In this article, we discuss Druckenmiller’s latest market prediction and his 10 defensive stock picks.
Stanley Druckenmiller of Duquesne Capital is one of the most famous investors on Wall Street, having averaged returns of over 30% in a more than two-decade period between the late 1980s and early 2010s as a money manager. His fund, now a family office, manages an equity portfolio worth more than $1.3 billion as of the end of the second quarter of 2022. Some of the top defensive stocks in the Stanley Druckenmiller portfolio include Chevron Corporation (NYSE:CVX), T-Mobile US, Inc. (NASDAQ:TMUS), and Eli Lilly and Company (NYSE:LLY). Defensive stocks are the safest bets to play the highly volatile stock market.
Druckenmiller recently sat down for an interview with Alex Karp, the chief executive officer of software firm Palantir, to discuss investment opportunities in the artificial intelligence space and the developing market situation with regards to recession fears. The veteran investor noted that it was becoming harder to predict which way the tide would turn as the Ukraine war, the pandemic, and rising interest rates pummeled the growth market. He further said:
“There’s a high probability in my mind that the market, at best, is going to be kind of flat for 10 years, sort of like this ’66 to ’82 time period.”
Druckenmiller added that “this is the hardest environment I have encountered to forecast” and it mimicked the market conditions between 1966 and 1982. The money manager claimed that rising inflation, interest rate hikes, and the ongoing Ukraine-Russia war, in addition to reversing globalization were some of the reasons that were likely to lead to a global recession within the next few years. Regarding US-China relations, Druckenmiller is of the view that the cold war seems to be turning into a hot war. He also believes that the US-China relations were at their best under President Trump’s regime. He noted that the market conditions that had created a bull market in the US after 1982 had not only stopped but were reversing.
Our Methodology
The companies listed below were picked from the investment portfolio of Duquesne Capital at the end of the second quarter of 2022. Stocks that operate in defensive sectors like energy, consumer staples, and pharma were preferred for the list. The analyst ratings and business fundamentals of the firms are also discussed to provide readers with some additional context for their investment choices. The hedge fund sentiment around each stock was calculated using the data of around 900 hedge funds tracked by Insider Monkey in the second quarter of 2022.
Market Could be “Flat” for 10 Years: Druckenmiller’s Prediction and His Defensive Stock Picks
10. Cenovus Energy Inc. (NYSE:CVE)
Number of Hedge Fund Holders: 42
Cenovus Energy Inc. (NYSE:CVE) develops, produces, and markets crude oil, natural gas liquids, and natural gas. Securities filings show that Duquesne Capital owned 1 million shares of Cenovus Energy Inc. at the end of June 2022 worth $20 million, representing close to 1.47% of the portfolio.
On August 10, investment advisory Credit Suisse assumed coverage of Cenovus Energy Inc. stock with an Outperform rating and a price target of C$37. Analyst William Janela issued the ratings update.
At the end of the second quarter of 2022, 42 hedge funds in the database of Insider Monkey held stakes worth $2.9 billion in Cenovus Energy Inc., compared to 44 in the previous quarter worth $2.4 billion.
Just like Chevron Corporation, T-Mobile US, Inc., and Eli Lilly and Company, Cenovus Energy Inc. is one of the prominent defensive stocks in the portfolio of Stanley Druckenmiller.
In its Q2 2022 investor letter, Vitava Funds, an asset management firm, highlighted a few stocks and Cenovus Energy Inc. was one of them. Here is what the fund said:
“We bought shares in Cenovus Energy Inc.. This marks the first time in 10 years that an oil producing company has appeared in the Vltava Fund portfolio. Cenovus is a Canadian integrated gas and oil company based in Calgary. It is Canada’s third-largest producer of crude oil and natural gas, the country’s second-largest refiner, and it combines high-quality and low-cost assets in the oil sands segment and heavy oil with extensive downstream infrastructure.
Investment in this sector is not at all easy. It is a cyclical industry where it is not easy to build a competitive advantage. The investment horizons are long and companies often work with large debt. Many companies face problems creating sufficient free cash flow in the long term. Our experience leads us to the view that it is necessary to give preference to companies that already today are producing at high levels so that they immediately can take advantage of the strong oil prices and need not rely on capacity that will be brought online only in the future. Such a company should have reasonable operating costs, low debt, and very long-term reserves the development of which need not swallow up all the profits that are generated. In our opinion, Cenovus Energy offers all of this and it also has a very shareholder-friendly capital allocation.”
9. Moderna, Inc. (NASDAQ:MRNA)
Number of Hedge Fund Holders: 45
Moderna, Inc. (NASDAQ:MRNA) is a biopharma company that discovers, develops, and commercializes messenger RNA therapeutics and vaccines. Latest data shows that Duquesne Capital owned 207,680 shares of Moderna, Inc. at the end of the second quarter of 2022 worth more than $29 million, representing 2.14% of the portfolio. Moderna, Inc. is one of the premier defensive stock picks of Stanley Druckenmiller.
On September 14, Argus analyst Jasper Hellweg maintained a Buy rating on Moderna, Inc. stock and lowered the price target to $150 from $180, noting the discounted shares offered a buying opportunity for investors.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm Theleme Partners is a leading shareholder in Moderna, Inc., with 6.4 million shares worth more than $907 million.
In its Q3 2021 investor letter, Carillon Towers Advisers, an asset management firm, highlighted a few stocks and Moderna, Inc. was one of them. Here is what the fund said:
“Moderna, Inc. is a biotechnology company pioneering messenger RNA (mRNA) therapeutics and vaccines. The stock proved to be an impressive contributor once again in the quarter, as investors continue to evaluate the potential for future growth driven primarily by the firm’s revolutionary COVID-19 vaccine. Strong global demand for the vaccine may persist for the foreseeable future in order to maintain immunity as well as provide protection against any additional future variants. The potential for the firm’s mRNA technology to be used in a number of other use cases, specifically influenza, could also provide an additional tailwind for future growth.”
8. Teck Resources Limited (NYSE:TECK)
Number of Hedge Fund Holders: 46
Teck Resources Limited (NYSE:TECK) engages in exploring for, acquiring, developing, and producing natural resources. Latest data shows that Duquesne Capital owned 1 million shares of Teck Resources Limited at the end of the second quarter of 2022 worth more than $32 million, representing 2.34% of the portfolio. Teck Resources Limited is a significant defensive stock pick of Stanley Druckenmiller.
On September 21, Deutsche Bank analyst Abhi Agarwal maintained a Buy rating on Teck Resources Limited stock and lowered the price target to $43 from $45, citing the reduction of met coal guidance as one of the reasons behind the target decrease.
Among the hedge funds being tracked by Insider Monkey, New York-based firm Soroban Capital Partners is a leading shareholder in Teck Resources Limited, with 13 million shares worth more than $416 million.
7. Freeport-McMoRan Inc. (NYSE:FCX)
Number of Hedge Fund Holders: 56
Freeport-McMoRan Inc. (NYSE:FCX) engages in the mining of mineral properties in North America, South America, and Indonesia. Latest data shows that the hedge fund led by Druckenmiller owned more than 3.2 million shares in Freeport-McMoRan Inc. at the end of the second quarter of 2022 worth close to $94 million, representing 6.84% of the portfolio. Freeport-McMoRan Inc. is also an elite defensive stock pick of Stanley Druckenmiller.
On July 22, RBC Capital analyst Sam Crittenden maintained a Sector Perform rating on Freeport-McMoRan Inc. stock and lowered the price target to $35 from $46, noting that the firm had posted another strong operating quarter.
At the end of the second quarter of 2022, 56 hedge funds in the database of Insider Monkey held stakes worth $2.4 billion in Freeport-McMoRan Inc., compared to 68 the preceding quarter worth $4.1 billion.
In its Q1 2022 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Freeport-McMoRan Inc. was one of them. Here is what the fund said:
“Supply chains eased for some goods, but remained challenged for many commodities including energy, agriculture, and fertilizer due to war and general scarcity, and also in many consumer products as semiconductors remained in short supply. Copper and gold producer Freeport- McMoRan rose as copper prices remained strong due to supply shortages and growing use in renewable energy systems and electric vehicles.”
6. Pioneer Natural Resources Company (NYSE:PXD)
Number of Hedge Fund Holders: 56
Pioneer Natural Resource Company (NYSE:PXD) operates as an independent oil and gas exploration and production company. Securities filings show that the hedge fund led by Druckenmiller owned 48,455 shares of Pioneer Natural Resources Company at the end of the second quarter of 2022 worth more than $10 million, representing 0.78% of the portfolio.
On September 21, Citi analyst Scott Gruber maintained a Buy rating on Pioneer Natural Resource Company stock and lowered the price target to $257 from $260, noting that exploration and production names had bounced back as oil slides.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Pioneer Natural Resource Company, with 698,300 shares worth more than $155.7 million.
In addition to Chevron Corporation, T-Mobile US, Inc., and Eli Lilly and Company, Pioneer Natural Resource Company is one of the prominent defensive stocks in the portfolio of Stanley Druckenmiller.
In its Q2 2022 investor letter, Carillon Tower Advisers, an asset management firm, highlighted a few stocks and Pioneer Natural Resource Company was one of them. Here is what the fund said:
“Pioneer Natural Resources performed well in a strong energy sector. Pioneer stood out recently with a pledge to return a large majority of free cash flow to shareowners through dividends and stock buybacks, and ended hedging to give shareowners more earnings and dividend potential should oil and gas prices continue to rise.”
5. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders: 59
Chevron Corporation engages in integrated energy and chemical operations worldwide. Securities filings show that Duquesne Capital owned 830,435 shares of Chevron Corporation at the end of June 2022 worth $120 million, representing close to 8.69% of the portfolio. Chevron Corporation is one of the defensive stock picks of Stanley Druckenmiller.
On September 12, investment advisory Piper Sandler maintained an Overweight rating on Chevron Corporation stock and raised the price target to $190 from $189. Analyst Ryan Todd issued the ratings update.
At the end of the second quarter of 2022, 59 hedge funds in the database of Insider Monkey held stakes worth $26 billion in Chevron Corporation, compared to 53 the preceding quarter worth $27.99 billion.
In its Q1 2022 investor letter, Diamond Hill, an asset management firm, highlighted a few stocks and Chevron Corporation was one of them. Here is what the fund said:
“Other top contributors in Q1 included multinational energy company Chevron Corp.. The company benefited from increased energy demand as COVID-related economic restrictions eased in tandem with concerns regarding supply interruptions related to Russia’s invasion of Ukraine.”
4. Antero Resources Corporation (NYSE:AR)
Number of Hedge Fund Holders: 64
Antero Resources Corporation (NYSE:AR) is an independent oil and natural gas company that acquires, explores for, develops, and produces natural gas, natural gas liquids, and oil properties. According to the latest filings, Duquesne Capital owned over 1 million shares of Antero Resources Corporation at the end of June 2022 2022 worth $31 million, representing 2.25% of the portfolio. Antero Resources Corporation is also an elite defensive stock pick of Stanley Druckenmiller.
On August 18, Mizuho analyst Vincent Lovaglio maintained a Buy rating on Antero Resources Corporation stock and lowered the price target to $49 from $53, noting that the broader thesis for the exploration and production sector holds after the Q2 results.
At the end of the second quarter of 2022, 64 hedge funds in the database of Insider Monkey held stakes worth $1.5 billion in Antero Resources Corporation, compared to 53 in the preceding quarter worth $1.4 billion.
3. Eli Lilly and Company (NYSE:LLY)
Number of Hedge Fund Holders: 70
Eli Lilly and Company discovers, develops, and markets human pharmaceuticals worldwide. Latest data shows that the hedge fund led by Druckenmiller owned more than 297,100 shares in Eli Lilly and Company at the end of the second quarter of 2022 worth close to $96 million, representing 6.97% of the portfolio.
On September 6, BMO Capital analyst Evan Seigerman maintained an Outperform rating on Eli Lilly and Company stock and raised the price target to $396 from $369, noting it was difficult to overemphasize the opportunity in obesity drugs for the firm.
Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in Eli Lilly and Company, with 5.9 million shares worth more than $1.9 billion.
In its Q2 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Eli Lilly and Company was one of them. Here is what the fund said:
“Eli Lilly and Company is a global pharmaceutical company focused on discovering, developing, and selling medicines for patients in the therapeutic areas of diabetes, oncology, immunology, and neuroscience. Stock performance was strong due to positive study results for Eli Lilly’s drug Tirzepatide (subsequently branded Mounjaro), which delivered up to 22.5% weight loss in adults with obesity. We think Tirzepatide is in the early innings of adoption in a large obesity market where penetration of anti-obesity medications is currently low. We continue to think Eli Lilly has a healthy base business with limited near-term patent expirations, a strong pipeline, and potential for significant margin expansion, which should translate to solid revenue and earnings growth over many years.”
2. T-Mobile US, Inc. (NASDAQ:TMUS)
Number of Hedge Fund Holders: 96
T-Mobile US, Inc. provides mobile communications services. Latest data shows that Duquesne Capital owned 676,867 shares of T-Mobile US, Inc. at the end of the second quarter of 2022 worth over $91 million, representing 6.58% of the portfolio. T-Mobile US, Inc. is one of the premier defensive stock picks of Stanley Druckenmiller.
On September 9, Raymond James analyst Ric Prentiss maintained a Strong Buy rating on T-Mobile US, Inc. stock and raised the price target to $178 from $175, noting that the board had authorized a $14 billion stock repurchase, which is positive for value creation.
Among the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Viking Global is a leading shareholder in T-Mobile US, Inc., with 9.2 million shares worth more than $1.2 billion.
In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and T-Mobile US, Inc. was one of them. Here is what the fund said:
“As mentioned, the communication services sector has come under some pressure, and irrational pricing competition has negatively impacted wireless industry growth and profitability of late, weighing on T-Mobile US, Inc.. Faced with these headwinds, and with pressure from other wireless carriers and cable companies that could cause the company to cede share in subscriber growth in 2022, we exited our position in the fourth quarter.”
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 258
Microsoft Corporation (NASDAQ:MSFT) develops, licenses, supports software, services, devices, and solutions worldwide. According to the latest filings, Duquesne Capital owned over 740,700 shares of Microsoft Corporation at the end of June 2022 2022 worth $190 million, representing 13.76% of the portfolio. Microsoft Corporation is one of the top defensive stock picks of Stanley Druckenmiller.
On July 27, Wedbush analyst Daniel Ives maintained an Outperform rating on Microsoft Corporation stock and lowered the price target to $320 from $340, noting that the metrics around cloud and commercial bookings looked strong for the firm.
At the end of the second quarter of 2022, 258 hedge funds in the database of Insider Monkey held stakes worth $56 billion in Microsoft Corporation, compared to 259 in the previous quarter worth $66 billion.
In its Q2 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Microsoft Corporation was one of them. Here is what the fund said:
“Shares of Microsoft Corporation, a leading global provider of software solutions, declined 16.6% in the quarter along with the broader software group as well as due to growing concerns of a potential macro-driven slowdown. This is despite the company posting strong quarterly financial results and successfully absorbing headwinds from the war in Ukraine. The company had 21% revenue growth, 23% operating income growth, and 35% growth in Microsoft Cloud (all year-over-year in constant currency), which now represents 47% of total revenues. (read more…)
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This article is originally published at Insider Monkey.
