RECAP: 10 LESSONS FROM A LEGENDARY INVESTOR
👑 Druckenmiller's Wisdom: 10 Key Takeaways for Success💼📈
NUGGETS OF ALPHA
Druckenmiller recently stated he has never experienced a down year in his career
Timing of entries alongside a long-time preference is critical for any investment
Druckenmiller began investing in AI stocks approximately five months ago
The more time you have, the less risk that you incur
Be patient, the stock market and crypto are both long-term games
Do your research and understand everything that is relevant before investing
“Get in hard, get in early, and hold on”—invest in what you know and stick with what you believe in
Diversify your portfolio - for me, its real estate, crypto, and disruptive equities
Druckenmiller diversifies with a tendency to skew toward the leading narrative
Nearly half of Druckenmiller’s portfolio is allocated toward artificial intelligence
Follow the bees to find pollen, and when they move, move with them
Rebalance your portfolio regularly; esp as market swings become more violent
Swinging between sectors is one of Druckenmiller’s observable strategies
Being a first mover is so important in investing; do not chase, replace!
After a difficult year, expect a better one to follow
A study by Ned Davis Research found that approximately 39 days generate 80%+ of the stock market’s gains every ten years - be on the train for those 39 days
You will be rewarded when you remain patient and invested; “wear your seat belt.”
Keep your “tap dancing shoes on” to remain flexible and adaptable
Only touch companies with top-line revenue growth and ones becoming leaders in their sector
You must remain intellectually curious to understand what is happening within the economy
The U.S. has $212T of liabilities; no way that taxes can ever pay for all of it
“Temperament is the iron wire on which the beads are strung. Of what use is fortune or talent to a cold and defective nature?” -Ralph Waldo Emerson
Ray Dalio believes everything you do should be based on identifying and making decisions around your blind spots.
This framework we will go through is designed to help you study the attributes that make famous investors successful, which can help you develop a profile of yourself as an investor so you can identify your strengths and weaknesses.
On this channel, we have profiled many of the top investors. We have created a four-category matrix:
time preference (short-term or long-term)
analytical approach (intuitive or quantitative)
focus (broad or narrow)
risk appetite (risk averse or risk taking)
Druckenmiller recently stated on Bloomberg that he has never experienced a down year in his career. While he has experienced significant drawdowns in any given year, Druckenmiller has remained in the market over the long term.
An example he cited was shorting DOT COM companies and losing $600M in 6 weeks. He was right about his thesis, as all the companies he shorted eventually went out of business. However, he was early in his trades. Timing is extremely important in investing, and having a longer time preference for any investment is important for improving your odds of success.
Druckenmiller recently shared insights into why he began investing in AI stocks approximately five months ago. He also shared his experience of simultaneously shorting the S&P 500 and getting smashed in his 40-minute Bloomberg interview.
These lessons reveal observations from the top 30 investors on earth and other InvesstAnswers Patreon community members. This should encourage you to find out who you are, what your blind spots are, and how you can shore them up.
The top investors consistently rank high on being analytical. This is a very important trait that can be shored up if you are not naturally inclined.
Focus can be both related to the subject matter and the sequence. You could concentrate on equities, real estate, or crypto for the subject. You might perform best for the sequence by focusing on one narrative at a time and going a mile deep, as Stanley Druckenmiller tends to do.
The more time you have, the less risk that you incur.
The more risk exposure, the more expected return.
Stanley Druckenmiller falls within our top 7 legendary investor profiles. The NTJ personality components are the most common pattern among top investors.
Thinkers tend to be more objective, with emotions clouding less of their judgments.
Judgers are decisive, which helps them act and “pull the trigger.”
Intuitives are creative and can see patterns others might miss—such as AI.
Sensors tend to focus on the present moment, which can naturally be a disadvantage in investing. Remember, you must play where the puck is going to be.
Feelers tend to make decisions based on emotions, which is not helpful. This is why this is a data-driven channel.
Perceivers are open to new experiences that can be weaknesses in certain situations. When investing, it is critically important to stick to a plan unless your thesis changes. Get in hard, get in early, and hold on.
I am a student of these investors by reading their books, listening to their interviews, and reviewing their investments. Druckenmiller is an extraordinary case study.
The stock and crypto markets are long-term games. I am a bit different from Duckenmiller in that I try to time the market because I believe we have the tools to do so.
This is critical before you make any trade. If you do not do all this and more, you are gambling.
An excellent modern-day example can be observed by investment analysts that do not understand Tesla’s business model. They are creating commentary and forecasts without understanding the fundamental value proposition of the company.
Peter Lynch invested in companies like 3M because he could understand the products.
Warren Buffet is famous for investing in companies like Coca-Cola for this reason.
I believe in real estate, crypto, and disruptive equities. So allocating according to these three categories is my way of diversifying. However, I am highly concentrated and focused on only a few assets in one narrative at a time.
Druckenmiller has a unique method of diversifying with a skew. He tends to concentrate on a leading narrative.
Druckenmiller’s current skew is toward an artificial intelligence (Ai) focused portfolio. Nearly half of Druckenmiller’s portfolio is allocated towards it.
Go where the bees are migrating to find the pollen, and when they migrate, then find another narrative or sector.
If you have a lot of money that is enough for you, then you do not want to risk it. If you do not have enough but a clear goal to reach, you may take on a bit more risk. I believe the market swings will be much more violent in the future, especially among disruptive sectors, so rebalancing will be a more important skill moving forward.
🟥 Tech (AI) grew substantially in Q1 23 in Druckenmiller’s portfolio.
🟪 Energy was exited in Q4 and subsequently, oil prices tanked.
The swing between sectors is a huge component of his investment strategy that can be observed from quarter to quarter.
Druckenmiller is a macro-style investor, so this speaks to how humble he is. Being a first mover is so important as there is no point in jumping on the bandwagon after a stock or sector has already moved. Don’t chase, replace.
Crypto is a good example of discouraging short-term fluctuations driven by events such as the SEC's legal notifications to exchanges. This development should not scare you away from the asset class. If your thesis is that blockchain will be disruptive, you should remain allocated.
Per Stanley Druckenmiller, the market always goes up in the long run. And if you see a terrible year like 2022, you should anticipate a strong year to follow like this year.
Some people got kicked in the teeth last year and left for six months. Then they come back and are shocked by whatever happened during that period. Approximately 39 days generate 80%+ % of the stock market’s gains every ten years. Remember this if nothing else. Be on the train for those days.
This is why I say, “Wear your seat belts.” When you remain patient and invested, you will be rewarded. This is the nature of markets. They will go up because the fiat is going down.
This book stresses the importance of following macro trends because it impacts everything. Keep an eye on global trends, interest rates, central bank policies, and geo-political events as they help inform your investment decisions.
Implement proper risk controls such as stop loss orders, remaining disciplined, and cutting positions when necessary.
Keep your “tap dancing shoes on” to remain flexible and adaptable.
Analyze everything about a company upfront—only touch companies that have top-line revenue growth and become leaders in their space. Over time you will capture long-term value if you remain patient.
This channel is all about continuous learning and sharing. You must remain intellectually curious to understand what is happening with the economy, industrial developments, new opportunities, and technology.
Now I will touch on some of the key points he touched on during a recent Bloomberg interview. I found some to be alarming, while others were more obvious.
The U.S. has $212T of total liabilities, and there is no way that taxes can ever pay for this. Money printing will go on forever, so get hard assets.
Druckenmiller believes the stock market is overvalued, so this is the reason he is shorting the S&P500. He might have forgotten the seven names now comprising 23% of the S&P500 market cap.
China’s economic ascension will bring about tensions in the global order. This could lead to unnecessary conflict and war.
Druckenmiller expressed numerous concerns about climate change and its negative economic impact.
He believes technology could lead to job displacement, economic disruption, and a decreased lifestyle for those who cannot monetize this disruption.
Investors must be ready for everything.