it was as an analyst where he honed his stock picking skills, which involved a very thorough written analysis that was then challenged by a stock committee. Drukenmiller learned that it's more important to identify the business factors that correlate and lead to stock movement, as opposed to a simple fundamental analysis. Frankly "even today many analysts still don't know what makes their particular stocks go up and down. " In one sector it could be earnings, another comp sales, or such as in chemicals, it could be capacity.Nothing revolutionary, but still interesting from the perspective of "How'd he do it?"
For example, "the ideal time to buy chemical stocks is after a lot of capacity has left the industry and there's a catalyst that you believe will trigger an increase in demand. Conversely the ideal time to sell is when there are lots of announcements for new plants, not when earnings turn down. The reason for this is behavioral pattern is that expansion plans mean that earnings will go down in tow to three years and the stock market tends to anticipate such developments. "
Traditional technical analysis and chart reading helped in timing his macro bets along with overall market valuations for context and size of potential moves. This led Drukenmiller to begin shorting in June 1987, citing a dividend yield 2.6% and a record high price to book value.
Thursday, August 19, 2010
Lessons From Soros Acolyte Stanley Druckenmiller
User "HistorySquared" at SeekingAlpha.com has produced a short piece on the recently departed Stanley Druckenmiller, based off of an interview in Jack Schwager's The New Market Wizards. Here's a taste: