Billionaire Stan Druckenmiller’s Small-Cap Stock Picks
In this piece, we will take a look at billionaire Stanley Druckenmiller's small-cap stock picks. If you want to skip our introduction to Mr. Druckenmiller and small-cap stocks in general, then head on over to Billionaire Stan Druckenmiller's Small-Cap Stock Picks: Top 5 Stocks.
Stanley Druckenmiller is one of the richest people in the world. According to Forbes Magazine, his latest net worth estimate sits at $6.2 billion, which is more than enough money to last anyone a lifetime. He is a former hedge fund boss who started out working in the finance industry in the late 1970s and within a couple of years would go on to set up his own hedge fund called Duquesne Capital Management.
During his career, Mr. Druckenmiller would work for George Soros of Soros Fund Management - another well known hedge fund. The early stages of the two investors' partnership would be quite lucrative as they would go on to successfully bet against the British Pound and net hundreds of millions of dollars in profit. However, differences would emerge between them later on during the dotcom bubble. This time period on the stock market is known for the crash of overvalued technology stocks. During the bubble, technology stock valuations soared, but Mr. Druckenmiller was uncertain about investing in them - a call that turned out to be correct over the long term. However, he changed his mind in 1999 - a decision that might have proven to be great for the Quantum Fund (the fund that Mr. Druckenmiller managed) during that year, but disastrous in the following year as the bubble burst and valuations plummeted.
Mr. Soros announced Mr. Druckenmiller's departure from the Quantum Fund in an investor letter where he shared:
Both Stan Druckenmiller, portfolio manager of the Quantum Fund, and Nick Roditi, portfolio manager of the Quota Fund, have decided to retire from active management of their funds. Stan will take a well-deserved sabbatical after 12 strenuous years managing the Quantum Fund. Nick Roditi will cease macro investing and gradually transfer management of the assets to a trusted outside adviser. Shareholders will be given the choice of remaining in Quota Fund, moving to the portion managed by this adviser or taking cash. Both Stan and Nick will remain associated with the firm, and retain substantial investments in the funds.
These personnel changes have prompted me to undertake a thorough reorganization of Soros Fund Management. We have come to realize that a large hedge fund like Quantum Fund is no longer the best way to manage money. Markets have become extremely unstable and historical measures of value at risk no longer apply. Quantum Fund is far too big and its activities too closely watched by the market to be able to operate successfully in this environment. My own needs are for a more reliable stream of income to fund my charitable activities.
After moving on from the Quantum Fund, Mr. Druckenmiller kept managing his hedge fund. One reason why he quit Quantum was that the stress of managing billions of dollars in capital was too much for him. This stress would return a decade later when he would shut down Duquesne Capital as well and he would return the billions of dollars in capital of the fund. 2010 was a particularly stressful time in the hedge fund industry, as funds had to deal with dropping technology valuations, a new European currency, and of course, they had to deal with the Great Recession which followed one of the worst stock market crashes in history. Some of Duquesne's biggest investments before Mr. Druckenmiller shut down shop were in Apple Inc (NASDAQ:AAPL), JPMorgan Chase & Co. (NYSE:JPM), and McDonald's Corporation (NYSE:MCD). Sharing his thoughts at the time, he wrote:
I have had to recognize that competing in the markets over such a long time frame imposes heavy personal costs. While the joy of winning for clients is immense, for me the disappointment of each interim drawdown over the years has taken a cumulative toll that I cannot continue to sustain.
These days, he manages capital through the Duquesne Family Office, which of course makes the job less stressful since fewer clients are involved. There are 53 stocks in the Duquesne Family Office portfolio, and several of these are in small-cap stocks. These stocks have a market capitalization below $5 billion and investing in them comes with its own set of advantages and disadvantages. The advantages include the potential of massive profits through small share price appreciation and the potential to catch important firms early on before they boom on the stock market. The disadvantages of investing in small-cap stocks include low liquidity, a potential for scams, and significant losses through minor share price movements when compared to large stocks.
Today, we'll take a look at Stanley Druckenmiller's small-cap investments out of which the top three stock picks are Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX), Vornado Realty Trust (NYSE:VNO), and Warby Parker Inc. (NYSE:WRBY).
Our Methodology
To compile our list of Stanley Druckenmiller's top small-cap stock picks, we took a look at his investment portfolio for the second quarter of 2023 and listed down all investments that were in stocks with a market capitalization below $5 billion.
Billionaire Stan Druckenmiller's Small-Cap Stock Picks
12. Sensei Biotherapeutics, Inc. (NASDAQ:SNSE)
Stanley Druckenmiller's Q2 2023 Investment: $114,000
Sensei Biotherapeutics, Inc. (NASDAQ:SNSE) is a biotechnology company that develops products for treating and managing cancerous tumors. The firm's second quarter of 2023 earnings results saw it report $78.8 million in cash reserves which it believes can last its operations for the next couple of years.
Insider Monkey's Q2 2023 survey of 910 hedge funds revealed that six had bought a stake in Sensei Biotherapeutics, Inc. (NASDAQ:SNSE). Out of these, the firm's largest shareholder is Noah Levy and Eugene Dozortsev's Newtyn Management since it owns 1.8 million shares that are worth $2 million.
Sensei Biotherapeutics, Inc. (NASDAQ:SNSE) joins Vornado Realty Trust (NYSE:VNO), Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX), and Warby Parker Inc. (NYSE:WRBY) in our list of Stnaley Druckenmiller's top small-cap stocks.
11. Joby Aviation, Inc. (NYSE:JOBY)
Stanley Druckenmiller's Q2 2023 Investment: $115,000
Joby Aviation, Inc. (NYSE:JOBY) is an aerospace company that is developing electric powered vertical takeoff and landing (VTOL) aircraft. The firm aims to provide these as a solution to urban mobility, or for use inside cities. Mr. Druckenmiller's family office owned a $115 stake in the firm by the end of this year's second quarter.
Along with the firm, 16 of the 910 hedge funds part of Insider Monkey's database had invested in Joby Aviation, Inc. (NYSE:JOBY). The aircraft company had some good news for investors in July and August, as it secured the FAA's approval for flight testing and conducted a test later on.
10. Grove Collaborative Holdings, Inc. (NYSE:GROV)
Stanley Druckenmiller's Q2 2023 Investment: $348,000
Grove Collaborative Holdings, Inc. (NYSE:GROV) is an American electronic commerce company that sells health and beauty products. The firm's been shaking up its management lately, with the appointment of a new chief executive officer.
After digging through 910 hedge funds for their second quarter of 2023 investments, Insider Monkey discovered that five had bought Grove Collaborative Holdings, Inc. (NYSE:GROV)'s shares. Stanley Druckenmiller's Duquesne Family Office owns 196,571 shares that are worth $348,000.
9. Compass, Inc. (NYSE:COMP)
Stanley Druckenmiller's Q2 2023 Investment: $1.3 million
Compass, Inc. (NYSE:COMP) is an American technology company that targets the needs of the real estate sector. It allows real estate agents and people looking to buy or sell homes to connect with each other and navigate through their real estate transactions. The stock is up 36% year to date and the weakening housing market affected its second quarter earnings as the company reported a 26% annual revenue drop.
During 2023's June quarter, 26 of the 910 hedge funds part of Insider Monkey's database had invested in the firm. Compass, Inc. (NYSE:COMP)'s largest hedge fund shareholder among these is Jacob Mitchell's Antipodes Partners since it owns a $55 million investment.
8. Acadia Pharmaceuticals (NASDAQ:ACAD)
Stanley Druckenmiller's Q2 2023 Investment: $1.7 million
Acadia Pharmaceuticals (NASDAQ:ACAD) is a biotechnology company that develops treatments for nervous system disorders such as depression, dementia, and schizophrenia. The firm's shares soared by 30% in July after it procured additional rights to sell a drug in the U.S. and abroad.
Mr. Druckenmiller's family office had held a $1.7 million stake in the firm during Q2 2023. Along with the fund, 28 of the 910 hedge funds polled by Insider Monkey had also bought Acadia Pharmaceuticals (NASDAQ:ACAD)'s shares, out of which Julian Baker and Felix Baker's Baker Bros. Advisors was the largest investor courtesy of a $1 billion stake.
7. AbCellera Biologics Inc. (NASDAQ:ABCL)
Stanley Druckenmiller's Q2 2023 Investment: $4.3 million
AbCellera Biologics Inc. (NASDAQ:ABCL) is another biotechnology firm. It provides backend products to biotechnology firms which aid them in product development. The firm announced in June that it has entered into a partnership with another company to discover antibodies to treat serious diseases.
For their second quarter of 2023 shareholdings, 25 of the 910 hedge funds surveyed by Insider Monkey had invested in AbCellera Biologics Inc. (NASDAQ:ABCL). The firm's biggest hedge fund shareholder is Julian Baker and Felix Baker's Baker Bros. Advisors since it owns 16.4 million shares that are worth $106 million.
6. H.B. Fuller Company (NYSE:FUL)
Stanley Druckenmiller's Q2 2023 Investment: $5.4 million
H.B. Fuller Company (NYSE:FUL) is an industrial products firm that focuses on making and selling industrial grade adhesives. Its shares are down 4% year to date, amidst broader weakness in the industrial sector.
Stanley Druckenmiller's Duquesne Family Office had held a $5.4 million stake in H.B. Fuller Company (NYSE:FUL) during Q2 2023. Along with it, 25 out of the 910 hedge funds part of Insider Monkey's research had also invested in the company. H.B. Fuller Company (NYSE:FUL)'s largest investor in our database is Claus Moller's P2 Capital Partners through an investment worth $61.4 million.
Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX), H.B. Fuller Company (NYSE:FUL), Vornado Realty Trust (NYSE:VNO), and Warby Parker Inc. (NYSE:WRBY) are some favorite small-cap stocks of billionaire Stanley Druckenmiller.
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Disclosure: None. Billionaire Stan Druckenmiller's Small-Cap Stock Picks is originally published on Insider Monkey.