Stanley Druckenmiller is a legend in the financial world. To date, he hasn’t achieved the same mainstream name recognition as investment wizards like Warren Buffett and George Soros, but that has nothing to do with his results. In fact, by some measures, he has exceeded his more famous peers by consistently delivering returns through the use of unconventional investment strategies.
Many investors attempt to duplicate Druckenmiller’s results by mirroring the highly-acclaimed “Stanley Druckenmiller Strategy”. Unfortunately, it’s not quite that easy.
The nuances are kept under wraps, and trades aren’t disclosed until it’s a bit too late to follow along. Here’s what we do know about Stanley Druckenmiller’s investment strategy – and how he developed it over a lifetime of investing experience.
Who Is Stanley Druckenmiller?
When Stanley Druckenmiller was born, his family wasn’t involved in finance, and the Druckenmiller name wasn’t remotely associated with investing prowess. In fact, his father was a chemical engineer, and the household was typical of middle-class families in the 1950s.
By 1975, Druckenmiller graduated from Bowdoin College and earned a degree in economics, along with a BA in English. As an interesting side-note, he and a friend opened a successful hotdog stand during their school years. That friend, Lawrence Lindsey, went on to serve as George W. Bush’s economic policy advisor.
Druckenmiller started working towards his Ph.D. through the University of Michigan’s economics program. However, he set that aside when he was offered a job with the Pittsburgh National Bank as an oil analyst.
Within a year, he was selected to lead the Bank’s equity research group. That launched Druckenmiller’s successful financial career, and he never looked back.
Stanley Druckenmiller Duquesne Capital Management
Druckenmiller founded an investment firm of his own in 1981. He named the project Duquesne Capital Management, and clients rapidly followed.
By 1985, he was simultaneously managing Duquesne and consulting for the Dreyfus Fund – an older firm that launched in 1951. When the Dreyfus Fund appointed him as its head, Druckenmiller was able to balance his responsibilities and continue his work with the growing Duquesne Capital Management.
George Soros watched Druckenmiller’s career with interest for several years before deciding it was time to form a partnership. Soros offered Druckenmiller a place at his Quantum Fund, and the two shocked the world with big gambles that paid off in big rewards.
One of the most stunning was their 1992 decision to short British pound sterling. They generated more than $1 billion in profit while the British government lost £3.14 billion – and the pound sterling was removed from the European Exchange Rate Mechanism (ERM).
Druckenmiller and Soros ended their professional relationship in 2000, and Druckenmiller returned to Duquesne Capital full-time.
For 10 years, the fund continued to produce exceptional returns, but those started to drop in 2010. Druckenmiller decided to close the fund that year, citing the stress of keeping up his perfect record while managing such a large portfolio. At the time, he was responsible for more than $12 billion.
Druckenmiller Famously Never Had A Down Year
The pressure that Stanley Druckenmiller felt so keenly was due to his astonishing, seemingly impossible success. In the years he managed Duquesne Capital, Druckenmiller famously never had a down year.
Over its three decades, the fund averaged returns of approximately 30 percent per year, and the idea of breaking that streak was simply too much for Druckenmiller. However, he didn’t leave the business empty-handed.
When Duquesne Capital closed, Stanley Druckenmiller’s net worth was estimated at $3.5 billion.
Of course, an investor as passionate and as successful as Druckenmiller couldn’t stay out of the markets for long. Later that year, Druckenmiller founded another fund under the name Duquesne Family Office.
While perhaps not quite as successful as Duquesne Capital, Druckenmiller was able to deliver strong returns with the significantly smaller portfolio. He was well-rewarded for his efforts, which earned him 12th place on Forbes’ Highest-Earning Hedge Fund Managers for 2017.
What Is Stanley Druckenmiller’s Investing Strategy?
Stanley Druckenmiller studied George Soros’ trading style for years, and in many ways, his own investing strategy is quite similar.
Druckenmiller takes a top-down approach that combines long positions and short positions in all types of assets – stocks, bonds, currencies, futures, etc. – based on the investor’s expectations for macroeconomic changes and market conditions within the relevant time period.
Given his long record of successful predictions, it seems that Druckenmiller has a special gift for understanding how current events influence future conditions.
However, it is worth noting that Druckenmiller is also willing to take on the risks associated with overconcentration or lack of diversification among assets. That means when he wins, he wins big.
Druckenmiller’s theory on placing his bets may be summed up best by this quote from Andrew Carnegie, which Druckenmiller cites on a regular basis:
Put all your eggs in one basket and watch the basket very carefully.
Indeed he does, keeping a close eye on subtle changes and making the right moves at the right time to generate consistent returns.
Stanley Druckenmiller Portfolio
Duquesne Family Office currently has $3.7 billion assets under management (AUM), and Stanley Druckenmiller has selected 54 investments for those funds.
He has created a balance that works in harmony to generate returns for his investors. The fund’s top ten holdings include the following:
- Microsoft Corp (MSFT) – 15.88 percent
- T-Mobile (TMUS) – 8.53 percent
- Amazon (AMZN) – 7.29 percent
- Starbucks (SBUX) – 5.72 percent
- Freeport-Mcmoran (FCX) – 4.42 percent
- Palo Alto Networks (PANW) – 4.41 percent
- Sea Ltd (SE) – 4.12 percent
- Penn Natl Gaming (PENN) – 3.55 percent
- Nuance Communications (NUAN) – 3.47 percent
- Disney (DIS) – 3.35 percent
Some were surprised by Druckenmiller’s decisions for the fourth quarter of 2020. When the fourth quarter securities filing was released in early February 2021, investors and analysts saw that the fund had closed its position in Netflix (NFLX) entirely.
Duquesne Family Office owned 278,372 shares valued at $139.1 million at the end of the third quarter, which made up 4.04 percent of the fund’s portfolio.
In other notable moves, Druckenmiller closed out of online retailer Alibaba (BABA), selling the fund’s 545,755 shares. At the end of third quarter 2020, Alibaba made up 4.66 percent of the portfolio. He also sold the rest of Duquesne Family Office’s 207,895 Facebook (FB) shares and reduced its position in Penn National Gaming by 19 percent.
Druckenmiller elected to use the proceeds from these sales to increase the fund’s position in Palo Alto Networks (PANW) – a cybersecurity firm that has been growing steadily over the past year.
Stanley Druckenmiller Stock Forecast
When Stanley Druckenmiller gives stock forecasts or makes market-related predictions, people listen. The fact that Druckenmiller famously never had a down year adds value to his guidance.
One of the most intriguing is his position on Bitcoin and his explanation for the move. In November 2020, he shared that he owns this cryptocurrency, as he believes it will generate profit when the dollar declines in value.
Frankly, if the gold bet works, the bitcoin bet will probably work better because it’s thinner, more illiquid, and has a lot more beta to it.
Like other proponents of Bitcoin, Druckenmiller appears confident that Bitcoin will enter the mainstream as a store of value.
Companies like Square (SQ), MassMutual, and Tesla (TSLA) are already converting some of their cash to Bitcoin in an effort to reduce dollar-related risk. It seems that Druckenmiller is expecting more market volatility in the near-term, and he is preparing his portfolio to ensure consistent returns.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.