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In this article, we presented the 10 best stocks to buy for 2021 according to billionaire Stan Druckenmiller. Click to skip ahead and see the 5 Best Stocks To Buy for 2021.
Billionaire investor Stanley Druckenmiller is one of the all-time great investors. Druckenmiller and his colleague George Soros worked together for years and established a history of generating huge gains from macroeconomic trends. The two legendary investors have famously bet against the British pound in 1992 that resulted in massive profits.
While the billionaire Druckenmiller has closed Duquesne Capital in 2010 and currently runs a family office to manage his fortune, his stock pickss and market analysis are worth considering. You may not remember but back in 2015 when David Einhorn was still an influential hedge fund manager and shorting Amazon, Druckenmiller talked positively about Amazon in an investment conference. You now know which hedge fund manager had a better eyesight. Also around the same time Warren Buffett was loading up on IBM shares. This time Druckenmiller was bearish on IBM (read this article to refresh your memory) and he was proven right one more time. That's why when Stan Druckenmiller takes a position, we pay attention.
The billionaire investor has recently claimed it’s not wise to short the markets, even though the focus is shifted towards value from growth stocks amid coronavirus vaccine discovery. He believes hundreds of companies are likely to benefit from coronavirus vaccine discovery.
“You’ve had a bunch of equities benefiting greatly from work from home,” Druckenmiller said. “A lot of money has rotated into them. They are overvalued.” “But then you’ve got a whole other sector of the market that has struggled mightily because of Covid,” he said. “They’re selling at under-value relative to, say, a three-to-five-year outlook. So the rotation into that would seem entirely rational.”
Stanley Druckenmiller of Duquesne Capital
Although he is popular for using a macroeconomics-driven investment style, his portfolio movements show a mix of long and short exposures.
The third quarter portfolio stakes show that the billionaire investor is bullish on stock markets, with a focus on both value and growth stocks. Duquesne Family Office portfolio includes 61 stocks valued at $3.4 billion, according to the latest 13F filing. Stanley Druckenmiller has initiated new positions in 16 stocks and added to 18 existing stakes. The firm has also sold out stakes in 27 stocks and reduced positions in 14 stocks.
The billionaire investor also looks bullish over the future fundamentals of gold and Bitcoin as he thinks Federal Reserve’s low-interest-rate policies along with stimulus measures would increase inflation in the years ahead. He suggests investors put money in gold and bitcoin as a way of hedging against the fall in the US dollar value.
Billionaire U.S. investor Stanley Druckenmiller recently said he owns bitcoin and he expects bitcoin to outperform in the days ahead. "Bitcoin has a lot of attraction as a store of value to both millennials and the new West Coast money and, as you know, they have a lot of it," Druckenmiller said. The Wall Street legend believes Bitcoin is stabilizing with every passing day since it launched in 2008.
While Stanley Druckenmiller's reputation remains intact, the same can’t be said of the hedge fund industry as a whole, as its reputation has been tarnished in the last decade during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 78 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Let’s start examining the 10 best stocks to buy for 2021 according to billionaire Stan Druckenmiller.
10. JD.com (NASDAQ: JD)
The Chinese e-commerce company JD.com (NASDAQ: JD) is the tenth-largest stock holding of the legendary Stanley Druckenmiller family office portfolio, accounting for 3.43% of the overall portfolio. The billionaire investor is seeking to generate returns from one of the top-performing growth stocks as pandemic has significantly shifted consumer's focus towards online platforms.
Indeed, the billionaire investor who recently stated that markets will extend gains despite higher valuations has added to its existing JD position in the latest quarter. The family office currently holds 1.5 million shares of the Chinese e-commerce company valued at $118 million. Druckenmiller's protfolio has benefited substantially from its position in JD.com since the second quarter of 2019 as shares of the Chinese online platform soared 135% in the last twelve months alone.
Its September quarter revenue jumped 29% year over a year while annual active customer accounts surged 32% to 441.6 million in the trailing twelve months.
Third Point talked about both JD and Alibaba (BABA) in its Q2 investor letter:
“During the quarter, we took advantage of jitters about China’s relationships with Hong Kong and the U.S. that created an air pocket in trading of Chinese‐related shares to establish new positions in e‐commerce leaders Alibaba and JD.com. As we have articulated in prior letters3, our outlook for Alibaba and the broader Chinese e‐commerce market is bright. We believe online gross merchandise value (“GMV”) will grow at a mid‐teens CAGR over the next five years, propelled by both (1) rising consumption per capita, as the Chinese retail market is equal in size to the U.S. despite four times as many consumers, and (2)increased penetration of retail by online, a trend which we believe has been structurally accelerated by the COVID‐ 19 pandemic.
As the e‐commerce market matures, we believe Alibaba & JD will leverage scale and growing repositories of transaction data to increase monetization of their platforms through targeted advertising to improve revenue yields (revenues as a percentage of GMV) from a starting point of less than 4% today. As a point of comparison, brick‐and‐mortar retail store rent expenses in China are greater than 10% of sales on average, which provides a significant umbrella for online marketplaces to take a greater share of GMV through a combination of commission and advertising spending as online retailer cost structures converge with brick‐ and‐mortar retail.
Finally, we continue to be excited about the latent potential in some of Alibaba’s businesses beyond the core e‐commerce marketplaces – particularly the cloud computing business, Aliyun. China’s cloud computing industry remains nascent but is growing nearly 3x faster than its developed market counterparts through a combination of rising IT intensity, rapid cloud penetration, and a gradual moderation in software piracy. Within that market, Aliyun is increasingly dominant (with nearly 50% market share) and will generate dramatic profit growth as margins expand with scale. As one reference point, Aliyun today resembles Amazon’s AWS business five years ago; this is an encouraging comparison given that today, AWS’ operating profits (and estimated enterprise value) exceed Alibaba’s business in its entirety. Ant Financial – in which Alibaba holds a ~30% stake that is worth roughly $70 billion – has announced its intention to go public later this year. Alibaba shares will benefit further should they become accessible to mainland Chinese investors through inclusion in the Southbound Connect.”
9. Starbucks Corporation (NASDAQ: SBUX)
SBUX ranks 9th in our list of the 10 best stocks to buy for 2021. The coffeehouse chain Starbucks Corporation (NASDAQ: SBUX) is among the best stocks to buy according to the billionaire investor. Stanley Druckenmiller's family office increased its stake by 61% in Starbucks Corporation during the third quarter. The firm currently holds 1.4 million shares of SBUX valued at $125, accounting for 3.65% of the portfolio.
Shares of Starbucks underperformed this year amid social distancing policies and lockdowns. However, Druckenmiller saw the underperformance as a buying opportunity for the long-term. The future fundamentals of Starbucks improved sharply due to the discovery of the coronavirus vaccine. In addition to prospects for share price gains, Starbucks Corporation's strategy of offering dividends to investors makes it a good stock to hold for the long-term. Its dividend yield currently hovers above 1.70%.
Pershing Square talked about SBUX in its 2020 Q2 investor letter. Here is an excerpt:
"Given the company’s leading presence in China, Starbucks was well-prepared for the arrival of Covid-19 in the U.S. After an outstanding start to the calendar year with same-store sales growth between 6% and 7% through mid-March, the company rapidly shifted to a drive-thru and delivery-only model. With 44% of the store base open, April same-store sales declined and bottomed at negative 65%. As management steadily reopened both locations and in-store ordering, same-store sales improved to negative 14% in July, with 96% of stores open. The sales recovery has been driven by store re-openings and underlying sales momentum, with same-store sales of stores open throughout the year improving from a low of negative 25% in April, to positive 2% in July. The recovery path in the U.S. closely parallels what Starbucks has achieved in China, albeit with a lag of about one quarter given the later arrival of the virus in U.S.
Starbucks is taking longer to recover than our other restaurant companies given that the brand generates 50% of sales from breakfast, a daypart which is geared towards work and school commuting routines. We believe that the company’s long-term earnings power, however, is undiminished, and that recent developments have left Starbucks in perhaps its strongest-ever competitive position, underpinned by the company’s leading digital ecosystem both in the U.S. and globally, as well as the demise of its key competitor, Luckin Coffee, in China. Management is playing offense by investing in key growth initiatives including digital, with the loyalty program set to receive another major upgrade this fall, new store formats such as pickuponly locations, and menu innovation including plant-based beverages and food. Management has cited improving speed of service at the drive-thru as the largest potential driver for increasing near-term sales.”
8. Barrick Gold Corporation (NYSE: GOLD)
GOLD ranks 8th in our list of the 10 best stocks to buy for 2021. Stanley Druckenmiller has invested aggressively in gold over the past couple of quarters as he believes the US dollar value depreciation will support gold price in the years ahead.
The all-time great hedge fund manager increased its stake in Barrick Gold Corporation by 13%, making it the eighth largest stock holding at the end of the third quarter. Duquesne Family Office currently holds 4.8 million shares of Barrick Gold valued at $136 million.
The shares of Canada based gold mining company soared close to 27% in the last twelve months, extending the five years gains to over 200%. Stanley Druckenmiller first initiated a stake in Barrick Gold during the fourth quarter of 2018. The gold mining company is a good stock to hold amid its hefty dividends. Its dividend yield currently stands above 1.5%.
7. Penn National Gaming (NASDAQ: PENN)
PENN ranks 7th in our list of the 10 best stocks to buy for 2021. The Casinos and Gaming company Penn National Gaming (NASDAQ: PENN) is among the largest stock purchases of Stanley Druckenmiller during the third quarter.
The billionaire investor seeks to make profits from the increasing demand for video-gaming activities. After initiating a position in the second quarter, he has increased his stake by 80% in Penn National Gaming during the September quarter, making it the seventh-largest stock holding. The investment is valued at $137 and accounts for 3.99% of the portfolio.
The shares of the casino and gaming giant surged more than 200% since the beginning of this year. Some market analysts say it’s just the beginning of the growth story.
"The sector has numerous tailwinds, including legislative, demographic, and technological. We see the TAM growing from ~$3B to >$18B and potentially >$40B... Currently, 25 states and Washington D.C., have legalized Sports Betting, but only 15 and D.C. have authorized online/mobile functionality," said Piper Sandler analyst Yung Kim.
Baron Discovery Fund is one of the investors who are bullish on Penn. Here is what they said in their Q3 investor letter:
“Shares of regional casino company Penn National Gaming, Inc. increased in the quarter on news of strong betting activity after the early September launch of Penn’s Barstool online sports betting application. Penn reported quarterly revenue and earnings results that beat investor expectations driven by robust margin growth across all of its casino properties. This margin expansion was especially impressive as revenues continue to be challenged by fewer customer visits due to COVID-19. Penn was able to more than offset the lower revenue by limiting non-gaming amenities and using targeted marketing to make sure it had the most profitable consumers in its casinos. The better-than-expected profitability, combined with a recent equity offering, helped Penn significantly improve its balance sheet. We think the stronger balance sheet will allow Penn to be in a better position to invest and aggressively grow its online sports betting operations going forward.”
6. Netflix (NASDAQ: NFLX)
The world’s largest streaming giant Netflix (NASDAQ: NFLX) has been among the biggest beneficiaries of social distancing and staying at home policies. Share of Netflix soared more than 60% so far in fiscal 2019, driven by substantial growth in subscribers. All-time great hedge fund investor Stanley Druckenmiller has sold 10% of his stake in the September quarter to capitalize on gains and move the cash towards other emerging opportunities.
Despite that, the investors believe in the future fundamentals of the streaming company as Netflix still accounts for 4.04% of the portfolio. Druckenmiller is also bullish on Disney, however, his DIS position in a fraction of his NFLX stake. Netflix has added 28.1 million paid memberships in the first nine months of the year, exceeding the 27.8 million that it added for all of 2019. The company expects to add 6 million global streaming paid net adds in the December quarter to reach 200M subscribers overall.
Click to skip ahead and see the 5 Best Stocks To Buy for 2021.
Disclosure: No Position. 10 best stocks to buy for 2021 according to billionaire Stan Druckenmiller is originally published on Insider Monkey.