Duquesne Capital Management, the hedge fund that was founded by Stanley Druckenmiller (Trades, Portfolio) in 1981 and converted into a family office in 2010, recently disclosed its 13F portfolio updates for the third quarter of 2022, which ended on Sept. 30.
In addition to being the president, CEO and chairman of Duquesne Capital Management, Druckenmiller managed money for George Soros (Trades, Portfolio) as the lead portfolio manager of the Quantum Fund, and the partners famously shorted the British pound in 1992. Soros’ influence can be seen in Druckenmiller’s trading style; he uses a top-down approach that combines long positions and short positions in all types of assets, including stocks, bonds, currencies and futures.
According to its latest 13F filing, the firm’s top trades of the quarter were reductions to Microsoft Corp. (MSFT, Financial) and Freeport-McMoRan Inc. (FCX, Financial) and new positions in Amazon.com Inc. (AMZN, Financial) and Lamb Weston Holdings Inc. (LW, Financial).
Investors should be aware that 13F reports do not provide a complete picture of a guru’s holdings. They include only a snapshot of long equity positions in U.S.-listed stocks and American depository receipts as of the quarter’s end. They do not include short positions, non-ADR international holdings or other types of securities. However, even this limited filing can provide valuable information.
Microsoft
The firm slashed its Microsoft (MSFT, Financial) holding by 547,250 shares for a remaining stake of 193,535 shares, shaving off 10.17% of its weight in the equity portfolio and knocking it out of the top three holdings. During the quarter, the stock traded hands for an average price of $264.05.
Druckenmiller’s bearishness on this tech giant is due largely to his overall bearish view of the current economic environment. At the Sohn Conference earlier this year, he said, “I assume, and pretty strongly, soon we're going to have a recession sometime in 2023." Despite the company’s robust business model, it will likely suffer in the near-term.
At Tuesday’s price of around $243 per share, the stock is modestly undervalued based on the GF Value chart, and the price-earnings ratio of 26.27 is in line with the company’s historical median price-earnings ratio.
Freeport-McMoRan
The firm also cut its Freeport-McMoRan (FCX, Financial) stake by 2,062,050 shares for a remaining investment of 1,169,777 shares. At the quarter’s average share price of $29.27, this took 4.36% off of the stock’s weight in the equity portfolio.
Freeport-McMoran is a large, geographically diverse mining company that primarily mines copper, gold and molybdenum, so it is no surprise the stock has had an excellent few years due to a combination of supply chain troubles and a significant increase in global investment in technology infrastructure such as 5G and electric vehicles. However, mining is a highly cyclical industry, and all too often, these stocks are at their most dangerous when they appear cheap on paper.
With shares trading around $37.62 apiece on Nov. 22, the GF Value chart rates the stock as fairly valued. The price-earnings ratio of 14.29 is higher than the historical median, which is unusual for a cyclical stock after such a huge spike and indicates long-term bullish sentiment among investors.
Amazon.com
Dusquesne initiated a new stake worth 906,250 shares in Amazon.com (AMZN, Financial) after selling out of its previous holding in the stock in the second quarter of 2022. Amazon is now the third-largest 13F position with a 5.81% weight. Shares traded for an average price of $126.40 during the quarter.
Both of Amazon’s main revenue drivers, e-commerce and cloud, are struggling against the current economic backdrop. The low-margin e-commerce business has been hit particularly hard as inflation drives up prices and Amazon struggles to remain cheaper than competitors. This has led to the stock trading at the same price as three years ago, despite recording an earnings per share growth rate of 47.6% over the same time frame.
The GF Value chart rates shares of Amazon as significantly undervalued at $92.70 apiece. The price-earnings ratio is still on the high side at 85.05, but it is much cheaper than the historical median price-earnings ratio of 143.49.
Lamb Weston Holdings
The firm bought 946,800 shares of Lamb Weston Holdings (LW, Financial), giving the stock a weight of 4.15% in the equity portfolio. During the quarter, shares traded for an average price of $78.21.
Known as North America’s premier frozen potato company, Lamb Weston is a food processing company that makes – you guessed it – frozen potato products such as French fries, waffle fries and hash browns. This is one of those boring but profitable businesses that we can expect to perform fairly consistently regardless of market conditions.
On Nov. 22, shares of Lamb Weston traded around $86.10 with a price-earnings ratio of 31.05, which is elevated compared to its historical median valuation. The GF Value chart rates the stock as fairly valued.
See also
The firm’s other notable trades during the quarter included additions to Eli Lilly and Co. (LLY, Financial) and Datadog Inc. (DDOG, Financial) as well as new buys in Vertiv Holdings Co. (VRT, Financial) and Sea Ltd. (SE, Financial).
As of the quarter’s end, Duquesne Capital Management’s equity portfolio consisted of holdings in 65 common stocks valued at a total of $1.76 billion. The top holding was Coupang Inc. (CPNG, Financial) with 18.37% of the equity portfolio, followed by Eli Lilly with 8.89% and Amazon with 5.81%.
In terms of sector weighting, the firm was most invested in consumer cyclical, technology and health care stocks.
