Last week marked what was arguably the most important data release of the entire first quarter. Feb. 17 was the deadline for institutional investors with at least $100 million in assets under management to file Form 13F with the Securities and Exchange Commission. A 13F details which stocks Wall Street's smartest money managers bought and sold in the latest quarter.
With Warren Buffett retiring, an argument can be made that billionaire Stanley Druckenmiller is now Wall Street's most-followed money manager. Druckenmiller is an active investor who loves growth stocks, as evidenced by sizable purchases of Alphabet (GOOGL 1.66%)(GOOG 1.69%) and Amazon (AMZN 1.52%) shares for a second consecutive quarter.
But not all members of the "Magnificent Seven" are in Druckenmiller's good graces.
Image source: Getty Images.
Duquesne Family Office's billionaire boss loves inexpensive artificial intelligence stocks
According to Duquesne's 13F detailing fourth-quarter trading activity, Druckenmiller bought 282,800 shares of Alphabet (Class A shares, GOOGL) and 300,870 shares of Amazon. This increased Duquesne's stake in both companies by 277% and 69%, respectively.
Both are industry leaders in their respective categories. Alphabet's Google holds a virtual monopoly in internet search traffic, with GlobalStats data showing it accounts for a 90% share of the global market. Meanwhile, Amazon has the most dominant online marketplace, as well as the No. 1 cloud infrastructure service platform, Amazon Web Services (AWS). These foundational segments are cash cows for Alphabet and Amazon.
NASDAQ: GOOGL
Key Data Points
But what likely attracts Duquesne's billionaire investor to both companies is their ties to artificial intelligence (AI). Alphabet and Amazon are incorporating generative AI and large language model capabilities into their respective cloud infrastructure service platforms (Google Cloud and AWS). Growth rates for both segments are reaccelerating, thanks to AI, with year-over-year sales increases of 48% for Google Cloud and 24% for AWS in the fourth quarter.
Their relatively inexpensive valuations may have also enticed Stanley Druckenmiller. Amazon is historically cheap, relative to its future cash flow, while Alphabet's forward price-to-earnings ratio of 24 isn't egregious considering its outsize growth from Google Cloud.
Image source: Getty Images.
Billionaire Stanley Druckenmiller gives Meta Platforms the heave-ho
However, another member of the Magnificent Seven found itself on the chopping block. Among the 31 stocks Druckenmiller's fund sold out of in the fourth quarter, none is more prominent than social media goliath Meta Platforms (META 2.52%). Druckenmiller dumped all 76,100 shares that were previously held.
One possible reason for this selling is simple profit-taking. The average security in Duquesne's portfolio has only been held for 7.5 months, indicating that Druckenmiller isn't shy about cashing in his chips. But there may be more to this selling than just a desire to ring the register.
NASDAQ: META
Key Data Points
For instance, Meta's third-quarter operating results pointed to higher-than-expected spending on AI infrastructure. While AI has been a source of rapid sales growth (see Alphabet and Amazon), many of Meta's major investments will take years to play out. Some investors, including Duquesne's chief, may have viewed this higher spending forecast as a future drag on earnings.
Meta Platforms also generates nearly 98% of its sales from advertising, making it a highly cyclical company. Possible concerns about economic weakness may have prompted Druckenmiller to dump his fund's stake in Meta.
