In this article, we discuss the 10 stocks that billionaire Stanley Druckenmiller is selling.
It is no secret that big technology stocks are undergoing a period of prolonged turmoil as soaring inflation and rising interest rates combine to invoke recession fears and keep investors on the sidelines with regards to growth offerings. Even Wall Street titans are starting to turn on big tech firms. Stanley Druckenmiller of Duquesne Capital, one of the biggest tech bulls in the market, recently sold off many growth stocks in anticipation of a slowdown in the US economy, per latest disclosures made by his hedge fund.
Some of the top stocks in the Duquesne Capital portfolio at the end of the second quarter of 2022 included Chevron Corporation (NYSE:CVX), CrowdStrike Holdings, Inc. (NASDAQ:CRWD), and Eli Lilly and Company (NYSE:LLY). Druckenmiller is not alone in fearing a market crash. Most benchmark indexes in the US are trading in the red over the past few months. The S&P 500 is down 17% year-to-date, the NASDAQ Composite is down 25% year-to-date, and even the Dow Jones Industrial Average is down more than 13%.
Druckenmiller has outlined his investing strategy clearly during a conference in June. The legendary investor said at the time that the markets were already in a bear territory for six months. He noted that even though tactical traders may take advantage of a small lull in this bear market, it was likely that it still had a long way to run. Latest filings show that between March 2022 and June 2022, the value of the equity portfolio of his fund decreased by around $1 billion as he sold off his big tech stakes and stock prices declined widely.
Our Methodology
The companies listed below were picked from the investment portfolio of Duquesne Capital at the end of the second quarter of 2022. The stocks which the hedge fund sold off completely in the second quarter, compared to filings for the first quarter of 2022, were selected. Data from around 900 elite hedge funds tracked by Insider Monkey in the second quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.
Billionaire Stanley Druckenmiller is Selling These Stocks
10. Sunrun Inc. (NASDAQ:RUN)
Number of Hedge Fund Holders: 36
Sunrun Inc. (NASDAQ:RUN) develops and installs residential solar energy systems. The company has been given a massive boost by the recent passing of the Inflation Reduction Act, a legislation that aims to extend tax benefits and includes other incentives for climate firms in the United States. The Act will also provide solar firms with some relief from soaring prices of solar panels, which rose 8% in the second quarter of 2022, and hit the sales of the technology in the country.
On August 18, Morgan Stanley analyst Stephen Byrd maintained an Overweight rating on Sunrun Inc. stock and raised the price target to $79 from $70, noting the firm would benefit from the Inflation Reduction Act.
Among the hedge funds being tracked by Insider Monkey, Bermuda-based investment firm Orbis Investment Management is a leading shareholder in Sunrun Inc., with 12.9 million shares worth more than $303 million.
Just like Chevron Corporation, CrowdStrike Holdings, Inc., and Eli Lilly and Company, Sunrun Inc. is one of the stocks on the radar of elite investors.
9. The PNC Financial Services Group, Inc. (NYSE:PNC)
Number of Hedge Fund Holders: 42
The PNC Financial Services Group, Inc. (NYSE:PNC) is a diversified financial services firm. On July 15, the company posted earnings for the second quarter, reporting earnings per share of $3.42, beating market estimates by $0.31. The revenue for the period was $5.1 billion, up over 9% compared to the revenue over the same period last year and missing analyst expectations by $9 million. The company also revealed that over the period, it had an operating leverage of 7%, reflecting revenue growth of 9% and expense growth of 2%.
On August 25, Baird analyst David George maintained an Outperform rating on The PNC Financial Services Group, Inc. stock with a price target of $230, noting the firm was executing well in a challenging environment.
At the end of the second quarter of 2022, 42 hedge funds in the database of Insider Monkey held stakes worth $592 million in The PNC Financial Services Group, Inc., compared to 49 in the previous quarter worth $1.4 billion.
8. Snap Inc. (NYSE:SNAP)
Number of Hedge Fund Holders: 44
Snap Inc. (NYSE:SNAP) is a camera company headquartered in California. In late August, the company announced that it would be cutting the workforce it had by nearly 20% as part of a massive restructuring plan. The 20% cut will translate to 1,200 jobs. The firm said it expected revenues for the current quarter to register an 8% year-over-year gain, well below expectations of market analysts. The company plans to double down on community growth, revenue growth, and augmented reality in a bid to boost the shares.
On September 1, RBC Capital analyst Brad Erickson maintained a Sector Perform rating on Snap Inc. stock and raised the price target to $11 from $10, noting that the positive pre-announcement and headcount reduction of the firm had again surprised investors.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Snap Inc., with 18 million shares worth more than $238 million.
In its Q4 2021 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Snap Inc. was one of them. Here is what the fund said:
“Snap Inc. is the leading social network among teens and young adults in North America and a growing number of overseas markets, including Western Europe and India. Shares fell this quarter on a greater-than anticipated impact from Apple’s new privacy changes for iOS mobile devices. These changes made it more difficult for Snapchat to measure the effectiveness of ads shown on its platform. We believe this is a near-term, industry-wide issue for which Snap Inc. is already developing a solution. Longer term, we continue to view Snap Inc. favorably as the company sustains its rapid pace of product innovation and expands its premium partnerships with advertisers.”
7. The Mosaic Company (NYSE:MOS)
Number of Hedge Fund Holders: 50
The Mosaic Company (NYSE:MOS) markets phosphate and potash crop nutrients. Duquesne Capital first purchased a stake in the firm back in the second quarter of 2021. This holding comprised 162,000 shares purchased at an average price of $33.91 per share. This stake was sold off in the next quarter. The share price of the firm, as of September 8, is in excess of $53 per share. At the end of the first quarter of 2022, the firm owned nearly 143,000 shares in the company.
On August 10, Barclays analyst Benjamin Theurer maintained an Underweight rating on The Mosaic Company stock and lowered the price target to $52 from $59, noting the firm had some downside risk with application in 2022 and low production levels.
At the end of the second quarter of 2022, 50 hedge funds in the database of Insider Monkey held stakes worth $895 million in The Mosaic Company, compared to 66 in the preceding quarter worth $1.5 billion.
In its Q4 2021 investor letter, Ariel Investments, an asset management firm, highlighted a few stocks and The Mosaic Company was one of them. Here is what the fund said:
“We continue to believe recent aggressive fiscal and monetary policy will drive high levels of intransient (rather than transitory) inflation. Recent inflation numbers have exceeded our hawkish predictions. While we believed the Consumer Price Index might rise +4% in 2021, double the Fed target of +2%; it rose +7%, the highest level in forty years. Ariel Focus Fund has been well positioned for this environment as natural resource and material companies such as The Mosaic Company which returned +72.15% for the year. This was one of our two largest holdings at year-end and have performed well very early into 2022.”
6. Flex Ltd. (NASDAQ:FLEX)
Number of Hedge Fund Holders: 50
Flex Ltd. (NASDAQ:FLEX) provides supply chain services and solutions. On July 27, the company posted earnings for the first fiscal quarter, reporting earnings per share of $0.54, beating market estimates by $0.06. The revenue for the period was $7.3 billion, up over 15% compared to the revenue in the same period last year and beating analyst expectations by $540 million. The company guided second fiscal quarter revenue to $7 billion – $7.4 billion versus consensus of $6.93 billion.
On August 16, Credit Suisse analyst Shannon Cross initiated coverage of Flex Ltd. stock with an Outperform rating and a price target of $24, noting the firm had a natural offset to cyclical spending and product launches.
At the end of the second quarter of 2022, 50 hedge funds in the database of Insider Monkey held stakes worth $1 billion in Flex Ltd., compared to 48 the preceding quarter worth $1.4 billion.
Along with Chevron Corporation, CrowdStrike Holdings, Inc., and Eli Lilly and Company, Flex Ltd. is one of the stocks that hedge funds are monitoring.
5. Zendesk, Inc. (NYSE:ZEN)
Number of Hedge Fund Holders: 63
Zendesk, Inc. (NYSE:ZEN) operates as a software development firm. The European Union has set a deadline of late September to rule on the planned purchase of Zendesk by Hellman & Friedman. Last month, the latter had purchased the former and filed with Chinese antitrust regulators in this regard. In late June, the firm had agreed on a deal to acquire the software company worth around $10.2 billion, equating to $77.50 per share. Hellman & Friedman is a private equity firm.
On July 28, William Blair analyst Arjun Bhatia downgraded Zendesk, Inc. stock to Market Perform from Outperform without a price target, noting that the slowdown in the business of the firm was greater than expected.
At the end of the second quarter of 2022, 63 hedge funds in the database of Insider Monkey held stakes worth $1.8 billion in Zendesk, Inc., compared to 66 in the previous quarter worth $3.2 billion.
In its Q3 2021 investor letter, Carillon Tower Advisers, an asset management firm, highlighted a few stocks and Zendesk, Inc. was one of them. Here is what the fund said:
“Zendesk, Inc. provides customer support software solutions. After successfully navigating the early stages of the pandemic in 2020, the firm has seen its stock cool off on the threat of increased competition from low-cost alternatives. We do not believe that the competitive dynamics have been altered. In fact, the company’s annual revenue growth rate has accelerated in 2021 from the second half of 2020. The shares also currently trade at a deep discount to other cloud-based software vendors.”
4. Sea Limited (NYSE:SE)
Number of Hedge Fund Holders: 65
Sea Limited (NYSE:SE) is a diversified technology company. The company has been featured in the Duquesne Capital portfolio consistently since the first quarter of 2019. Back in 2019, the holding consisted of around 22,000 shares purchased at an average price of $17.52 per share. The share price of the firm, as of September 8, is in excess of $58 per share. At the end of the first quarter of 2022, the firm owned nearly 48,000 shares in the company. Duquesne had been selling the stock since late 2020.
On August 18, Barclays analyst Jiong Shao maintained an Overweight rating on Sea Limited stock and lowered the price target to $114 from $125, noting that many macro factors had become more uncertain in recent months for the firm.
At the end of the second quarter of 2022, 65 hedge funds in the database of Insider Monkey held stakes worth $2.6 billion in Sea Limited, compared to 77 in the previous quarter worth $5 billion.
In its Q1 2022 investor letter, Farrer Wealth Advisors, an asset management firm, highlighted a few stocks and Sea Limited was one of them. Here is what the fund said:
“Sea Limited had been selling off since its peak in early November of ~$363/share. This was driven by both a general sell off in tech, especially non-profitable tech, and a general belief that its gaming arm (Garena) was experiencing a slowdown due to its flagship game Free Fire. Free Fire has experienced a slowdown for three reasons: it is a victim of its own success, and by the end of Q321, nearly 10% of the world’s population already played the game, and thus reaching new users was difficult; A return to normal with people traveling/going out more and spending less time playing games; and the Indian market imposed a ban on the game due to anti-Chinese sentiment (Tencent is a large shareholder in Sea Limited). We believed that these issues, while worth considering, were a bit overblown, and some of the data we saw from 3rd party sources showed that though Free Fire usage was dipping, it wasn’t too drastic. Thus, we marginally added to the position throughout the quarter. This was a mistake. During Sea’s earnings report in early March, the company guidance for Garena (down nearly 35% yoy) showed that the slowdown was far worse than predicted. Secondly, Shopee (Sea’s ecommerce arm) has pulled out of certain markets (in Europe and India), which long-term is probably the right strategy, but short-term hampers the optionality of the business. After considering this information and the guidance from earnings, we decided to significantly trim the position. In our opinion, management does have a bit of egg on its face from an overly aggressive expansion or as one investor called it, “bull market hubris.” We think management’s moves were mostly logical, it’s just that their failures came during an unforgiving market. While we believe that Sea’s future is still bright (especially with regards to their e-commerce and financial services), it will take a few quarters of strong earnings for them to regain their momentum, and for now the capital can be better spent elsewhere.”
3. Expedia Group, Inc. (NASDAQ:EXPE)
Number of Hedge Fund Holders: 80
Expedia Group, Inc. (NASDAQ:EXPE) operates as an online travel firm. On August 4, the company posted earnings for the second quarter of 2022, reporting earnings per share of $1.96, beating market estimates by $0.40. The revenue over the period was $3.1 billion, up over 50% compared to the revenue over the same period last year and beating analyst expectations by $190 million. The company also revealed that lodging gross bookings were up 8% versus the second quarter 2019.
On August 19, UBS analyst Lloyd Walmsley maintained a Neutral rating on Expedia Group, Inc. stock and raised the price target to $112 from $108, citing the marketing pivot of the firm as one of the reasons behind the target raise.
At the end of the second quarter of 2022, 80 hedge funds in the database of Insider Monkey held stakes worth $3 billion in Expedia Group, Inc., compared to 88 in the previous quarter worth $6 billion.
In its Q1 2022 investor letter, Aristotle Capital Management, an asset management firm, highlighted a few stocks and Expedia Group, Inc. was one of them. Here is what the fund said:
“Expedia Group, Inc. outperformed in the first quarter following a better-than-expected earnings report for the company’s fourth quarter of 2021. During the pandemic, the company reduced expenses which has improved operating leverage as revenue recovers. Expectations for travel in 2022 have improved as COVID cases have declined.”
2. Netflix, Inc. (NASDAQ:NFLX)
Number of Hedge Fund Holders: 95
Netflix, Inc. (NASDAQ:NFLX) owns and runs an online streaming platform. As the subscriber growth of the firm hits a snag, the company has started pushing ahead with plans for advertisements in order to keep pace with competitors like Disney. Per reports, the company is considering limited targeting for advertisers. This would effectively let Netflix control which programming to advertise in. The initial rates are $60 to reach a thousand viewers and a minimum investment of $20 million.
On September 7, Jefferies analyst Andrew Uerkwitz maintained a Hold rating on Netflix, Inc. stock and lowered the price target to $230 from $243, noting the firm had a near-term lack of growth and a lot to prove.
Among the hedge funds being tracked by Insider Monkey, Chicago-based firm Citadel Investment Group is a leading shareholder in Netflix, Inc., with 6.3 million shares worth more than $1.1 billion.
In its Q2 2022 investor letter, L1 Capital International, an asset management firm, highlighted a few stocks and Netflix, Inc. was one of them. Here is what the fund said:
“While it seems an eternity ago, in April Netflix, Inc. reported Q1 2022 results and gave forward guidance which flashed many red flags. Not only were subscription numbers (and forward guidance) well below expectations, but management also gave new disclosure on the massive extent of password sharing which raises concerns that Netflix is much more mature than we had previously considered, constraining future growth. Management also haphazardly announced it will introduce an advertising-supported subscription tier, albeit currently lacking the necessary capabilities to do so. Despite continuing to produce world-leading content, we have lost confidence in management’s ability to respond to increased competition and a more challenging operating environment. We sold our entire investment in Netflix immediately post Q1 2022 results. Currently we do not consider Netflix to meet our stringent quality criteria to be considered as a potential investment in the Fund.”
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 252
Amazon.com, Inc. (NASDAQ:AMZN) is a diversified technology firm with core interests in e-commerce. The company has featured in the Duquesne Capital portfolio intermittently since the fourth quarter of 2010. Back in 2010, the holding consisted of around 12 million shares purchased at an average price of $8.48 per share. The share price of the firm, as of September 8, is in excess of $128 per share. Amazon, already one of the largest conglomerates in the world, is preparing to enter the prescription drug sales market in Japan, per reports.
On August 29, Citi analyst Jason Bazinet maintained a Buy rating on Amazon.com, Inc. stock with a price target of $152, noting that the firm would face regulatory risks with buying Electronic Arts.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm Citadel Investment Group is a leading shareholder in Amazon.com, Inc., with 66 million shares worth more than $7 billion.
In its Q2 2022 investor letter, L1 Capital International, an asset management firm, highlighted a few stocks and Amazon.com, Inc. was one of them. Here is what the fund said:
“Amazon.com, Inc. was the largest negative contributor to the Fund during the quarter. Q1 2022 results and Q2 2022 profit guidance were below market expectations. Amazon has been operating in an extraordinary environment since the start of the COVID-19 pandemic. Lockdowns led to an exceptionally rapid shift in retail activity online and Amazon benefitted from a dramatic increase in revenue. Management responded by doubling fulfilment and logistics capacities over a 2-year period – a response which has proven to be somewhat excessive.
Too much capacity, combined with elevated shipping and logistics costs, employee inefficiencies and a resetting of higher share-based compensation have pressured near-term profitability of Amazon’s retail (non-Amazon Web Services) operations. Management changes have exacerbated market uncertainty. We consider these issues to be real and negative to valuation, but somewhat transitory and more than reflected in Amazon’s current share price. Meanwhile Amazon Web Services (AWS) continues to deliver strong, profitable growth, ahead of our base case.
To describe our perspectives on Amazon we are reminded of the opening line in A Tale of Two Cities by Charles Dickens – “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness…”. In our tale, one city is Amazon Web Services (AWS), while the other is everything else, which we will refer to as Retail and Other…” (Click here to read the full text)
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