Stanley Druckenmiller has proven his investing expertise over the long haul. At the helm of Duquesne Capital Management, he generated an average annual return of 30% over three decades. And he didn't deliver any money-losing years. With a track record like that, it's not surprising that investors love to watch his portfolio for potential investing inspiration.
The good news is, even though Druckenmiller retired many years ago, he continues to manage money -- for the Duquesne Family Office -- and he's still making exciting moves. In fact, a few over the past year have been particularly striking.
The billionaire sold all of his shares of Nvidia (NVDA 3.85%) a year ago, and did the same with Palantir Technologies (PLTR 7.93%) earlier this year. These are two of the most successful artificial intelligence (AI) companies around, and their stocks have gained 1,400% and 2,300%, respectively, over the past three years.
Druckenmiller has turned to two stocks set to win in one of the decade's hottest growth markets. Let's check out these recent buys.
Image source: Getty Images.
Druckenmiller's regrets
First, a quick note on Druckenmiller's sales of Nvidia and Palantir. The billionaire sold his last Nvidia shares in the third quarter of last year, and even expressed regret about the decision, calling Nvidia "a wonderful company" in an interview with Bloomberg.
But Druckenmiller considered the stock's valuation had significantly increased, and it was time to sell. We don't know exactly why Druckenmiller exited Palantir, but considering its valuation also has surged -- trading for more than 125x forward earnings estimates for most of the first quarter of this year, the period of Druckenmiller's sale -- this could be a reason.
Now, let's consider the purchases Druckenmiller made in recent times that offer him access to another huge growth market. The billionaire bought shares of Eli Lilly (LLY +1.15%), a leader in the weight loss drug market, and Viking Therapeutics (VKTX 3.81%), a biotech aiming to enter this industry:
- In the fourth quarter of last year, Druckenmiller opened a position in Eli Lilly, buying 62,190 shares. He increased the position over the past two quarters and now holds 100,675 shares.
- In the second quarter of this year, Druckenmiller opened a position in Viking and holds 549,295 shares.
Blockbuster revenue
Why are these stocks good buys? The weight loss drug market, worth $28 billion today, is on track to reach $95 billion by the end of the decade, according to Goldman Sachs Research. And trends seen by Lilly, which already is generating blockbuster revenue in the market, support this idea of growth. Lilly and Novo Nordisk, today's market leaders, have seen demand for their drugs surpass supply, and their products even ended up on the U.S. Food and Drug Administration's shortage list last year.
The companies' efforts to ramp up manufacturing have helped boost supply, but demand still remains high and is driving growth. For example, Lilly reported a 54% increase in revenue in the recent quarter thanks to its weight loss portfolio.
NYSE: LLY
Key Data Points
As for Viking, the company isn't yet participating in this market, but has a candidate in late-stage development -- and clinical trial results have been strong. So, in the next few years Viking could potentially join this high-growth market -- and the good news is, considering the need for these drugs, there's room for Viking to carve out a spot and benefit, even as Lilly continues to maintain its leadership. More than one company can score a win, and Druckenmiller clearly sees this, as he's invested in both Lilly and Viking.
What should your investment strategy be?
So, should you follow the billionaire's footsteps and turn away from Nvidia and Palantir, and instead bet on these potential healthcare winners? This depends on your investment strategy.
Nvidia and Palantir remain great stocks to own if you're a growth investor -- the AI boom isn't over, and they still could have room to run. Cautious investors, though, may prefer a shift into healthcare, and particularly may favor a player like Lilly, since the company sells a wide range of products, including its weight loss drugs. Viking represents a bit more risk, since it hasn't yet commercialized a drug -- but if its weight loss candidate arrives at the finish line, the company and investors could win big.
All this means each of these past and current Druckenmiller bets could be right for your portfolio -- the final decision depends on your comfort with risk and investment goals.
