Worried About Deficit Stan Druckenmiller Is Still Very Bullish On These Stocks
In this article, we discuss worried about the deficit Stan Druckenmiller is still very bullish on these stocks. If you want to see more stocks in this selection, check out Stan Druckenmiller Is Still Very Bullish On These 5 Stocks.
Will reckless spending and failure to issue debt at low rates by the federal government be the biggest undoing of the decade? That's the big worry for billionaire investor Stanley Druckenmiller, who fears mistakes of past years on monetary policy will ultimately lead to tough choices in future. The legendary investor concerns the US economy is in a debt crisis as government spending has risen to 25% of GDP, fuelled mainly by too much debt.
The debt crisis is further exacerbated by the fact that the US government is seeking $56 billion in emergency funding for disaster relief and childcare programs. According to Druckenmiller in an interview with CNBC, the spending spree will not slow any time soon , as the government seeks an additional $106 billion to support Israel and Ukraine amid the tussles in Europe and the Middle East. Amid the spending spree, the US federal government ended its fiscal year in September with a deficit of about $1.7 trillion. Its total debt has also risen to nearly $34 trillion.
"It really started with Donald Trump running a full employment deficit of over $1 trillion deficit," said Druckenmiller. "If that wasn't enough, Biden came in and we got Covid. He doubled and tripled down on Federal spending. What's amazing is he's still at it."
The government raising more debt on interest rates rising to highs of between $5 and 5.25% presents one of the biggest challenges, according to the legendary investor who founded Duquesne Capital. Treasury yields and stocks have fallen significantly since mid-July on worries that persistent inflations will require the Federal Reserve to keep interest rates higher for longer.
The prospect that the government will have to issue more bonds at high-interest rates to sustain its soaring spending translates to a rocky road for investors, according to hedge fund manager Druckenmiller. On the other hand, if interest rates are to stay where they are now, the interest that the government pays on its debt will have to climb 4.5% of GDP by 2033, something that could present more troubles to the economy.
Amid the debt problem, Druckenmiller believes the market will be much more challenged heading into year-end. The billionaire investor believes only disciplined stock pickers would be rewarded amid the deteriorating macroeconomics. The sentiments come against some legendary investor stock picks bouncing back after a recent steep pullback from all-time highs.
The S&P 500 is on a bounce-back spree after a 10% pullback from highs recorded in July. The Index has rallied by more than 6% over the past week as investors take advantage of depressed valuation after the recent correction. The tech-heavy Index has also rallied more than 6% over the past week.
Stan Druckenmiller
The rally in the equity markets comes at the backdrop of the US Federal Reserve going slow on interest rate hikes. The central bank paused on hikes for the second consecutive time, signaling it might have reached its peak ongoing tightening. The ease has helped fueled sentiments about equities, with high-growth stocks backed with solid underlying fundamentals emerging as some beneficiaries.
Druckenmiller, who co-managed George Soros Quantum Fund and participated in the legendary $10 billion bet against the pound in 1992, believes there is a glimmer of opportunities in the stock market. Increased adoption of artificial intelligence is one of the developments that present tremendous opportunities for staunch stock pickers. Nvidia, Microsoft, and Meta platforms remain some of Druckenmiller's top stock picks amid the artificial intelligence revolution.
Diversification is also an essential aspect of Duquesne Capital's investment strategy as one of the ways of shrugging and offsetting swings amid the volatile economic situation. While the hedge fund invests much of its portfolio in technology stocks, it also bets big on the Service sector and industrial goods companies. The hedge fund also invests in consumer goods companies, healthcare, financials and other bets. Druckenmiller is pessimistic about the market outlook amid the debt problem and high-interest rate environment. However, the legendary investor believes there are stocks likely to outperform amid the easing FED monetary policy tightening.
Our Methodology
We looked at the 13F filings of Duquesne Capital, the hedge fund run by billionaire Stanley Druckenmiller, and found his top stock picks that he has been holding for a long time. These stocks are based on their popularity among other hedge funds and their strong fundamentals that support their future growth. We ranked the stocks by the number of hedge funds that own them.
Worried About Deficit Stan Druckenmiller Is Still Very Bullish On These Stocks
10. Illumina, Inc. (NASDAQ:ILMN)
Duquesne Capital’s Equity Stake: $10.29 Million
Number of Hedge Fund Holders: 43
Illumina, Inc. (NASDAQ:ILMN) is a company that makes systems for studying genes and their functions. It sells products and services to research, clinical, and applied markets. It has products like scanners, reagents, and training tools. It has services like sequencing, microarray, monitoring, and consulting.
Illumina, Inc. (NASDAQ:ILMN) is one of the stocks Duquesne Capital is still bullish on. The hedge fund initially acquired stakes in the company in Q3 2013. However, the hedge fund again acquired stakes in the company in the first quarter of 2023 after exiting its position in the second quarter of 2019.
The Druckenmiller hedge fund held stakes worth $10.29 million in the company as of Q2 2023, accounting for 0.36% of the portfolio as of Q2. Forty-three hedge funds, or about 4.7% of the 910 hedge funds that Insider Monkey tracks, had shares in Illumina, Inc. (NASDAQ:ILMN) at the end of Q2 2023.
In Q3 2023, Illumina, Inc. (NASDAQ:ILMN)'s prominent shareholder was Paul Cantor, Joseph Weiss, and Will Worm's Beech Hill Partners since it owns 8,105 shares worth $1.11 million.
9. Cameco Corporation (NYSE:CCJ)
Duquesne Capital’s Equity Stake: $27.25 million
Number of Hedge Fund Holders: 54
Cameco Corporation (NYSE:CCJ) is a company that provides uranium for nuclear power. It has two segments: Uranium and Fuel Services. The Uranium segment mines and sells uranium. The Fuel Services segment refines, converts, and fabricates uranium.
Cameco Corporation (NYSE:CCJ) is Duquesne Capital's energy play, as the company produces uranium for electricity generation. Duquesne Capital has been an intermittent investor in CCJ, as it has bought and sold the stock several times over the years. The hedge fund first acquired stakes worth $32.71 million in the company in Q1 2014. Currently, the hedge fund holds 869,740 shares of the company valued at $27.25 million.
As the second quarter of this year ended, 54 out of the 910 hedge funds monitored by Insider Monkey had invested in the firm. Cameco Corporation (NYSE:CCJ)'s biggest hedge fund shareholder is Kerr Neilson's Platinum Asset Management, holding a $122.61 million stake.
8. Teck Resources Ltd (USA) (NYSE:TCK)
Duquesne Capital’s Equity Stake: $143.84 Million
Number of Hedge Fund Holders: 79
Teck Resources Ltd (USA) (NYSE:TCK) is a company that mines and develops various minerals, such as copper, coal, zinc, and oil. It has operations in Canada, Chile, Peru, and the US. It has five business segments: Steelmaking, Coal, Copper, Zinc, Energy, and Corporate.
Duquesne Capital has always turned to Teck Resources Ltd (USA) (NYSE:TCK) to gain exposure to the mining of critical industrial metals, including copper, zinc, and steel. Consequently, the stock accounts for 5% of the hedge fund portfolio with stakes worth $143.84 million after the hedge fund acquired stakes in Q3 2020.
In the second quarter of 2023, 79 out of the 910 hedge funds surveyed by Insider Monkey had positions in the company. However, in the third quarter of 2023, David Dattel's NewGen Asset Management emerged as the prominent investor in the company, holding a substantial 145,000 shares valued at $6.25 million.
7. T-Mobile US, Inc. (NASDAQ:TMUS)
Duquesne Capital’s Equity Stake: $163.84 Million
Number of Hedge Fund Holders: 86
T-Mobile US, Inc. (NASDAQ:TMUS) offers wireless services to different types of customers under the T-Mobile and MetroPCS brands. Its main office is in Bellevue, Washington. T-Mobile US, Inc. (NASDAQ: TMUS) is considered one of the stocks which Stan Druckenmiller is still very bullish on., with 86 hedge funds also including the company's stock in their portfolios.
While T-Mobile US, Inc. (NASDAQ:TMUS) is up by 5% for the year, it has gained about 68% since Duquesne Capital started investing in the company in 2017. The hedge fund owned stakes worth $163.84 million in the company in Q2 2023, accounting for 5.69% of the diversified portfolio
During the third quarter, BlueDrive Global Investors held a significant stake of more than 150,800 in T-Mobile US, Inc. (NASDAQ:TMUS), with an estimated value of $20.95 million, representing 31.64% of the firm's portfolio.
Here's the comment ClearBridge Investments made about T-Mobile US, Inc. (NASDAQ:TMUS) in its Q3 2023 investor letter:
"During the quarter, we initiated positions in two new names: T-Mobile US, Inc. (NASDAQ: TMUS) and Gilead Sciences. T-Mobile is the best-in-class player in the wireless space, delivering the strongest growth with the lowest cost structure and the best consumer proposition. T-Mobile's strength is rooted in its advantaged competitive position. Its superior spectrum holdings enable it to provide better wireless service at meaningfully lower cost. T-Mobile's annual capital expenditures run about $10 billion, on the order of half the amount its peers must spend. Due to its lower cost structure, T-Mobile can undercut its competitors on price while generating compelling profitability and returns.
This combination — superior service at lower prices — has enabled T-Mobile to outgrow its competition. In the three years since completing its merger with Sprint, T-Mobile has grown its post-paid subscriber base by about 22%. Over the same period, AT&T has increased by about 14%, while Verizon's by less than 5%.
Given the high fixed-cost nature of the wireless business, these steady increases in revenue growth have led to outsize increases in profits and free cash flow. Free cash flow in 2023 is expected to come in at around $13.5 billion, up from less than $8 billion last year. In 2024, free cash flow is expected to grow by over 20% to approximately $17 billion — providing a 10% yield based on today's stock price.
We have long admired T-Mobile, but until recently, the stock did not pay a dividend. The company announced its inaugural dividend in September, and we bought the stock shortly after that. The initial yield is about 2%, and it is expected to grow almost 10% per year."
6. Micron Technology, Inc. (NASDAQ:MU)
Duquesne Capital’s Equity Stake: $14.02 Million
Number of Hedge Fund Holders: 86
Micron Technology, Inc. (NASDAQ:MU) is a company that makes memory and storage products for computers and other devices. The technology company provides memory and storage technologies that comprise random access memory semiconductor devices with low latency that offer high-speed data retrieval and non-volatile and re-writeable semiconductor storage devices.
Micron Technology, Inc. (NASDAQ:MU) is one of the stocks Druckenmiller is still very bullish on going by the 50% plus gain year to date as it benefits from solid demand for its chips amid the artificial intelligence revolution. Similarly, Druckenmiller hedge fund first acquired stakes worth $16.49 million in the company in Q3 2016.
In Q2 2023, 86 out of the 910 hedge funds in Insider Monkey's database had invested in the company. Kerr Neilson's Platinum Asset Management stands as a notable shareholder of Micron Technology, Inc. (NASDAQ:MU), with ownership of 1.59 million shares valued at $107.95 million.
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Disclosure: None. Worried About Deficit Stan Druckenmiller Is Still Very Bullish On These Stocks is originally published on Insider Monkey.
