Two weeks ago, on Feb. 17, institutional investors with at least $100 million in assets under management were required to file Form 13F with regulators. A 13F is an invaluable data set that allows investors to track which stocks and exchange-traded funds (ETFs) Wall Street's preeminent money managers bought and sold in the latest quarter.
Following Warren Buffett's retirement, Stanley Druckenmiller of Duquesne Family Office is, arguably, Wall Street's savviest billionaire investor. According to Duquesne's 13F, its billionaire boss was a decisive seller of two top-performing stocks during the fourth quarter -- Teva Pharmaceutical Industries (TEVA 2.99%) and Taiwan Semiconductor Manufacturing (TSM 4.25%), commonly known as "TSMC" -- and a big-time buyer of an ultra-popular sector-based ETF.
Image source: Getty Images.
Billionaire Stanley Druckenmiller is paring down two of his biggest winners
According to Duquesne's latest 13F filing, Druckenmiller reduced his fund's position in Teva Pharmaceutical by 10,719,065 shares (a 65% cut) and sent 222,000 shares of TSMC to the chopping block (a 29% reduction).
If you're wondering why one of Wall Street's most prominent billionaire money managers is heading for the exit, look no further than the respective outperformance of these two stocks.
NYSE: TEVA
Key Data Points
Shares of Teva have effectively doubled since Druckenmiller began building a sizable position during the third quarter of 2024. Under CEO Richard Francis, Teva has placed more emphasis on higher-margin novel drug development, which has translated into stronger sales growth. This boost in the company's top-line comes after years of cost-cutting and non-core asset sales that have meaningfully improved the financial flexibility of Teva's balance sheet.
Meanwhile, Taiwan Semiconductor stock has more than doubled since Druckenmiller opened a position (also in the third quarter of 2024). TSMC is the world's leading chip fabricator and an undeniable beneficiary of the artificial intelligence (AI) revolution. TSMC's chip-on-wafer-on-substrate technology, which packs high-bandwidth memory with graphics processing units, is an AI-accelerated data center staple.
With the average security in Duquesne's $4.5 billion investment portfolio only held for 7.5 months, it's no surprise to see its billionaire boss ringing the register.
Image source: Getty Images.
Financials are the new apple of Druckenmiller's eye
Perhaps the biggest surprise of Duquesne's 13F was the 5,495,600 shares purchased of the State Street Financial Select Sector SPDR ETF (XLF 1.47%). In simpler terms, Druckenmiller purchased a security that represents the financial sector components of the benchmark S&P 500 -- and he made it his fund's No. 2 holding.
Investors typically buy into a financial sector ETF to take advantage of cyclical upside. Banks and insurance companies tend to ebb and flow with the health of the U.S. economy. With U.S. gross domestic product expanding, this roughly $301 million purchase by Druckenmiller may signal optimism in the U.S. economy and for lenders.
NYSEMKT: XLF
Key Data Points
However, optimism usually peaks with the State Street Financial Select Sector SPDR ETF when interest rates are rising. Higher rates lead to more profitable loan originations and higher interest income for financial institutions. Yet, the Federal Reserve has been in a rate-easing cycle since September 2024.
It's also possible that Duquesne's billionaire investor is concerned about inflation and the possibility that interest rates will stabilize or even rise. If the central bank were to reverse course, financial stocks would be sitting pretty.
