Stanley Druckenmiller Predicted Nvidia’s Rally; now he has new goals

Of all the great sayings about courage that have been said over the centuries, Stanley Druckenmiller probably summed it up best.

“It takes guts to be a pig,” the billionaire investor said.

Related: Stanley Druckenmiller Predicts Nvidia Rally; now he has a new target

Note that the first thing Druckenmiller heard when he entered the business world was the old saying, “Bulls make money, bears make money, and pigs are slaughtered.”

But his experience with investor and philanthropist George Soros gave him a different view of the markets, and he wondered if maybe the pigs were onto something.

Druckenmiller managed money for Soros from 1988 to 2000 as lead portfolio manager for the Quantum Fund.

Their most famous play was a bet against the pound in 1992. They “broke the Bank of England”, as commentators say, apparently winning a billion dollars.

“Soros taught me that when you have tremendous conviction in a job, you have to go for the jugular,” he told author Jack Schwager. “It takes guts to be a pig.”

Druckenmiller is the former president and chairman of Duquesne Capital, which he founded in 1981 and closed in 2010, when it had more than $12 billion in assets.

In 2011, he transitioned to a family office, founding the wealth management firm Duquesne Family Office.

Duquesne Family Office President and CEO Stanley Druckenmiller during the Bloomberg Invest event in New York, U.S., Wednesday, June 7, 2023. Photographer: Jeenah Moon/Bloomberg via Getty Images

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Druckenmiller’s strategy promotes ‘investment discipline’

Druckenmiller believes that good investors “succeed not because of their IQ, but because they have an investment discipline.”

Its impressive track record makes investors eager to see its market activity, and one way to get a glimpse of how it brings home the bacon is through regulatory filings.

Related: Big names exit Nvidia stock as AI giant stumbles ahead of earnings

Investment funds with more than $100 million in assets must notify the SEC of portfolio changes quarterly. The reports, known as 13-F filings, are backdated to the end of the previous quarter.

In May, Duquesne lowered its position in semiconductor titan Nvidia (NVDA) up 5.5 percentage points to 3.6% of the portfolio, or $159 million. And it wiped out its 7.2% position in Nvidia call options.

At the time, Druckenmiller told CNBC that the rapid AI boom may be overblown in the short term.

“We cut that and many other positions at the end of March,” he said. “I just need a break. I ran like hell. Much of what we recognized has now become recognized by the market.”

Druckenmiller first bought Nvidia shares in the fourth quarter of 2022, admitting that “I didn’t even know how to write.”

“So AI might be a little overhyped now, but underrated in the long run,” he said. “The big payoff could be four to five years.”

Druckenmiller is selling more Nvidia stock

The second-quarter filing finds that Duquesne unloaded about 1.5 million additional Nvidia shares, representing about 88 percent of the company’s stock holdings.

Shares in Nvidia soared earlier this year, and the group briefly eclipsed Microsoft (MSFT) to become the most valuable company in the world.

The company’s shares fell 4.4 percent for the quarter after a stunning first-half advance of about 150 percent, and some of Wall Street’s biggest investors appear to be looking elsewhere for their exposure to AI stocks.

Stephen Guilfoyle of TheStreet Pro said in his latest column that “the two greatest investors/traders of my long career on Wall Street were Warren Buffett and Stanley Druckenmiller.”

He noted that Druckenmiller has reduced his long position in Apple (AAPL) and Microsoft (MSFT) while I had completely left the parent company on Meta Platforms Facebook (THE TARGET) .

Druckenmiller’s sizable bet on small caps broadly is missing, Guilfoyle added, “because maybe he feels the trade has come and gone.”

“Like Druckenmiller, we shorted Nvidia, not during the quarter, but after the completion of the second peak of its summer double top,” he said. “We added a few more during the market crash last Monday.”

Druckenmiller adds new stocks to its portfolio, including MELI

Duquesne de Druckenmiller reported a new position in Mid-America Apartment Communities (MAH) a real estate investment trust that is buying $92 million worth of multifamily apartments and in cigarette maker Philip Morris International Inc. (P.M) of 90 million dollars.

Earlier this month, Goldman Sachs analysts added Philip Morris to the US Company Condemnation List as part of the August update, according to The Fly.

The firm has a buy rating on the stock with a $126 price target and believes the market is underappreciating Philip Morris’ growth opportunity as the company innovates around its smokeless alternatives to cigarettes.

Those alternatives are more profitable and position the company well among peers with direct U.S. exposure, Goldman said.

On August 14, Barclays raised the company’s price target for Philip Morris to $130 from $110 and maintained an overweight rating on the stock.

Tobacco stocks had a strong Q2 because market multiples are not based on what’s happening now, but what could happen in the terminal year, Barclays said.

More AI actions:

• Nvidia shares tumble in tech decline amid key chip questions
• Microsoft exec warns of an ongoing problem
• Apple posts top forecasts, iPhone sales fall ahead of AI launch

The firm extended its price targets by six months and raised multiples by 10%.

Duquesne also bought new stakes in Adobe (ADBE) and Latin American e-commerce and payments company MercadoLibre (MELIA) which were worth about $20 million and $60 million, respectively.

Citi raised the company’s price target on MercadoLibre to $2,200 from $2,000 on Aug. 15 and maintained a buy rating on the stock.

Related: MercadoLibre share price rises on Wall Street after earnings

Even amid a challenging quarter, particularly in Brazil, MercadoLibre was able to accelerate gross merchandise volume and deliver one of its best volume increases in years, the firm said.

Citi said that was the most important takeaway from the company’s second-quarter report and the main reason it raised its sales estimates.

The Uruguay-based company beat Wall Street’s second-quarter earnings expectations earlier this month, reporting a profit of $10.48 per share on revenue of $5.1 billion.

Analysts had expected earnings of $8.53 per share on revenue of $4.7 billion. The company reported net income of $531 million, up from $262 million a year ago.

Marcos Eduardo Galperin, chairman, president and CEO of MercadoLibre, told analysts during the company’s earnings call that Aug. 2 “marks 25 years since we founded MercadoLibre with a mission to democratize commerce and financial services in America Latin.

“Over these 25 years, we’ve built a sustainable company that gives millions of small and medium-sized businesses the tools they need to compete with bigger players,” he said.

“We enabled the shift to online retail, providing tens of millions of consumers with world-class service levels. And we included millions of people in the financial system in the region for the first time,” added Galperin.

Related: Veteran fund manager sees world of pain coming for stocks