Stanley Druckenmiller

Market Wizards Index: +37%
Compound annual over 12 years

Fund or affiliation

  • Quantum Fund, Duquesne Fund

Methodology

  • Holding a core group of stocks long and a core group of shorts, then use leverage to trade S&P futures, bonds and currencies.

Research Techniques Employed

  • Focused his analysis on seeking to identify the factors that were strongly correlated to the stock price movement as opposed to looking at all the fundamentals.
  • He also used technical analysis.

Trading Techniques Employed

  • He never used valuation to time the markets. He use liquidity analysis and TA. Valuations only tells him how are a market can move if there is a catalyst.
  • To attain truly superior l-t returns is to grind it out until you’re up 30-40%, and then if you have convictions, go for a 100% year. If you can put together a few near-100% years and avoid losing years, you can achieve really outstanding l-t returns.
  • Soros taught: "when you have tremendous conviction on a trade, you have to go for the jugular. It takes courage to be a pig." As far as Soros is concerned, when you’re right on something, you can’t own enough.
  • If a trade doesn’t work, Soros is confident enough about his ability to win on other trades that he can easily walk away from the position.

Philosophy and beliefs

  • When you earn the right to be aggressive, you should be aggressive. A philosophy reinforced by Soros.
  • The way to build long-term returns is through preservation of capital and home runs.

History and other facts

  • At the age of 28 Druckenmiller launched Duquesne after a person offered him $10,000/mo. just to talk to him.
  • In 1982, after losing all his money, he landed a client who had sold out his software business. This individual account allowed him to start using shorts and leverage.
  • The queen in chess, which can move in all directions, is a far more powerful piece than the pawn, which can only move forward. [analogy: hedge funds vs. pension funds]

Examples

  • Was dead wrong entering 19 Oct. 87 with a leveraged long position. Market opened over 200 points lower, liquidated his entire position and went net short; and made a small profit.
  • Long Deutsche mark right after the fall of Berlin Wall in anticipation of expansionary fiscal policy and tight monetary policy.

Performance Record

  • 37% over 12 years: "The longest-running measure of Druckenmiller’s performance in the markets is his own Duquesne fund. Since its inception in 1980, the fund has averaged 37% annually."


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