Stan Druckenmiller ran the successful hedge fund Duquesne Capital Management between 1981 and 2010. He never had a single losing year and his hedge fund returned an average of 30% per year to its clients, easily outperforming the S&P500 (INDEXSNP: ^GSPC).
Today, Druckenmiller manages his personal wealth through Duquesne Family Office and he remains an excellent case study for investors. Indeed, it returned 41% in the three-year period ended March 31, crushing the S&P 500’s 32% return.
In the first quarter, Druckenmiller had 20.1% of its portfolio invested in just two stocks: 11% in Microsoft (NASDAQ:MSFT) and 9.1% in Coupang (NYSE:CPNG). Both stocks have performed brilliantly over the past year, with Microsoft returning 31% and Coupang 36%, while the S&P 500 returned 26%.
Are they still profitable today?
Microsoft: Monetizing Artificial Intelligence with Enterprise Software and Cloud Computing
Microsoft is arguably the most indispensable IT provider in the world. It accounted for 18% of business software sales last year and its market share is expected to exceed 21% by 2027. Critical software products include Office 365 for business productivity and Dynamics 365 for enterprise resource planning (ERP) (ERP), as well as Power Platform. for analysis and automation.
Microsoft built generative artificial intelligence (AI) that complement its core software products. For example, Copilot for Finance leverages ERP data to simplify and automate tasks like financial analysis and account reconciliation. Likewise, Copilot for Microsoft 365 can compose text in Word, summarize conversations in Teams, and create slides in PowerPoint. Nearly 60% of Fortune 500 companies use a Microsoft Copilot product, according to CEO Satya Nadella.
Beyond software, Microsoft Azure is gaining momentum in cloud infrastructure and platform services (CIPS), primarily driven by demand for artificial intelligence solutions. Indeed, 65% of Fortune 500 companies now use Azure OpenAI Service, a product that allows companies to refine large language models from OpenAI and integrate them into generative AI applications. Azure accounted for 25% of CIPS spending in the most recent quarter, up from 23% the year before.
Microsoft reported encouraging financial results during the March quarter. Revenue increased 17% to $61.9 billion driven by strong growth in Office 365, Dynamics 365 and Azure. Meanwhile, GAAP net income increased 20% to $2.94 per diluted share. Notably, Activision’s recent acquisition boosted revenue growth by 4 points, but reduced earnings per share growth by about 2 points.
Looking ahead, Microsoft is well-positioned to maintain momentum as digital transformation drives adoption of software and cloud services, particularly those related to artificial intelligence. Wall Street analysts forecast annual profit growth of 13.7% over the next three to five years. This makes its current valuation of 36.7 times earnings look somewhat expensive. Personally, I would wait for a slightly cheaper multiple – closer to 30 times earnings – before buying this stock.
Coupang: The e-commerce market leader in South Korea
Coupang operates South Korea’s most popular online marketplace, in terms of monthly visitors. It also supports merchants with advertising, fintech and logistics services, and engages consumers with restaurant delivery (Coupang Eats) and streaming content (Coupang Play). These adjacencies strengthen the network effect inherent to its market by attracting more merchants and consumers into its ecosystem.
Additionally, Coupang has expanded its commercial and logistics footprint to Taiwan, the world’s thirteenth largest economy. Management believes there are numerous growth opportunities in both geographies. “We still represent a single-digit share of a huge retail opportunity in Korea and an even smaller share of that in Taiwan,” CEO Bom Kim said during the latest earnings conference call.
Coupang reported mixed first-quarter results. Revenue rose 23% to $7.1 billion, driven by modest sales growth in its core e-commerce business and triple-digit sales growth in Developing Offerings, a category of products which includes Taiwan retail, Coupang Eats, Coupang Play and fintech services. Less encouraging, GAAP net income fell to break-even, down from $0.05 per diluted share the prior year, due to costs associated with its acquisition of Farfetch.
However, even if Farftech is excluded from the calculation, GAAP net income remains stable at $0.05 per diluted share. This slow results was due to Coupang’s aggressive investments in logistics infrastructure and membership benefits from WOW, a loyalty program similar to Amazon Prime.
Looking ahead, Wall Street expects the company to grow revenue 17% annually through 2026. That makes its current valuation of 1.5 times sales seem reasonable, assuming Coupang can reaccelerate profit growth. Personally, I would feel more comfortable buying stocks once profitability moves in the right direction again.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Trevor Jennevine has positions at Amazon. The Motley Fool holds positions and recommends Amazon, Coupang and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Mad Motley has a disclosure policy.
Billionaire Stan Druckenmiller Has 20% of His Portfolio Invested in 2 Brilliant Stocks was originally published by The Motley Fool
