management LLC is a leading shareholder in Sunrun Inc., with 7 million shares worth more than $242 million.
According to the latest data, Duquesne Capital owned 178,450 shares of Sunrun Inc. at the end of the fourth quarter of 2021, worth $6.1 million, representing 0.22% of the total portfolio.
In its Q2 2021 investor letter, Horizon Kinetics, an asset management firm, highlighted a few stocks and Sunrun Inc. was one of them. Here is what the fund said:
“What this table did not cover is valuation. What’s expensive, what’s cheap? A good business that is too expensive is not a good investment. The most expensive business in the table is Sunrun. Sunrun is the nation’s largest residential rooftop solar panel system seller/installer. Sunrun’s valuation might also shed Thumbnail valuation.
To start at the top of the income statement, Sunrun shares trade at 10.3x revenues. The most profitable company in the S&P 500, Microsoft, trades at 13x revenues. Sunrun operates at a loss. Obviously, not only is tremendous growth anticipated, but tremendous profitability, too.
Let’s simply accept that investors have correctly anticipated Sunrun’s future success and make that the starting point for a valuation exercise.
If, 10 years from now, Sunrun is ultimately valued at 25x net income, and if today’s $9.5 billion valuation is appropriate, that would require $380 million of net income ($9,500 million ÷ 25).
Let’s say Sunrun will have the same net profit margin as the average S&P 500 company, which is 10%. That means it would need $3,800 million of sales to generate that level of earnings ($380 mill ÷ 10%).
Since sales are now $920 million, they would have to rise by 4.1x in the next 10 years. That would require annual sales growth of 15.2%.
You see how neatly that all works: investors accept the company’s 10-year, 15% annual sales growth projections, and if a 10% net profit margin and a P/E of 25x earnings are reasonable, then the company will have a $9.5 billion market cap at that time. Except that is the current price. That means a 10-year return of zero.
In order to get a 10% annualized return from the stock, Sunrun would need to be priced at a P/E of 65x its earnings 10 years from now, if at a 10% net margin. Or it would have to have some combination of lower P/E and higher growth and/or higher profit margin.
In the meantime, this is Sunrun’s recent pattern of revenue growth and profitability (the company did recently increase its estimate of installed-capacity growth in 2021 from 20-25% to a new estimate of 25% to 30%).
For the time being, Sunrun loses an extraordinary amount of money, an amount that has been getting larger. Perhaps there are scale economies that will manifest in the future,so that it will attain profitability. Perhaps from the roughly one-half of Sunrun’s revenues that are from long-term customer service agreements that run up to 25 years. For now, though, the company would seem to require a lot of external financing, and that is one of the greatest of business risks.”
2. Lockheed Martin Corporation (NYSE:LMT)
Number of Hedge Fund Holders: 51
Lockheed Martin Corporation operates as a security and aerospace firm. Druckenmiller purchased a new stake in the company between October and December 2021. This stake consists of 14,450 shares worth $5.1 million, representing 0.18% of the portfolio.
Lockheed Martin Corporation is one of the favorite security stocks in the US. Among the hedge funds being tracked by Insider Monkey, New York-based firm Millennium Management is a leading shareholder in Lockheed Martin Corporation, with 561,512 shares worth more than $193 million.
In its Q4 2020 investor letter, RiverPark Advisors, LLC, an asset management firm, highlighted a few stocks and Lockheed Martin Corporation was one of them. Here is what the fund said:
“Despite better-than-expected third quarter results, LMT shares were weak for the quarter as defense spending is expected to be flat for the coming year. With a record $150 billion backlog and almost 30% of its revenue coming from building F-35 aircraft with deliveries forecast to reach 180 per year in 4-5 years (3Q’s revenue upside was from the F-35), we believe LMT should grow at a higher rate than overall defense budget growth and Street expectations over the next several years. Further, strategic acquisitions (LMT acquired AJRD for $4 billion in late December), debt pay down, a 3% dividend yield, and continued share buybacks from $6 billion per year of free cash flow should lead to even greater shareholder returns.”
1. Snap Inc. (NYSE:SNAP)
Number of Hedge Fund Holders: 78
Snap Inc. is a California-based camera company. Among the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Lone Pine Capital is a leading shareholder in Snap Inc., with 22.6 million shares worth more than $1.6 billion.
Latest 13F filings show that Druckenmiller opened a new position in Snap Inc. during the fourth quarter of 2021. The position comprises over 1.4 million shares worth $67 million, representing 2.46% of the portfolio.
In its Q2 2021 investor letter, RiverPark Funds, an asset management firm, highlighted a few stocks and Snap Inc. was one of them. Here is what the fund said:
“Snap shares were a top contributor for the quarter as well, also driven by strong first quarter results. The company reported accelerating revenue growth of 66% for the period (up from 62% fourth quarter growth), driven by user growth of 22%, and a 36% expansion in average revenue per user (ARPU). The company also guided to stronger-than-expected and accelerating 81%-85% revenue growth for second quarter 2021. Adjusted EBITDA improved by $79 million year over year for a break-even margin, up 1,800 basis points, and free cash flow improved dramatically, turning positive for the period to $126 million. Snap also continued to roll-out products that should help drive further expansion in user growth and ARPU, including Spotlight, a TikTok-like experience, with more than 125 million Snapchatters using it during March, and original programming starring Ryan Reynolds.
With TTM of $2.8 billion in revenue and an ARPU that is about 1/2 that of Twitter and 1/3 that of Facebook, we believe Snap has a long runway for both revenue growth and expanded profitability as it improves its platform functionality, grows its audience, and continues to advance its monetization.”
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This article is originally published at Insider Monkey.
