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Stanley Druckenmiller – the hedge fund manager who worked for fellow billionaire George Soros before striking out on his own – has quite a track record.
While on his own, Druckenmiller generated 30% annualized returns from 1986 to when he turned his hedge fund into a family office in 2010. He’s still a well-followed investor and still reports his hedge fund holdings to the Securities and Exchange Commission.
Although Druckenmiller has noted that he believes the Federal Reserve has created a bubble – thanks to its policies of quantitative easing and near-zero interest rates – he has been bullish on tech stocks of late. In his latest SEC filing, he revealed that he’s been dumping two major tech companies and buying up another two.
Druckenmiller’s Major Sales
Druckenmiller’s Duquesne Capital sold close to 40% of its Facebook (NASDAQ: FB) stake during the fourth quarter.
The tech stock gained 34% in 2015. However, there are issues with Facebook that Druckenmiller might have sensed. This includes the fact that advertising revenues could be peaking for the social network. Behind that thesis is the fact that user growth and time spent on Facebook over the next couple years is likely to decline.
Druckenmiller also sold close to 20% of his Microsoft (NASDAQ: MSFT) stake. The tech giant is being confronted with a major headwind: declining computer sales. Microsoft also has a declining phone segment.
The relatively new Windows 10 operating system isn’t yielding any financial benefits, and 2016 could be another year in which Microsoft’s software, like Azure and Office 365, struggle to offset declines in its hardware business.
Druckenmiller’s Major Buys
On the other hand, Druckenmiller has also made some major tech investments recently. He nearly doubled his Amazon.com (NASDAQ: AMZN) stake during the fourth quarter. It’s now his third-largest holding. However, shares of the e-commerce giant are already down 15% in 2016.
Now, Druckenmiller is a smart man, so he still thinks that investors will reward Amazon in 2016 for the potential that it can make serious money in the future. Right now, Amazon’s margins are virtually nonexistent, but sales continue to grow.
At some point, Amazon has to figure out how to actually make money. But for now, it’s doing a solid job of taking market share in the U.S. retail space, with an eye toward breaking into the large and growing developing markets. It also has a newly announced stock buyback plan.
Another major buy of Druckenmiller’s last quarter was his new stake in Google holding company Alphabet (NASDAQ: GOOGL), which is now one of his top 10 holdings. Alphabet is in a battle with Apple (NASDAQ: AAPL) to be the largest publicly traded company in the world.
Google is well positioned to win the Internet search advertising land grab over companies like Facebook. Google search has over 60% of the worldwide market share, while no competitor has more than 10%. And Google still has growth opportunities, including further growing its YouTube subscription model.
Despite Druckenmiller’s reservations about the Fed’s monetary policies, he’s not forsaking tech investments altogether. Instead, he’s placing his bets wisely. In the context of the Facebook reduction, it makes sense that Druckenmiller also upped his Google stake, since Facebook’s potential loss in ad dollars will be Google’s gain.
Tesla, Apple and Google Are Creating This
When people think of Tesla, what immediately comes to mind is the world’s first electric car. It’s an astounding achievement. But what few people realize is that Tesla’s next technological wonder could easily put it to shame. Morgan Stanley says this breakthrough could save the American economy $1.3 trillion each year. And Tesla’s not the only one racing to get it out the door. Apple and Google are working on their own versions too.
Get the whole story right here.