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Stanley Druckenmiller Shelves Netflix and Affirm in the 3rd Quarter

Two of the guru's top holdings get a boost

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Nov 26, 2021
Summary
  • The guru boosted top holdings in Coupang and Alphabet.
  • 12 new stocks added to the portfolio during the quarter.
  • Druckenmiller continues to pull back his Microsoft holding.
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Stanley Druckenmiller (Trades, Portfolio), Chairman and CEO of Duquesne Capital, has revealed his portfolio for the third quarter of 2021. His top trades include a significant reduction in his Microsoft Corp. (MSFT, Financial) holding, additions to positions in Coupang Inc. (CPNG, Financial) and Alphabet Inc. (GOOGL, Financial) and selling out of holdings in Affirm Holdings Inc. (AFRM, Financial) and Netflix Inc. (NFLX, Financial).

Druckenmiller worked for

George Soros (Trades, Portfolio) from 1988 to 2000 as the lead portfolio manager for the Quantum Fund. He founded Duquesne Capital in 1981 and it operated as a hedge fund until 2010, but now operates as a family office. Druckenmiller uses a top-down approach that combines long and short positions in all types of assets.

Portfolio overview

At the end of the quarter, the guru’s portfolio contained 49 stocks with 12 new holdings. It was valued at $3.08 billion and has seen a turnover rate of 17%. Top holdings in the portfolio include Coupang, Amazon.com Inc. (

AMZN, Financial), Alphabet, Starbucks Corp. (SBUX, Financial) and Microsoft.

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The top sectors represented in the portfolio are consumer cyclical (43.72%), communication services (21.38%) and technology (20.37%).

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Microsoft

Druckenmiller slashed his Microsoft (

MSFT, Financial) holding by 48.43% with the sale of 730,327 shares. The shares sold at an average price of $290.90 throughout the quarter. Overall, the sale had a -4.90% impact on the portfolio and GuruFocus estimates the total gain of the holding at 61.04%.

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Microsoft develops and licenses consumer and enterprise software. It is known for its Windows operating systems and Office productivity suite. The company is organized into three equally sized broad segments: productivity and business processes (legacy Microsoft Office, cloud-based Office 365, Exchange, SharePoint, Skype, LinkedIn, Dynamics), intelligence cloud (infrastructure- and platform-as-a-service offerings Azure, Windows Server OS, SQL Server) and more personal computing (Windows Client, Xbox, Bing search, display advertising, and Surface laptops, tablets, and desktops).

On Nov. 26, the stock was trading at $334.98 per share with a market cap of $2.43 trillion. According to the GF Value Line, the stock is trading at a significantly overvalued rating.

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GuruFocus gives the company a financial strength rating of 7 out of 10, a profitability rank of 9 out of 10 and a valuation rank of 1 out of 10. There is one severe warning sign issued for assets growing faster than revenue. The company’s stellar profitability rank is propped up by operating and net margins that beat at least 96% of industry competitors.

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Other top guru shareholders in Microsoft (

MSFT, Financial) include Ken Fisher (Trades, Portfolio), Pioneer Investments, Primecap Management, Chase Coleman (Trades, Portfolio) and Dodge & Cox.

Coupang

The guru also boosted his fresh-faced Coupang (

CPNG, Financial) holding. The holding grew by 47.46% with the purchase of 4.99 million shares that traded at an average price of $34.58 during the quarter. GuruFocus estimates the total loss of the holding at 35.10% and the purchase had a 4.51% impact on the portfolio.

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Coupang Inc is an e-commerce company. The company sells apparel, electronics, footwear, food products, furniture, nutritional supplements, and other products.

As of Nov. 26, the stock was trading at $27.22 per share with a market cap of $47.67 billion. There is not currently enough data to display a GF Value Line and shares prices have fallen below the company’s debut price.

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GuruFocus gives the company a financial strength rating of 5 out of 10 and there is a severe warning sign issued for inventory building up. The company’s cash-to-debt ratio of 1.88 ranks better than 73.49% of industry competitors despite an increase in debt in 2020.

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Lee Ainslie (Trades, Portfolio), Baillie Gifford (Trades, Portfolio), Bill Gates (Trades, Portfolio), David Abrams (Trades, Portfolio) and Chris Davis (Trades, Portfolio) also own Coupang (CPNG, Financial) shares.

Affirm

The quarter also saw Druckenmiller sell out of his Affirm (

AFRM, Financial) position. The 1.37 million shares sold at an average price of $79.94 throughout the quarter after two quarters of ownership. The sale had a -2.30% impact on the portfolio overall and GuruFocus estimates the guru’s loss on the holding at 18.16%.

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Affirm offers a platform for digital and mobile-first commerce. It comprises a point-of-sale payment solution for consumers, merchant commerce solutions, and a consumer-focused app. The firm generates its revenue from merchant networks, and through virtual card networks among others. Geographically, it generates a major share of its revenue from the United States.

The stock was trading at $134.99 per share with a market cap of $37.93 billion on Nov. 26. The stock rallied through the beginning of November to hit a peak of almost $170 per share.

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GuruFocus gives the company a financial strength rating of 5 out of 10 and a profitability rank of 1 out of 10. There are no severe warning signs issued for the company and a medium warning sign is issued for insiders selling shares. The company has generated increased revenue over the last several years but has failed to pull net income out of the red.

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Affirm (

AFRM, Financial) shares are also owned by Baillie Gifford (Trades, Portfolio), Philippe Laffont (Trades, Portfolio), Pioneer Investments, Chase Coleman (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio).

Alphabet

Druckenmiller’s Alphabet (

GOOGL, Financial) holding also saw a 28.55% boost during the quarter with the purchase of 25,985 shares. The shares traded throughout the quarter at an average price of $2,720.51 and landed the guru at a total estimated gain of 19.53% on the holding. Overall, the purchase had a 2.26% impact on the portfolio.

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Alphabet is a holding company, with Google, the Internet media giant, as a wholly owned subsidiary. Google generates 99% of Alphabet revenue, of which more than 85% is from online ads. Google's other revenue is from sales of apps and content on Google Play and YouTube, as well as cloud service fees and other licensing revenue. Sales of hardware such as Chromebooks, the Pixel smartphone, and smart homes products, which include Nest and Google Home, also contribute to other revenue. Alphabet's moonshot investments are in its other bets segment, where it bets on technology to enhance health (Verily), faster Internet access to homes (Google Fiber), self-driving cars (Waymo) and more.

On Nov. 26, the stock was trading at $2,843.66 per share with a market cap of $1.89 trillion. According to the GF Value Line, the stock is trading at a modestly overvalued rating.

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GuruFocus gives the company a financial strength rating of 8 out of 10, a profitability rank of 9 out of 10 and a valuation rank of 3 out of 10. There are two severe warning signs issued for a declining gross margin and a declining operating margin. Alphabet’s cash flows have grown steadily over the last decade, leaving plenty of capital available for its moonshot investments.

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Ken Fisher (Trades, Portfolio), Primecap Management, Pioneer Investments, Spiros Segalas (Trades, Portfolio) and Frank Sands (Trades, Portfolio) also maintain positions in Alphabet (GOOGL, Financial).

Netflix

The quarter also saw Netflix (

NFLX, Financial) get the boot from the portfolio as Druckenmiller sold the 172,215 shares that he purchased in the second quarter. The shares traded at an average price of $550.68 during the quarter. The sale had a -2.25% impact on the portfolio overall and GuruFocus estimates the total gain of the holding at 24.55%.

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Netflix's primary business is a streaming video on demand service now available in almost every country worldwide except China. Netflix delivers original and third-party digital video content to PCs, Internet-connected TVs and consumer electronic devices. In 2011, Netflix introduced DVD-only plans and separated the combined streaming and DVD plans, making it necessary for subscribers who want both to have separate plans.

As of Nov. 26, the stock was trading at $665.64 per share with a market cap of $294.85 billion. A fair value rating is given to the stock by the GF Value Line.

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GuruFocus gives the company a financial strength rating of 5 out of 10, a profitability rank of 8 out of 10 and a valuation rank of 2 out of 10. There are two severe warning signs issued for assets growing faster than revenue and a Beneish M-Score indicating the company may manipulate its financials. Prior to 2011, Netflix showed strong capital efficiency, but struggled throughout the majority of the last decade.

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Other top guru shareholders in Netflix (

NFLX, Financial) include Baillie Gifford (Trades, Portfolio), Frank Sands (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Spiros Segalas (Trades, Portfolio) and Chase Coleman (Trades, Portfolio).

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Disclosures

I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
The views of this author are solely their own opinion and are not endorsed or guaranteed by GuruFocus.com
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