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Stanley Druckenmiller's Top Predictable Stocks: Nextra Energy Inc. (FPL), Amgen Inc. (AMGN), Kohl's Corp. (KSS), Green Mountain Coffee Roasters (GMCR)

May 31, 2010 | About:
In this article, I'd like to share with you some of Stanley Druckenmiller’s best holdings based on their earnings predictability. Earnings Predictability is one of the most important factors when determining intrinsic value (i.e. fair value) and is the basis for the following article. By themselves, earnings multiples are important, but without the ability to accurately predict a company's future profits then the price you pay becomes much less important.

As you know, Stanley Druckenmiller (born 1953 in Pittsburgh, Pennsylvania) is the President, CEO and Chairman of Duquesne Capital, which he founded in 1981. The fund is reported to have more than $10 billion in assets. [1] He managed money for George Soros from 1988 to 2000 as the lead portfolio manager for Quantum Fund. With an estimated current net worth of around $3.5 billion, he is ranked by Forbes as the 164th-richest person in the world.

Druckenmiller began his financial career in 1977 as a management trainee at Pittsburgh National Bank and soon became head of the bank's equity research group after one year before leaving in 1981 to form Duquesne Capital Management.

In 1988, he was hired by George Soros to replace Victor Niederhoffer at Quantum Fund. He and Soros famously "broke the Bank of England" when they shorted British pound sterling in 1992, reputedly making more than $1 billion in profits. He left Soros in 2000 after taking large losses in technology stocks. Since then he has concentrated full time on Duquesne Capital. One of George Soros's key prodigies, Druckenmiller has a knack for taking big positions at the right time, which contributed heavily to Quantum's quantum returns.

However, Druckenmiller is very shy when it comes to press coverage and withdrew his bid to buy a controlling stake in the Pittsburgh Steelers in September of last year. In 2008, while the market lost 33%, Druckenmiller's fund reportedly returned more than 5% net of fees.

Duquesne Capital Management provides its services to high net worth individuals and institutions. It invests in the public equity and hedging markets across the globe. The firm also makes investments in power and utility sectors. It invests in growth-oriented value stocks to make its portfolios.

And, while his investment strategy is not fully documented like many of the other investment gurus, it's almost impossible to deny that Stanley is probably the best currency trader alive. His main focus has been on capital preservation and "home runs." Druckenmiller also proves that success is not a matter of luck. His consistent returns demonstrate a sound underlying strategy along with the willingness to take occasional risks. His is a trading strategy that worked, and his success offers good insights for all investors.

With that in mind, over the last quarter Druckenmiller has upped his position in the Technology and Industrials, while decreasing his position in everything else. However, he is still heavily weighted in Healthcare and Basic Materials, which makes up roughly 30% of his $4.46 billion stock portfolio.

Visit the following link for more information on Stanley Druckenmiller: http://www.gurufocus.com/holdings.php?GuruName=Stanley+Druckenmiller

Stanley Druckenmiller's Top Predictable Stocks:

No. 1: Nextra Energy Inc. (FPL), Weightings: 0.11% - 105,500 Shares

No. 2: Amgen Inc. (AMGN), Weightings: 0.46% - 341,751 Shares

No. 3: Kohl's Corp. (KSS), Weightings: 0.09% - 75,000 Shares

No. 4: Green Mountain Coffee Roasters (GMCR), Weightings: 0.12% - 55,500 Shares

No. 1: Nextra Energy Inc. (FPL)

Formerly, FPL Group, Nextera is a public utility holding company. NextEra Energy Resources has power generating facilities in 26 states and Canada. Our portfolio is diversified by fuel source and geographic region.

Nextera Energy, Inc. has a market cap of $20.66 billion; its shares were traded at around $49.93 with a P/E ratio of 12.18 and P/S ratio of 1.32. The dividend yield of Nextera Energy, Inc. stocks is 4.01%. Nextera Energy, Inc. had an annual average earnings growth of 5.8% over the past 10 years. GuruFocus rated Nextera Energy, Inc. the business predictability rank of 4-star.

Based on their current book value (27.51), 2011 EPS (4.42), an estimated growth rate (9.8%), and using GuruFocus.com's standard discount rate (12%), the FAIR VALUE for FPL is $89.32 per share. The stock also carries a 8.9% earnings yield.

Druckenmiller owns 105,500 shares as of 3/31/2010, which accounts for 0.11% of the $4.46 billion stock portfolio.

No. 2: Amgen Inc. (AMGN)

Amgen Inc. discovers, develops and delivers innovative human therapeutics. Its main products include Aranesp and EPOGEN, erythropoietic-stimulating agents (ESAs) that stimulate the production of red blood cells; Neulasta, a pegylated protein, based on the Filgrastim molecule, and NEUPOGEN, a recombinant-methionyl human granulocyte colony-stimulating factor, both of which selectively stimulate the production of neutrophils (a type of white blood cell that helps the body fight infection), and Enbrel, an inhibitor of tumor necrosis factor, a substance that plays a role in the body’s response to inflammatory diseases.

Amgen Inc. has a market cap of $50.31 billion; its shares were traded at around $51.78 with a P/E ratio of 10.17 and P/S ratio of 3.44. Amgen Inc. had an annual average earnings growth of 18.1% over the past 10 years. GuruFocus rated Amgen Inc. the business predictability rank of 4-star.

Based on their current book value (23.13), 2011 EPS (5.03), an estimated growth rate (10%), and using GuruFocus.com's standard discount rate (12%), the FAIR VALUE for AMGN is $75.31 per share. The stock is trading near its 52 week low and also carries a 9.8% earnings yield.

Druckenmiller owns 341,751 shares as of 3/31/2010, which accounts for 0.46% of the $4.46 billion stock portfolio.

No. 3: Kohl's Corp. (KSS)

Kohl's Corporation operates family oriented, specialty department stores primarily in the Midwest, Mid-Atlantic and Northeast areas of the United States that feature quality, national brand merchandise priced to provide exceptional value to customers. As of January 30, 2010, the Company operated 1,058 stores in 49 states; it leased 686 of its 1,058 retail stores. In addition, Kohl’s offers on-line shopping on its Website at www.Kohls.com.

Kohl's Corp. has a market cap of $15.58 billion; its shares were traded at around $50.75 with a P/E ratio of 14.84 and P/S ratio of 0.91. Kohl's Corp. had an annual average earning growth of 13.4% over the past 10 years. GuruFocus rated Kohl's Corp. the business predictability rank of 4-star.

Based on their current book value (26.38), 2011 EPS (3.74), an estimated growth rate (12.4%), and using our standard discount rate (12%), the FAIR VALUE for KSS is $81.80 per share.

Druckenmiller owns 75,000 shares as of 3/31/2010, which accounts for 0.09% of the $4.46 billion stock portfolio.

No. 4: Green Mountain Coffee Roasters (GMCR)

Green Mountain Coffee roasts high-quality arabica coffees to produce a variety of coffee which it sells through a coordinated multi-channel distribution network in its wholesale and direct mail operations. It sells over 200 whole bean and ground coffee selections, cocoa, teas and coffees in K-Cup portion packs, Keurig single-cup brewers, and other accessories. The Company operates in two business segments: Specialty Coffee business unit and Keurig business unit.

Green Mountain Coffee Roasters Inc. has a market cap of $3.1 billion; its shares were traded at around $23.65 with a P/E ratio of 45.19 and P/S ratio of 3.86. Green Mountain Coffee Roasters Inc. had an annual average earning growth of 22.1% over the past 10 years. GuruFocus rated Green Mountain Coffee Roasters Inc. the business predictability rank of 3.5-star.

Based on their current book value (4.87), 2011 EPS (1.01), an estimated growth rate (20%), and using our standard discount rate (12%), the FAIR VALUE for ENR is $27.39 per share. Despite providing a smaller margin of safety than the other stocks in this article, GMCR has the highest growth potential.

Druckenmiller owns 55,500 shares as of 3/31/2010, which accounts for 0.12% of the $4.46 billion stock portfolio.

The stock highlighted above are only what I feel are the best ideas still mispriced within this guru's portfolio. No one cares more about your money than you do. By using GuruFocus.com anyone can find stocks that fit their personal investment criteria. Remember, that you shouldn’t always follow the guru’s stock picks, but instead learn from both their mistakes and their success to become a better investor.

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About the author:

Jonathan Poland
Since 2002, I've worked with investors all over the world. Between 2009 and 2010 worked with GuruFocus to start their investment newsletter service.

Visit Jonathan Poland's Website


Rating: 2.5/5 (11 votes)

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