In this article, we discuss Druckenmiller’s latest market prediction and his 10 defensive stock picks. If you want to read about some more stocks in the Druckenmiller portfolio, go directly to Druckenmiller’s Prediction and His 5 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. (NYSE:CVE) 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. (NYSE:CVE) 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. (NYSE:CVE), compared to 44 in the previous quarter worth $2.4 billion.
Just like Chevron Corporation (NYSE:CVX), T-Mobile US, Inc. (NASDAQ:TMUS), and Eli Lilly and Company (NYSE:LLY), Cenovus Energy Inc. (NYSE:CVE) 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. (NYSE:CVE) was one of them. Here is what the fund said:
“We bought shares in Cenovus Energy Inc. (NYSE:CVE). 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. (NASDAQ:MRNA) at the end of the second quarter of 2022 worth more than $29 million, representing 2.14% of the portfolio. Moderna, Inc. (NASDAQ:MRNA) 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. (NASDAQ:MRNA) 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. (NASDAQ:MRNA), 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. (NASDAQ:MRNA) was one of them. Here is what the fund said:
“Moderna, Inc. (NASDAQ:MRNA) 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 (NYSE:TECK) at the end of the second quarter of 2022 worth more than $32 million, representing 2.34% of the portfolio. Teck Resources Limited (NYSE:TECK) 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 (NYSE:TECK) 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 (NYSE:TECK), 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. (NYSE:FCX) at the end of the second quarter of 2022 worth close to $94 million, representing 6.84% of the portfolio. Freeport-McMoRan Inc. (NYSE:FCX) 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. (NYSE:FCX) 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. (NYSE:FCX), 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. (NYSE:FCX) 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 (NYSE:FCX) 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 (NYSE:PXD) 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 (NYSE:PXD) 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 (NYSE:PXD), with 698,300 shares worth more than $155.7 million.
In addition to Chevron Corporation (NYSE:CVX), T-Mobile US, Inc. (NASDAQ:TMUS), and Eli Lilly and Company (NYSE:LLY), Pioneer Natural Resource Company (NYSE:PXD) 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 (NYSE:PXD) was one of them. Here is what the fund said:
“Pioneer Natural Resources (NYSE:PXD) 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.”
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Disclosure. None. Market Could be “Flat” for 10 Years: Druckenmiller’s Prediction and His 10 Defensive Stock Picks is originally published on Insider Monkey.