A Billionaire Investor Who Has Never Had A Losing Year Reveals His Investing SecretMauldin Economics
Billionaire Stan Druckenmiller might be the greatest investor alive today. His track record is astonishing…
Druck had 30 straight profitable years from 1980 to 2010. During that time, he earned 30% per year.
If you took $10,000 and compounded it at 30% per year for 30 years, you’d amass a $26.2 million fortune.
And Druck has never had a losing year… ever!
He made money in 2001 during the dot-com crash. And reportedly made $260 million in 2008—while most investors lost their shirts.
So what’s his secret?
Long the “Disruptors,” Shorting the “Disrupted”
Druck is low-key and rarely gives interviews. But in one rare interview with Bloomberg, he revealed his secret to success.
He said: “We are long the disruptors and short the disrupted… it has worked beautifully.”
Disruptors are not ordinary stocks. They don’t compete with industry leaders. They destroy them.
In the process, they often hand investors gains of 3x, 4x, 5x, or better.
How Adobe Systems Steamrolled Xerox and Canon
Take a company like Adobe Systems (ADBE). Its PDF software transformed American offices.
Remember Xerox (XRX)? It makes those big, clunky paper copiers.
Believe it or not, Xerox was once a mighty tech giant. Thirty years ago, it was America’s twentieth-largest company.
Today its stock chart is a sad reminder of what it’s like to get steamrolled by a disruptor.
Xerox stock peaked at $168/share in the late 1990s. Today, it trades for just $21/share—an 88% wipe out:
Canon (CAJ), one of the world’s biggest manufacturers of printers, is a victim of Adobe’s disruption, too.
In the past decade, printer sales have plunged 30%. And Canon’s stock has been cut in half since 2007.
Meanwhile, Adobe stock has surged 600% since 2010. That’s four and a half times better than the S&P 500.
And if you’d bought Adobe when it was an “early stage” disruptor in the late 1990s, you’d have earned over 20,000%.
Now Druck Bets on the Cloud
Today, Druck is plowing billions into a disruptive technology called “the cloud.”
As I explained recently, the cloud gives businesses cheap access to powerful supercomputers.
Druckenmiller has invested over $1 billion in cloud businesses including Microsoft (MSFT), Amazon (AMZN), and ServiceNow (NOW).
In fact, 52% of his stock holdings are in cloud companies, according to SEC filings.
Not without a reason. Cloud disruptors have crushed the S&P 500 over the last five years:
Druck Isn’t the Only Legend Buying Disruptors
Have you seen the movie The Big Short?
It tells the story of a few investors who made a killing by betting on the US housing collapse in 2007–2008.
Steve Eisman, played by Steve Carrell, was a mastermind behind the trade. His fund made about $1 billion from the housing collapse.
In a recent interview, Eisman was asked, “What are the biggest opportunities you see today?”
He said, “The disruptor vs. disruptee theme. [It] will last for a long time and there’s lots of way to play that…”
Druck and Eisman Are What I Call “Bloodhound Investors”
Many legendary investors got rich by specializing in one strategy.
Warren Buffett buys undervalued businesses and holds them forever.
Carl Icahn is an “activist” investor. He buys big chunks of companies and influences CEOs to make changes.
Neither Druck nor Eisman specialize. Instead, they seek out moneymaking opportunities like bloodhounds.
Druck has famously made big money across all assets: stocks, bonds, currencies. Eisman made his fortune during the worst market crash since the Great Depression.
You could say they’re agnostic in what they buy.
It’s like when bank robber Willie Sutton was asked why he robbed banks? He answered “because that’s where the money is.”
Disruption Is Where the Big Money Is Today
In a recent interview Druckenmiller said, “We’re in the most economically disruptive period since the 1880s.”
Clearly, these guys know the big money today is in disruptor stocks.
I like to see two of the world’s smartest money managers on my side, buying disruptors along with me.
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Article By Stephen McBride