Guru’s top trades of the quarter
Stanley Druckenmiller (Trades, Portfolio), CEO and Chairman of Duquesne Capital, has revealed his portfolio for the third quarter. Major changes include cutting the holdings in JPMorgan Chase & Co. (NYSE:JPM), PayPal Holdings Inc. (NASDAQ:PYPL) and Workday Inc. (NASDAQ:WDAY) significantly.
Druckenmiller worked for George Soros (Trades, Portfolio) from 1988 to 2000 as the lead portfolio manager for the Quantum Fund. He founded Duquesne Capital in 1981 and it operated as a hedge fund until 2010, but now operates as a family office. Druckenmiller takes a macroeconomic approach to investing.
At the end of the quarter, the portfolio contained 61 stocks, with 15 new holdings. Overall, it was valued at $3.45 billion and has seen a turnover rate of 27%. Top holdings at the end of the quarter were Microsoft Corp. (NASDAQ:MSFT), Amazon.com Inc. (NASDAQ:AMZN), T-Mobile US Inc. (NASDAQ:TMUS), Alibaba Group Holding Ltd. (NYSE:BABA) and Sea Ltd. (NYSE:SE).
By weight, the top three sectors represented are consumer cyclical (30.88%), technology (26.31%) and communication services (20.98%).
The largest impact on the portfolio during the quarter came from an addition to the guru’s largest holding. The Microsoft positions was boosted by 46.99% with the purchase of 845,805 shares. The shares traded at an average price of $210.04 during the quarter. Overall, the purchase had a 5.16% impact on the portfolio and GuruFocus estimates the total gain of the holding at 42.94%.
Microsoft develops and licenses consumer and enterprise software. It is known for its Windows operating systems and Office productivity suite. The company is organized into three overarching segments: productivity and business processes, intelligence cloud and personal computing. Through acquisitions, Microsoft owns Xamarin, LinkedIn and GitHub.
On Nov. 20, the stock was trading at $212.17 per share with a market cap of $1.60 trillion. The GF Value Line shows that the stock is trading at a significantly overvalued level.
GuruFocus gives the company a financial strength rating of 7 out 10, a profitability rank of 9 out of 10 and a valuation rank of 1 out of 10. There is one severe warning sign issued for assets growing faster than revenue. The profitability rank is propped up by operating and net margin percentages that place the company above 96% of the industry. The company has managed to slowly decrease debt while maintaining cash levels over the last four years.
JPMorgan & Chase
The guru’s holding in JPMorgan & Chase was slashed during the third quarter. The holding was cut by 93.91% with the sale of 1.51 million shares. During the quarter, the shares traded at an average price of $98.20. The sale had an impact of -4.36% on the portfolio and GuruFocus estimates the total gain at 0.28%.
JPMorgan Chase is one of the largest and most complex financial institutions in the United States, with more than $2.5 trillion in assets. It is organized into four major segments: consumer and community banking, corporate and investment banking, commercial banking and asset and wealth management. JPMorgan operates, and is subject to regulation, in multiple countries.
As of Nov. 20, the stock was trading at $114.38 per share with a market cap of $349.11 billion. The company is given a modestly undervalued rating according to the GF Value Line.
GuruFocus gives the company a financial strength rating of 3 out of 10, a profitability rank of 5 out of 10 and a valuation rank of 4 out of 10. There is one severe warning sign issued for poor financial strength. The company has a Piotroski F-Score of 5 that indicates a stable financial situation despite the poor financial strength warning sign.
The holding in PayPal also saw a significant reduction with the sale of 627,177 shares. The sale cut the holding by 81.61% and the shares traded at an average price of $188.22 during the quarter. GuruFocus estimates the total gain of the holding at 40.14% and the sale had an overall impact of -3.35% on the holding.
PayPal was spun off from eBay in 2015 and provides electronic payment solutions to merchants and consumers, with a focus on online transactions. The company had over 300 million active accounts at the end of 2019, including 20 million merchant accounts. The company also owns Xoom, an international money transfer business, and Venmo, a person-to-person payment platform.
Nov. 20 saw the stock trading at $194.25 per share with a market cap of $227.54 billion. The GF Value Line gives the company a significantly overvalued rating.
GuruFocus gives the company a financial strength rating of 6 out of 10 and a profitability rank of 7 out of 10. There is currently one severe warning sign issued for declining gross margin percentage. The weighted average cost of capital is supported by a strong return on invested capital.
Nuance communications represented one of the new buys for the quarter. The holding was established with the purchase of 2.91 million shares. The shares traded at an average price of $28.98 during the quarter and represented a 2.81% impact on the portfolio. GuruFocus estimates the total gain of the holding at 41.93% since it was purchased.
Nuance Communications is the pioneer in conversational artificial intelligence innovations that bring intelligence to everyday work and life. The company delivers solutions that understand, analyze and respond to people amplifying human intelligence to increase productivity and security. Its health care segment is primarily engaged in providing clinical speech and clinical language understanding solutions. These improve the clinical documentation process, aiding the capture of complete patient records and quality measures for reimbursement.
On Nov. 20, the stock was trading at $41.27 per share with a market cap of $11.64 billion. According to the GF Value Line, the company is currently significantly overvalued.
GuruFocus gives the company a financial strength rating of 4 out of 10, a profitability rank of 4 out of 10 and a valuation rank of 1 out of 10. There is currently one severe warning sign issued for declining revenue per share. Debt levels remain high despite recent decreases resulting in a cash-to-debt ratio of 0.19 that ranks the company lower than 89.79% of the industry.
The holding in Qorkday also saw a large reduction with the sale of 460,135 shares. The sale represented a 66.09% decrease in the holding and the shares traded at an average price of $197.97 during the quarter. Overall, the sale represented a -2.64% impact on the portfolio and GuruFocus estimates the total gain of the holding at 18.81%.
Workday is a software company that offers human capital management, financial management and business planning solutions. Known for being a cloud-only software provider, Workday is headquartered in Pleasanton, California. Founded in 2005, Workday now employs over 12,000 employees.
As of Nov. 20, the stock was trading at $211.90 per share with a market cap of $50.33 billion. It is trading at a fair value rating according to the GF Value Line.
GuruFocus gives the company a financial strength rating of 6 out of 10 and a profitability rank of 3 out of 10. There is currently one severe warning sign issued for assets growing faster than revenue. Cash flows have increased steadily over the last five years as net income has decreased.
Disclosure: Author owns no stocks mentioned.
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