Stanley Druckenmiller is likely one of the greatest buyers of all time. From 1981 to 2010, Druckenmiller by no means had a dropping 12 months, reaching a median annual return of 30% together with his hedge fund Duquesne Capital Administration, an exceptional observe file.
Lately, Druckenmiller nonetheless invests by way of the Duquesne Household Workplace, and his strikes are intently watched by buyers on the lookout for insights into the market from the highest cash supervisor.
Within the first quarter, one commerce was significantly intriguing. Druckenmiller bought out of all of his shares of Palantir Applied sciences (PLTR 3.54%), the high-flying synthetic intelligence (AI) software program inventory that has been the perfect performer within the S&P 500 this 12 months. Palantir was not an enormous holding of his, value round $5 million on the time of the sale, or 41,710 shares.
It is not clear why Druckenmiller bought out of Palantir, however we will speculate as to the reasoning. Let’s check out a few doable causes.
Picture supply: Getty Pictures.
1. Valuation
Valuation is probably the most logical motive that Druckenmiller would exit the Palantir stake. The AI inventory has stretched what’s sometimes thought-about an affordable value to pay for a inventory.
At this writing, Palantir was buying and selling at a price-to-sales ratio of 111, a valuation sometimes reserved for a development-stage inventory in biotech or one other rising trade. Will probably be troublesome for Palantir to keep up that a number of as any flaws with its outcomes are prone to drive a sell-off within the inventory.
This is not the primary time that Duquesne bought Palantir. It dumped most of its stake within the third quarter of 2024, promoting 728,255 shares value about $30 million on the time as that sale got here earlier than Palantir inventory soared within the fourth quarter and into this 12 months.
Druckenmiller purchased the inventory within the first quarter of 2024, however he did not maintain it for lengthy. Issues about valuation additionally appear the most probably trigger for the sale as he made an analogous determination with Nvidia, promoting out of the inventory in 2024, although he later acknowledged that was a mistake because the inventory continued to rise. Explaining the choice to promote Nvidia, Druckenmiller mentioned that the market had come to acknowledge what he acknowledged earlier when he purchased the inventory in 2022.
Notably, Duquesne purchased almost 500,000 shares of Taiwan Semiconductor Manufacturing within the first quarter, value round $100 million, displaying that the chip manufacturing chief could also be his most well-liked AI play.
2. Diversifying away from the U.S.
Like other buyers who could also be responding to the simmering commerce warfare, Druckenmiller appears to have diversified his portfolio away from the U.S. 5 of Duquesne’s prime 9 holdings are primarily based in international nations or do most of their enterprise in international nations, together with Teva Prescription drugs, Coupang, Philip Morris Worldwide, MercadoLibre, and Taiwan Semiconductor.
Out of these 5, Druckenmiller added to a few of them (Teva, Coupang, and TSMC) within the first quarter, and he bought shares of Philip Morris. He made no adjustments to MercadoLibre.
After all, there are causes to personal these shares apart from their worldwide publicity, however it’s a notable change for Duquesne. A 12 months in the past, the portfolio was far more weighted to the U.S.
Not solely is Palantir an American firm, however it additionally makes most of its cash from the U.S. and is seeing quicker progress within the U.S. than worldwide markets. Its greatest buyer is the U.S. authorities. CEO Alex Karp has additionally denigrated Europe for refusing to evolve its strategy to AI and embrace Palantir’s expertise.
What it says about Druckenmiller’s technique
Based mostly on Druckenmiller’s determination to promote out of Palantir only a 12 months after shopping for the inventory and the same determination to promote Nvidia, we will conclude a number of issues about his fashion.
First, the Duquesne boss is not a long-term buy-and-hold investor. He spots alternatives primarily based on valuation and traits and makes an attempt to capitalize on them. As soon as he has achieved important positive factors, he sometimes sells. Many of the shares in his portfolio have solely been there a 12 months or two.
Equally, he stays energetic. Of the 90 positions he held on the finish of the fourth quarter of 2024, solely eight have been unchanged, and he bought out of almost half of his holdings.
There’s a couple of technique that may work in investing, in fact, and Druckenmiller prefers an energetic buying and selling fashion by which he is prone to promote positions after a considerable achieve.
His determination to promote Palantir would not essentially bode poorly for the inventory, however buyers needs to be conscious of the valuation. Reserving some earnings within the high-flying inventory would not look like a foul thought given the excessive price ticket.
Jeremy Bowman has positions in MercadoLibre, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Idiot has positions in and recommends MercadoLibre, Nvidia, Palantir Applied sciences, and Taiwan Semiconductor Manufacturing. The Motley Idiot recommends Coupang and Philip Morris Worldwide. The Motley Idiot has a disclosure coverage.
