Lots of inventors have made money in the stock market, but only a handful have succeeded in building massive fortunes. That small club includes well-known names like Warren Buffett, George Soros, Carl Icahn, Ray Dalio, Peter Lynch, and Stanley Druckenmiller. While their trading styles differ, members of this group have certain characteristics in common: patience, discipline, and a deep understanding of market behavior.
The investing greats have dedicated their lives to perfecting their trading techniques. Though it isn’t possible to match them trade-for-trade, they have shared the principles that guide their decisions. That gives investors at all levels of experience a starting point from which to launch their own successful portfolios.
Who is the greatest trader in the world, and what methods and strategies can today’s investors learn from their history of wins and losses? It depends on who you ask. Every member of the billionaire club has passionate followers who are convinced that their mentor is the best trader of all time.
Choosing a trader to emulate comes down to matching personal characteristics and preferred trading styles with any one of the world’s top investors. Here are the details on Stanley Druckenmiller (net worth $6.8 billion) and his 45+ years-long investing career.
Who Is Stanley Druckenmiller?
Unlike many of his wealthy peers, Stanley Druckenmiller wasn’t born into an affluent family. His father was a chemical engineer – not a financial wizard. Druckenmiller grew up in a traditional 1950s household, and after graduating high school, he enrolled in Bowdoin College.
Druckenmiller earned two degrees from Bowdoin – one in economics and another in English. He supplemented his meager college income through entrepreneurship, opening a popular hotdog stand with his friend, Lawrence Lindsey.
After Bowdoin, Druckenmiller enrolled in the University of Michigan’s Ph.D. program with the intention of getting a doctorate in economics. However, when the Pittsburgh National Bank recruited him for a lucrative position as an oil analyst, he decided it was an offer he couldn’t refuse.
He was soon promoted to a leadership position in Pittsburgh National Bank’s equity research group, but he didn’t stay with Pittsburgh National Bank for much longer. By 1981, he was ready to strike out on his own. He launched an investment firm, Duquesne Capital Management, and he was on his way to his first billion.
How Did Stanley Druckenmiller Make His Money?
Though there was plenty to keep Stanley Druckenmiller busy at Duquesne Capital Management, his in-demand skills resulted in more offers he simply couldn’t turn down. In addition to his work with Duquesne Capital Management, he began consulting for the Dreyfus Fund in 1985. Before long, he was named head of that firm as well.
Druckenmiller’s success caught the attention of investing genius George Soros, and the two began working together to grow Soros’ Quantum Fund. They placed massive bets that paid off in massive rewards. In their most famous move, they shorted the British pound sterling causing the British government to lose £3.14 billion in 1992. The pair made off with more than $1 billion in profit.
All good things must come to an end, and the partnership between Druckenmiller and Soros was no exception. In 2000, the two parted ways amicably, and Druckenmiller resumed leadership of Duquesne Capital Management full time.
In the ten years that followed, Duquesne Capital Management produced exceptional returns for its clients – and for Druckenmiller himself. In fact, the firm never had a down year and averaged 30 percent returns over the 30 years it was in business. However, in 2010, Druckenmiller realized that he wouldn’t be able to maintain his perfect record much longer, so he decided it was time to dissolve the fund and move on to another project. At the time, Stanley Druckenmiller’s net worth topped $3.5 billion.
In 2011, Druckenmiller founded the Duquesne Family Office – a much smaller firm. Today, Duquesne Family Office has less than $2.5 billion in assets under management (AUM) compared to the $12 billion AUM that Duquesne Capital Management held when it closed.
The Duquesne Family Office fund’s top holdings include Coupang (approximately 16 percent of the total portfolio), Microsoft (approximately 15 percent of the total portfolio), Freeport-McMoRan Inc. (approximately 11 percent of the total portfolio), and Amazon (approximately 9 percent of the total portfolio).
How Does Stanley Druckenmiller Trade?
Stanley Druckenmiller’s investing strategy is similar to that of George Soros in many ways, as Druckenmiller considered Soros to be his mentor for decades. However, certain aspects of his strategy diverge from Soros’ methods to create an investment method unique to Druckenmiller.
Like Soros, Druckenmiller uses a top-down approach in making his trades. He begins with a careful examination of global and domestic economic factors like unemployment rates, interest rates, inflation, GDP growth, tax regulations, and similar. Druckenmiller completes a thorough analysis of historical data and combines the results with his own remarkable instinct for predicting what will come next. Only then does he look at specific sectors, industries, and individual companies to determine which trades he will make.
Druckenmiller takes both long and short positions depending on his expectations for a particular market, and he spreads his holdings across various asset classes. That includes bonds, stocks, futures, currencies, and, more recently, cryptocurrencies.
Unlike Warren Buffett, Druckenmiller is a proponent of crypto. He believes “Bitcoin is like anything else: It’s worth what people are willing to pay for it.” According to Druckenmiller, there is an opportunity to build wealth through crypto by predicting its price fluctuations.
It is with noting that Druckenmiller doesn’t concern himself with diversification – he is willing to take risks to achieve exceptional rewards. Contrary to the prevailing investment wisdom of spreading risk across industries, market caps, and geographies, Druckenmiller is willing to put all of his eggs in one basket. However, as he points out at every opportunity, you must “watch the basket carefully.”
Stanley Druckenmiller’s strategy might be summed up best with this quote: “I’ve always loved to play games, and face it: investing is one big game. You need to be decisive, open-minded, flexible and competitive.”
Does this make him the greatest trader in the world? Perhaps. Perhaps, the debate will continue. His track record with virtually no losing years and 30% annualized returns are tough to beat. He is undoubtedly one of the boldest and most highly skilled investors of all time.
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.