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Form 13Fs provide investors with an over-the-shoulder look at which stocks Wall Street's brightest money managers are buying and selling.
There may be more than just profit-taking behind billionaire Stanley Druckenmiller's disposition of Palantir stock.
Meanwhile, Druckenmiller can't stop building up his fund's stake in two outperforming businesses (one of which is another artificial intelligence stock).
Though earnings season is often viewed as the highlight of each quarter, there are a number of other data releases that can tell investors a lot about the health of the stock market. In particular, the filing of Form 13F with the Securities and Exchange Commission is, arguably, one of the most important quarterly data dumps.
Institutional investors with at least $100 million in assets under management are required to file Form 13F no later than 45 calendar days following the end to a quarter. This filing allows investors to look over the proverbial shoulders of Wall Street's top-tier money managers to see what they've been buying and selling.
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Though 13Fs are far from perfect -- since they're up to 45 days old when filed, they can present a stale picture for active hedge funds -- they're invaluable in the sense that they highlight the stocks and trends piquing the interest of Wall Street's smartest investors.
Image source: Getty Images.
While Warren Buffett is the most-followed investor, he's far from the only billionaire fund manager known for their outsized returns. Duquesne Family Office's billionaire chief Stanley Druckenmiller is another billionaire asset manager with a knack for locating amazing deals.
Based on the latest round of 13Fs filings, Druckenmiller completely jettisoned his fund's stake in Wall Street's artificial intelligence (AI) darling Palantir Technologies (NASDAQ: PLTR) and loaded up on two outstanding stocks for the third consecutive quarter.
Perhaps the most eye-popping of all moves during the March-ended quarter was Druckenmiller sending all remaining shares of AI-driven data-mining specialist Palantir to the chopping block. Duquesne's 13F shows 41,710 shares were sold in the March-ended quarter, and nearly 770,000 shares were given the heave-ho since March 31, 2024.
Profit-taking is a logical reason Druckenmiller was eager to depress the sell button. Since 2023 began, shares of Palantir have skyrocketed by more than 2,200%, as of the closing bell on July 15. With the average holding in Duquesne's investment portfolio sticking around for less than nine months, Druckenmiller has demonstrated a willingness to lock in profits.
The concern is there may be more to Stanley Druckenmiller's exit than initially meets the eye.
For example, in a May 2024 interview with CNBC, Duquesne's billionaire investor proclaimed, "AI might be a little overhyped now, but under-hyped long-term." This speaks to the reality that no game-changing innovation has escaped an early innings bubble-bursting event for more than 30 years. Artificial intelligence will need time to mature as a technology and there's not much evidence that businesses are anywhere close to optimizing their AI solutions, as of yet.
Though Palantir's Gotham and Foundry platforms are respectively fueled by multiyear government contracts and enterprise subscriptions, which would help protect Palantir from a rapid decline in revenue, weak investor sentiment during a bubble would likely drag down its share price.
The other glaring issue with Palantir Technologies is its valuation. Prior to the dot-com bubble bursting, businesses on the leading edge of the internet revolution peaked at price-to-sales (P/S) ratios of 31 to 43. Palantir is currently clocking in at a P/S ratio of almost 119. No stock in history has ever been able to maintain such an aggressive premium.
Image source: Getty Images.
While Stanley Druckenmiller hasn't been shy about locking in profits in recent quarters, he's also done a bit of buying. Arguably no stock has been at the top of his buy list more than generic and novel drugmaker Teva Pharmaceutical Industries (NYSE: TEVA). Over the last three quarters (where 13Fs have been filed), Duquesne has purchased:
In just nine months, Teva vaulted to the second-largest holding for Druckenmiller -- and it's not hard to understand why.
First off, Teva has moved beyond the litigation issues that had previously crippled its stock. In 2023, it settled opioid litigation with 48 states for $4.25 billion, which includes $1.2 billion in generic Narcan (the opioid overdose reversal drug) that it'll supply to states. This amount is spread across 13 years and removed any potentially crippling financial burden from Teva's plate.
Secondly, CEO Richard Francis has shifted more of his company's focus toward novel-drug development. Even though in-house therapies offer a limited period of sales exclusivity, the margins and growth potential with brand-name drugs is considerably higher than with generics. For instance, tardive dyskinesia drug Austedo has a shot at surpassing $2 billion in annual sales this year.
Another reason Teva is landing on the radars of top-tier money managers like Stanley Druckenmiller is because of its much-improved balance sheet. Shortly after acquiring generic-drug company Actavis in 2016, Teva had north of $35 billion in net debt. This figure has now shrunk to less than $15 billion in net debt.
The cherry on the sundae for investors is Teva Pharmaceutical's valuation. A forward price-to-earnings (P/E) ratio of 5.8 is almost unheard of amid a historically pricey stock market.
Though Druckenmiller has prominently been a seller of high-growth tech stocks in recent quarters, world-leading chip fabrication company Taiwan Semiconductor Manufacturing (NYSE: TSM) is the exception to the rule. Over the previous three quarters where 13Fs were filed, Druckenmiller's fund has purchased:
The near-term lure of Taiwan Semiconductor Manufacturing, which is also known as "TSMC," is its growing role in the AI revolution. Major graphics processing unit (GPU) companies are leaning on TSMC to rapidly expand its chip-on-wafer-on-substrate capacity, which is a necessity for the packaging of high-bandwidth memory in high-compute data centers. TSMC's rapid chip-fab expansion is leading to sustained double-digit growth and a mammoth backlog.
But the key to Taiwan Semi's long-term success is that it's far more than just an AI play.
For instance, TSMC is the primary manufacturer of the processors Apple uses in its iPhone. TSMC also manufactures chips and components found in next-generation vehicles and internet-connected devices, as well as smartphones. If the AI bubble were to form and burst, as history suggests it will, Taiwan Semi will have plenty of sales channels to fall back on beyond the AI space.
Stanley Druckemiller might also be attracted to Taiwan Semiconductor's attractive valuation, relative to most AI stocks. Taking into account that chip fabrication companies tend to be highly cyclical, TSMC's forward P/E ratio of less than 22 is still pretty reasonable given an expected sales growth rate of 26% in 2025 and 16% next year.
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Sean Williams has positions in Teva Pharmaceutical Industries. The Motley Fool has positions in and recommends Apple, Palantir Technologies, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
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