Stanley Druckenmiller may not be as well known as some of the other hedge fund billionaires, but if you want to learn from the best, it’s hard to do better than Druckenmiller.
Druckenmiller was a protégé of George Soros and helped make the famous bet with Soros that collapsed the Bank of England, causing the British pound to collapse and making him more than $1 billion in 1992.
Even better, as manager of Duquesne Capital Management, Druckenmiller generated a compound annual average return of 30% from the fund’s inception in 1981 to its closing in 2010. Druckenmiller continues to invest through his family office, and his moves are closely monitored. Druckenmiller emphasizes position size in his strategy, saying, “It’s not a matter of whether you’re right or wrong; it’s a matter of how much you make when you’re right and how much you lose when you’re wrong.” He’s also known for following macro trends and quickly changing his mind as situations change.
So what did Druckenmiller buy in the second quarter? Let’s take a look at some of its most intriguing purchases.
1. Philip Morris
One of Duquesne Capital Management’s largest new positions in the quarter was Philip Morris International (NYSE: PM)the international tobacco giant.
Duquesne bought nearly 900,000 shares of Philip Morris stock, worth about $110 million. It also bought calls on the stock, signaling further optimism about the tobacco asset. Druckenmiller’s bet appears to have paid off, with the stock up more than a third from its April 12 low, a big move for a recession-proof industry known for dividends and safety.
Philip Morris shares have risen as the company has been more successful in transitioning to smoke-free products than peers such as Altria And British American TobaccoIn fact, about 40% of Philip Morris’ revenue now comes from next-gen products like Zyn nicotine pouches and Iqos heat-not-burn devices. The company has even acquired the license to sell Iqos sticks in the US, opening up a potentially huge market for the smoke-free product.
In the second quarter, Philip Morris saw solid growth with organic sales increasing 9.6% to $9.5 billion and a 10.6% increase in adjusted earnings per share to $1.77. Growth in the smoke-free categories was even more impressive, as organic sales increased 18% and gross profit increased 22%. As smoke-free products become a larger part of the business, this should lead to higher sales 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 (NYSE: COHR)which follows after he acquired a significant interest in Stubborn and sold most of his shares Nvidia.
Coherent makes lasers and develops laser-based technology and electro-optical switches. The technology has become valuable in semiconductor manufacturing, which has tied the company to the artificial intelligence (AI) boom.
The company is seeing strong growth in its Datacom transceiver business, a key component of fiber networking, driven by growth in generative AI. That also helped Coherent’s gross margin expand in the quarter, which rose 440 basis points to 32.9%.
Wall Street expects earnings to continue to rise as it benefits from emerging technology. Coherent’s own forecast 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 grow 24.7% at the midpoint of its forecast of $1.27 billion to $1.35 billion.
Like Philip Morris, Coherent also recovered in the second quarter, up more than 50% from its April low.
Druckenmiller was an early investor in Nvidia after ChatGPT launched, buying the stock in the fourth quarter of 2022, so he has a keen understanding of the artificial intelligence industry, which could explain his aggressive bet on Coherent. The laser technology company is an under-the-radar AI stock that could be a long-term winner if it can continue to ramp up profits.
Should You Invest $1,000 in Philip Morris International Now?
Before buying Philip Morris International stock, you should consider the following:
The Motley Fool Stock Advisor team of analysts has just identified what they think is the 10 best stocks for investors to buy now… and Philip Morris International wasn’t one of them. The 10 stocks that made the cut could deliver monster returns in the years to come.
Think about when Nvidia made this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $792,725!*
Stock Advisor offers investors an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks each month. The Stock Advisor has service more than quadrupled the return of the S&P 500 since 2002*.
View the 10 stocks »
*Stock Advisor returns as of August 26, 2024
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Coupang and Nvidia. The Motley Fool recommends British American Tobacco Plc, Coherent and Philip Morris International and recommends the following options: long January 2026 $40 calls on British American Tobacco and short January 2026 $40 puts on British American Tobacco. The Motley Fool has a disclosure policy.
Billionaire Stanley Druckenmiller Goes on a Bargain Hunt: 2 Stocks He Just Bought was originally published by The Motley Fool
