Stanley Druckenmiller bets on themes. Nicely, he does loads of different issues, however when he invests in particular person shares, he sometimes buys due to a multi-year secular theme. It could actually pay to take heed to the legendary investor and former right-hand man to George Soros, too, as he has put up phenomenal inventory returns over the lengthy haul. Within the 30 years of operating exterior cash for Duquesne Capital Administration, he has averaged a 30% annual return whereas by no means having a down 12 months.
Immediately, Druckenmiller is just managing his personal capital via the Duquesne Household Workplace. However he’s nonetheless investing the identical approach. As of his newest 13-F submitting, the household workplace had a concentrated portfolio, primarily of know-how shares. Two of his largest positions — Nvidia and Microsoft — have been extremely worthwhile bets on the expansion of synthetic intelligence (AI) and cloud computing. Nvidia is his largest place, whereas Microsoft is his third. Each make up over 10% of the household workplace’s portfolio.
These two shares are recognizable names with market capitalizations of over $1 trillion. However Druckenmiller’s second-largest place is small and never even working in the US, his house nation. The inventory is Coupang (NYSE: CPNG), the biggest e-commerce operator in South Korea with plans to increase in East Asia. What does Druckenmiller see in Coupang inventory? Let’s discover out.
Why Coupang?
In keeping with CNBC, Druckenmiller grew to become an investor in Coupang years earlier than it went public in 2021. Since its debut on the general public markets, Druckenmiller has held on to most of his place, indicating he’s nonetheless bullish on the inventory in spite of everything these years.
So what has him so bullish? I feel a number of issues. First, the corporate is working in a fast-growing sector: on-line procuring in South Korea. Coupang’s income has gone from basically zero 10 years in the past to over $20 billion in the present day. It’s quickly gaining market share in its house nation, with an extended runway for reinvestment forward. The Korean commerce market (each offline and on-line) is roughly $500 billion. If Coupang retains gaining market share in e-commerce whereas an increasing number of buyers shift from in-person to on-line procuring, the corporate nonetheless has a few years left to develop.
Second, the corporate has a unbelievable founder operating the enterprise named Bom Suk Kim. Kim began Coupang and nonetheless runs the enterprise as CEO in the present day, overseeing its domination of the South Korean market. Founder-led companies have been proven to outperform the typical inventory. Buyers ought to need Bom Suk Kim to stay round at Coupang for a lot of, a few years.
Increasing into Taiwan
Coupang began out with an intense give attention to its house market, South Korea. Now, it’s slowly increasing to different international locations in East Asia. First is Taiwan, an island nation with an analogous geographic density to South Korea. On the most recent earnings name, Coupang’s administration mentioned it was growing its funding in Taiwan after seeing speedy progress within the area. The Coupang cellular app is projected to be probably the most downloaded app in all of Taiwan for 2023.
Within the quick run, heavy investments into Coupang might result in widening losses. Coupang’s “creating choices” enterprise section noticed its adjusted lack of earnings earlier than curiosity, taxes, depreciation, and amortization (EBITDA) loss widen to $160 million in comparison with $44 million in 2022. However over the long term, it’s going to increase Coupang’s income and earnings potential. Buyers fascinated with Coupang will need to monitor income progress from the creating choices section to validate the Taiwan growth. Final quarter, section income grew 41% 12 months over 12 months.
The inventory appears grime low cost
Lastly, Druckenmiller is probably going nonetheless interested in Coupang as a result of the inventory appears low cost. Shares are down 71% from all-time highs, and its market capitalization is now simply $26 billion.
In 2023, Coupang ought to generate near $25 billion in income, relying on the forex fluctuations of the Korean received and U.S. greenback. Over the long run, administration expects the enterprise to hit round 10% revenue margins. The corporate is already exhibiting progress on this regard, with internet revenue hitting a margin of 1.5% final quarter regardless of the heavy losses coming from the Taiwan growth. Its core produce commerce section had an adjusted EBITDA margin of 6.6% final quarter.
A ten% revenue margin on $25 billion in income is $2.5 billion in bottom-line earnings. In comparison with a market cap of $26 billion, that offers Coupang a ahead price-to-earnings ratio (P/E) of 10.4. For an organization rising income at a quick charge (21% 12 months over 12 months final quarter) and with such a big market alternative forward of it, Coupang inventory appears undervalued at these ranges.
The time is correct to wager together with Druckenmiller. Immediately appears like an amazing shopping for alternative in Coupang inventory for buyers who plan to carry on to their shares for a few years.
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Brett Schafer has positions in Coupang. The Motley Idiot has positions in and recommends Coupang, Microsoft, and Nvidia. The Motley Idiot has a disclosure policy.
Billionaire Investor Stan Druckenmiller Has 38% of His Portfolio in 3 Growth Stocks: 1 of Them May Surprise You was initially revealed by The Motley Idiot
