Stanley Druckenmiller might not be as well known as some other hedge fund billionaires, but if you're looking to learn from the best, it's hard to do better than Druckenmiller.
A protege of George Soros, Druckenmiller helped make the famous bet with Soros that broke the Bank of England, crashing the British pound and making more than $1 billion in 1992.
Even better, as the manager of Duquesne Capital Management, Druckenmiller has generated a compound annual average return of 30% from the fund's founding in 1981 to its closure in 2010. Druckenmiller continues to invest through his family office, and his moves are closely followed. Druckenmiller stresses position sizing in his strategy, saying, "It's not whether you're right or wrong; it's how much you make when you're right and how much you lose when you're wrong." He's also known for following macro trends, and being quick to change his mind as situations change.
So what was Druckenmiller buying in the second quarter? Let's take a look at a couple of his most intriguing buys.
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1. Philip Morris
One of Duquesne Capital Management's biggest new positions in the quarter was Philip Morris International (PM +3.44%), the international tobacco giant.
Duquesne bought nearly 900,000 shares in Philip Morris, worth roughly $110 million. It also bought calls in the stock, indicating even more bullishness on the tobacco asset. Druckenmiller's bet appears to have paid off as the stock has jumped by more than a third since its bottom on April 12, a big move from a recession-proof industry known for dividends and safety.
NYSE: PM
Key Data Points
Philip Morris stock has broken out as the company has been more successful at pivoting to smoke-free products than peers like Altria and British American Tobacco. In fact, roughly 40% of Philip Morris' revenue now comes from next-gen products like Zyn nicotine pouches and Iqos heat-not-burn devices. It even acquired the license to sell Iqos sticks in the U.S., opening up a potentially large market for the smoke-free product.
In its second quarter, Philip Morris saw solid growth with organic revenue up 9.6% to $9.5 billion and a 10.6% increase in adjusted earnings per share of $1.77. Growth from its smoke-free categories was even more impressive as organic revenue rose 18% and gross profit was up 22%. As smoke-free products make up more of the business, it should drive increased revenue growth.
Philip Morris also remains a strong dividend stock with a dividend yield of 4.3%.
2. Coherent
Druckenmiller's biggest holding is now Coherent (COHR 5.93%), which comes after he sold a significant stake in Coupang and sold most of his shares of Nvidia.
Coherent makes lasers and develops laser-based technology and electro-optic switches. Its technology has become valuable in semiconductor manufacturing, which has connected the company to the artificial intelligence (AI) boom.
The company is seeing strong growth in its Datacom transceiver business, a key part of fiber-optic networks, which is being driven by growth in generative AI. That also helped expand Coherent's gross margin in the quarter, which rose 440 basis points to 32.9%.
NYSE: COHR
Key Data Points
Wall Street expects profits to continue to ramp up as it capitalizes on the emerging technology. Coherent's own guidance calls for adjusted earnings per share of $0.53 to $0.69, up from just $0.16 in the quarter a year ago, while revenue is expected to grow 24.7% at the midpoint of its guidance range of $1.27 billion to $1.35 billion.
Like Philip Morris, Coherent also rallied in the second quarter, jumping more than 50% from its low point in April.
Druckenmiller was early to invest in Nvidia after ChatGPT launched, buying that stock in the fourth quarter of 2022, so he has sharp insight into the artificial intelligence industry, and that could explain his aggressive bet on Coherent. The laser technology company is an under-the-radar AI stock and could be a long-term winner if it can continue to ramp up profits.
