Swelling government debt issuance and a hard landing for the US economy are some of the concerns keeping legendary investor Stan Druckenmiller on the edge heading into 2024. The US Federal Reserve hiking interest rates to one of the highest levels and insisting on keeping them higher for longer to curb inflationary pressures is also a significant point of concern for the billionaire investor.
Druckenmiller, the founder of Duquesne Capital, is maintaining a cautious approach to equity investments. At a Sohn Investment Conference in October, Druckenmiller touted slowing retail sales and turmoil in US regional banks as some of the reasons for caution. The investor is also wary of the unemployment rate rising above 5%, having notched to 3.9% in October.
The billionaire investor fears that mistakes of the past years on monetary policy could come to haunt the US and lead to tough choices in the future. He is especially concerned about increased government spending that has risen to 25% of GDP even as the economy remains in a debt crisis.
Druckenmiller has already called out Treasury Secretary Janet Yellen for committing one of US history's “biggest blunders” by failing to take advantage of the ultra-low interest rates era. Likewise, the US is finding itself in a big debt hole that is now up to more than $33 trillion on issuing debt in an environment of high-interest rates.
“When rates were practically zero, every Tom, Dick and Harry in the U.S. refinanced their mortgage… corporations extended [their debt],” he said. “Unfortunately, we had one entity that did not: the U.S. Treasury.”
The legendary investor who managed money for George Soros for more than a decade is predicting a hard landing for the US economy. He believes corporate profits, a critical driver of the upward momentum, could fall by between 20% and 30%. He also expects the real estate sector to come under pressure.
Billionaire Druckenmiller's 10 Stocks Picks with Huge Upside Potential
Stan Druckenmiller
Amid the gloom on the macroeconomics front, Druckenmiller believes there are some glimmers of opportunity in the stock market. Artificial intelligence adoption and development continue to give rise to unique investment opportunities on which the legendary investor maintains a close eye.
With an investment portfolio of $2.7 billion, Druckenmiller has made significant adjustments in line with the changing fundamentals. In the third quarter, he added dozens of new companies, taking advantage of a deep pullback as the overall market remained under pressure.
Some of the latest additions to his portfolio include Veeva Systems Inc. (NYSE:VEEV), Danaher Corporation (NYSE:DHR), and Western Digital Corporation (NASDAQ:WDC). Likewise, he exited some that he does not expect to perform amid the challenging environment, including Skechers U.S.A., Inc. (NYSE:SKX), Vornado Realty Trust (NYSE:VNO) and Tempur Sealy International, Inc. (NYSE:TPX).
Our Methodology
We scanned Duquesne Capital's Q3 13F fillings and picked 10 stocks that have the highest upside potential from their current levels based on average analyst price targets.
Billionaire Druckenmiller's Stocks Picks with Huge Upside Potential
KBR, Inc. (NYSE: KNR) stands out as a key industrial investment in Druckenmiller's portfolio. The company focuses on delivering cutting-edge scientific technology and engineering solutions to both government entities and commercial clients.
While KBR, Inc. (NYSE:KNR) has been highly volatile, it is up by about 2% for the year and rewards investors with a 1.02% dividend yield. It is rated as a Buy with a $69.67 price target, implying a 31.18% upside potential from current levels.
9. Compass, Inc. (NYSE:COMP)
Duquesne Capital’s Equity Stake: $1.16 Million
Share Price Upside Potential: 31.62%
Number of Hedge Fund Holders: 19
Compass, Inc. (NYSE:COMP) is one of the billionaire Druckenmiller's stock picks with tremendous upside potential with exposure in the real estate sector. Compass, Inc. (NYSE:COMP) provides real estate brokerage services while operating as a cloud-based platform for delivering an integrated software suite for customer relation management, marketing, and client service.
By the end of Q3 2023, 19 hedge funds out of the 910 tracked by Insider Monkey had bought the firm’s shares. Compass, Inc. (NYSE:COMP)’s most significant hedge fund investor among these is Richard Mashaal’s Rima Senvest Management through its $44.88 million stake.
Coupang, Inc. (NYSE:CPNG) is one of Druckenmiller's top stock picks, operating as an internet retailer, owning and operating e-commerce businesses through mobile applications and internet websites in South Korea. Coupang, Inc. (NYSE:CPNG) sells various products and services in the home goods and décor products categories. It also deals in beauty products, fresh food, and groceries.
Coupang, Inc. (NYSE:CPNG) is up by about 2.1 % for the year and is rated as Buy by analysts on Wall Street with an average price target of $21.27, implying 38.48% upside potential. Duquesne Capital has held stakes in Coupang, Inc. (NYSE:CPNG) since 2021 and held shares worth $355.37 million as of Q3 2023, accounting for 12.75% of the portfolio.
NVIDIA Corporation (NASDAQ:NVDA) remains Druckenmiller's biggest holding in technology, offering exposure to the artificial intelligence frenzy. The company has been flying high amid growing demand for its graphics processing units used in supporting and powering AI innovation. NVIDIA Corporation (NASDAQ:NVDA)’s chips are also in high demand in gaming, data center, and automotive markets.
New York-based TKO Group Holdings, Inc. (NYSE:TKO) operates as a sports and entertainment company. The company produces live events, television programs, and long/short-form video content across various platforms. TKO Group Holdings, Inc. (NYSE:TKO) also merchandises video games, apparel equipment, trading cards, and digital goods.
While TKO Group Holdings, Inc. (NYSE:TKO) has come under pressure heading into yearend, it is still up by about 10% for the year. Analysts on Wall Street rate it as a ‘Buy’ with a $114.50 price target, implying 51.66% upside potential from current levels.
Here is what Baron Opportunity Fund said about TKO Group Holdings, Inc. (NYSE:TKO) in its Q3 2023 investor letter:
“We trimmed our investment in TKO Group Holdings, Inc. (NYSE:TKO) down to a position size we were more comfortable with because of uncertainties regarding the competitive environment in the mixed martial arts space and TV carriage deals in the wrestling vertical.”
