Stanley Druckenmiller bets on subject matter. Well, he does a lot of other things, but when he invests in individual stocks, he typically buys them because of a multi-year, long-term theme. It’s worth hearing what the legendary investor and former right-hand man has to say. It’s also a man for George Soros, as he’s achieved stunning stock returns over the long term.In 30 years of running outside money for Duquesne Capital Management, he averaged annual returns of 30%; no way It’s been a down year.
Today, Druckenmiller only owns his capital through the Duquesne Family Office. But he still invests the same way. The family office has a concentrated portfolio that primarily manages technology stocks, according to his latest 13-F filing. His two biggest corporate jobs— Nvidia and Microsoft –Having made high bets on the growth of artificial intelligence (AI) and cloud computing. Nvidia is his largest segment, and Microsoft is his third segment. Both account for more than 10% of the family office’s portfolio.
Both stocks are recognized big names, with market caps in excess of $1 trillion, but Druckenmiller’s second-largest position is so small that it doesn’t even operate in his native United States. Cupang (NYSE:CPNG)South Korea’s largest e-commerce operator plans to expand in East Asia. What does Druckenmiller think of Coupang stock? let’s see.
According to CNBC, Druckenmiller became an investor in Coupang several years before it went public in 2021. Druckenmiller has held a majority position in Coupang since its debut on the public markets, showing he remains bullish on the stock over the years.
So what makes him so optimistic? I think there are the following points. First, the company operates in a rapidly growing industry: online shopping in South Korea. Coupang’s revenue has gone from almost zero 10 years ago to over $20 billion today. Gaining market share quickly in your home country and reinvesting goes a long way. The Korean business market (including offline and online) is approximately US$500 billion. If Coupang continues to gain market share in the e-commerce space while more and more shoppers switch from South Korea to online shopping, the company still has many years to grow.
Secondly, the company has an amazing founder named Bom Suk Kim. Kim founded Coupang and still serves as CEO, overseeing its dominance of the Korean market. Founder-led businesses have been proven to outperform the average stock. Investors should hope that Bom Suk Kim stays at Coupang for many, many years.
Coupang initially focused on its home market, South Korea. Now, it is slowly expanding to other countries in East Asia. The first is Taiwan, an island country with a similar geographical density to South Korea. In its latest earnings call, Coupang management said it would increase investment in Taiwan after seeing the region’s rapid growth. The Coupang mobile app is expected to become the most downloaded app in Taiwan in 2023.
In the short term, Coupang’s heavy investment may lead to wider losses. Coupang’s “Developed Products” business unit posted an adjusted EBITDA loss (Interest, tax, depreciation and amortization advance profit) losses widened to $160 million, compared with $44 million in 2022. But in the long run, this will expand Coupang’s revenue and earnings potential. Investors interested in Coupang will want to track revenue growth in the developed products segment to validate expansion in Taiwan. In the first quarter, the division’s revenue increased by 41% year-on-year.
The stock looks very cheap
Ultimately, Druckenmiller may still be attracted to Coupang because the stock looks cheap. The stock is down 71% from its all-time high and currently has a market capitalization of just $26 billion.
Coupang’s revenue will approach $25 billion by 2023, depending on currency fluctuations in the Korean won and U.S. dollar. Over the long term, management expects margins on the business to be around 10%. The company has already achieved net profit growth of 1.5% last quarter despite heavy losses from its expansion in Taiwan, and its core agricultural products business unit posted an adjusted EBITDA margin of 6.6% last quarter.
A 10% margin on $25 billion in revenue is $2.5 billion in bottom-line earnings. Compared to a market capitalization of $26 billion, this gives Coupang a forward P/E ratio (P/E ratio) of 10.4. For a company with revenue growing rapidly (21% year over year last quarter) and facing such a huge market opportunity, Coupang stock looks undervalued at current levels.
Now is a great time to bet with Druckenmiller. For investors who plan to hold the stock for many years, today looks like a great buying opportunity in Coupang stock.
Should you invest $1,000 in Coupang right now?
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Billionaire investor Stan Druckenmiller has 38% of his portfolio invested in 3 growth stocks: 1 may surprise you Originally published by The Motley Fool