Stanley Druckenmiller loads up on Alphabet and tech darlings

Renowned hedge fund manager and the head of Duquesne Capital, Stanley Druckenmiller is making a bold bet on Google-parent Alphabet (NASDAQ: GOOGL), according to his latest 13F filings.

In a 2015 speech, Druckenmiller explained to the audience why you should never invest in the present. He said “it doesn't matter what a company's earning, what they have earned - you have to visualise the situation 18 months from now - that's where the price will be.”

Druckenmiller's 13F added a few select tech stocks while holding onto key positions in Nvidia and Microsoft, suggesting that the AI-powered tech rally may have further to go.

Duquesne 13F Summary

The below data was obtained from Whalewisdom:

• Market value: US$2.79bn vs. US$2.87 in the previous quarter
• New purchases: 12 stocks
• Additional purchases: 10 stocks
• Sold out of 24 stocks
• Reduced holdings in 9 stocks
• Top 10 holdings account for 73.18% of the portfolio
• Top 10 holdings have been held an average of 2.9 quarters

Top Five Holdings

• Nvidia (NASDAQ: NVDA)  13.65%
• Coupang (NASDAQ: CPNG)  12.75%
• Microsoft (NASDAQ: MSFT) 11.53%
• Eli Lilly (NYSE: LLY) 8.75%
• Tech Resources (NYSE: TECK)  6.35%

New Additions

The notable new additions include:

• Alphabet (NYSE: GOOG) – $110 million worth 3.94% of the portfolio
• Business services provider Vistra – $65.9 million worth 2.37% of the portfolio
• Data storage company Seagate – $60.3 million worth 2.17% of the portfolio
• Semis and software developer and manufacturer Broadcom – $43.2 million worth 1.55% of the portfolio

Position Increases

• Microsoft (NASDAQ: MSFT) – Added $59.5 million which raised its portfolio weighting to 11.53%
• UBS (NYSE: UBS) – Added $54.0 million shares which raised its portfolio weighting to 1.94%

Complete Exits

Druckenmiller exited several stocks including:

• Taiwan Semiconductor (NYSE: TSM)
• Oracle Corp (NASDAQ: ORCL)
• IQVIA
• PTC Inc
• Marvell Technology

For the full list of stocks, go to 13F.info, where you can also find comparisons between each quarter. As always, 13F filings only mandate the declaration of long positions and the filings don’t require investors to reveal the price paid, strike price or expiration date of options purchased.

Insight #1 – Buying the Alphabet Dip

On 25 October, Alphabet marked its third worst session ever - down 9.6% after a mixed third quarter result. While overall revenue and earnings topped analyst expectations, cloud computing profits of US$266 million missed estimates of US$434 million. There was little tolerance for weaker-than-expected cloud computing earnings, given all the hype around AI and the ‘Magnificent Seven’ tech stocks.

The Q3 earnings flagged an interesting dynamic where total revenues returned to double-digit year-on-year growth rates (from a trough of near-flat growth in 4Q22) thanks to a recovery in business segments such as advertising, search and Youtube. But growth rates for Google Cloud have been in a downtrend since 4Q19.

"After a period of historic volatility, we were pleased with the year-on-year revenue growth of Search and YouTube advertising in the third quarter … there was a stabilisation in spending by advertisers,” noted CFO Ruth Porat.

Insight #2 – Selective Tech Exposure

Druckenmiller let go of his entire stake in Taiwan Semiconductor (TSMC), worth approximately US$47.6 million. These are the guys that manufacture chips for companies like Apple, Nvidia and AMD.

TSMC’s third quarter earnings were better-than-feared, with revenue down 14.6% and operating income down a sizable 26.5% on dampened end market demand and ongoing inventory adjustments. But it's outlook commentary was far from bullish:

"Due to the persistent weaker overall macroeconomic conditions and slow demand recovery in China, customers remain cautious in their inventory control. That's why we expect the inventory digestion to continue in the fourth quarter,” said CEO C. C. Wei.

"Having said that, we are observing some early signs of demand stabilisation in the PC and smartphone end market. Together with such a level of inventory control, we forecast fabless semiconductor inventory to further reduce & exit 4Q '23 at last year's level.”