Billionaire Stanley Druckenmiller Goes Bargain Hunting: 2 Stocks He Just Bought

Stanley Druckenmiller may not be as well known as other hedge fund billionaires, but if you want to learn from the best, it’s hard to do better than Druckenmiller.

A protégé of George Soros, Druckenmiller helped make the famous Soros bet that broke the Bank of England, crashing the pound and making more than $1 billion in 1992.

Even better, as manager of Duquesne Capital Management, Druckenmiller generated an average compounded annual return of 30% from the fund’s inception in 1981 until it closed in 2010. Druckenmiller continues to invest through his family office, and his moves are closely watched. Druckenmiller emphasizes position sizing in his strategy, saying, “It’s not whether you’re right or wrong; it’s how much you win when you’re right and how much you lose when you’re wrong.” He is also known for following macro trends and has been quick to change his mind as situations change.

So what did Druckenmiller buy in the second quarter? Let’s take a look at some of his most interesting acquisitions.

Image source: Getty Images.

1. Philip Morris

One of Duquesne Capital Management’s largest new positions in the quarter was Philip Morris International (P.M 0.92%)the international tobacco giant.

Duquesne bought nearly 900,000 shares of Philip Morris, worth about $110 million. It also bought calls on the stock, indicating further bullishness in the tobacco asset. Druckenmiller’s bet appears to have paid off as the stock is up more than a third from its April 12 low, a big move from a recession-proof industry known for dividends and safety.

Shares in Philip Morris have soared as the company has been more successful in transitioning to smoke-free products than peers. Altria and British American Tobacco. In fact, about 40 percent of Philip Morris’s revenue now comes from cutting-edge products like Zyn nicotine pouches and smoke-free Iqos devices. It even obtained the license to sell Iqos sticks in the US, opening up a potentially large market for the smokeless product.

In the second quarter, Philip Morris posted solid growth, with organic revenue up 9.6% to $9.5 billion and a 10.6% increase in adjusted earnings per share of $1.77. Growth in its non-smoking categories was even more impressive, with organic revenue up 18% and gross profit up 22%. Since smokeless products are a bigger part of the business, they should drive revenue growth.

Philip Morris also remains a strong dividend stock, with a dividend yield of 4.3%.

2. Coherent

Druckenmiller’s largest holding is now Coherent (COHR 0.06%)which comes after it sold a significant stake in Coupang and sold most of his shares of Nvidia.

Coherent manufactures lasers and develops laser-based technology and electro-optical switches. Its technology became valuable in semiconductor manufacturing, which connected the company to the artificial intelligence (AI) boom.

The company is seeing strong growth in its Datacom transceiver business, a key part of fiber optic networks, which is being driven by the rise of generative AI. This also helped expand Coherent’s gross margin in the quarter, which rose 440 basis points to 32.9%.

Wall Street expects profits to continue to rise as it capitalizes on the emerging technology. Coherent’s own guidance calls for adjusted earnings per share of $0.53 to $0.69, up from just $0.16 in the year-ago quarter, while revenue is expected to rise 24.7 % in the middle of the guidance range of $1.27 billion to $1.35 billion.

Like Philip Morris, Coherent also rallied in the second quarter, jumping more than 50% from its low point in April.

Druckenmiller was early to invest in Nvidia after the launch of ChatGPT, buying that stock in the fourth quarter of 2022, so he has a clear view of the AI ​​industry and that could explain his aggressive bet on Coherent. The laser technology company is an under-the-radar AI stock and could be a long-term winner if it can continue to grow profits.