Billionaire Stanley Druckenmiller sells NVIDIA stock: What is he buying instead?

Stanley Druckenmiller sells NVIDIA (NVDA 0.80%). One of the greatest investors of all time, he said he regrets selling his shares too early for the Duquesne Family Office, and said he regrets selling his shares too soon for the Duquesne Family Office. Admitted that he has gotten out of intelligence (AI) stocks. Although he’s currently on the sidelines, Druckenmiller has been with Nvidia for most of its 500% rally over the past three years, netting his portfolio hundreds of millions of dollars.

So what will he buy next? His 13-F filing with the SEC shows he made two big bets on his portfolio this summer. Here’s what Stan Druckenmiller is currently buying on behalf of Nvidia.

1. Coherent: A new way to bet on AI?

Duquesne’s largest position currently is Coherent. (COHR -0.90%)accounting for nearly 10% of the portfolio. The company provides photonics, lasers, and materials for industrial markets. In fact, it serves a variety of market segments, including manufacturing, communications products for internet and cloud providers, computer chips, and equipment for life science research.

All four of these areas are seeing strong tailwinds, especially in North America, where Coherent generates more than half of its revenue. Given the importance of manufacturing, cloud, and semiconductors in this fast-growing sector, some might argue that this is a new way to shoulder the growing AI spending. Perhaps this is why Druckenmiller is buying the stock.

Over the past 12 months, Coherent generated revenue of $4.7 billion. Last quarter, revenue increased 9%. But looking under the hood, revenue from the communications division (i.e. AI data centers) grew 19% and now accounts for the majority of Coherent’s revenue. If this trend continues, revenue growth could accelerate in the coming years.

Currently, Coherent is not making much profit as it reinvests for growth. Last quarter’s gross margin was close to 40%, which is solid and should lead to reasonable margins at scale. If Coherent continues to grow its earnings thanks to end-market tailwinds, the stock is likely to do well for long-term investors.

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2. Philip Morris International: The resurgent nicotine market

Mr. Druckenmiller’s other bet is not focused on technology, so this one may be for those wary of the hard-to-understand high-tech industry. In fact, this stock is something that everyone can understand.

philip morris international (afternoon -2.21%) is one of the world’s largest tobacco companies. Traditional tobacco companies have been most successful in developing less harmful nicotine products, such as nicotine pouches and heated tobacco units. Druckenmiller owns the underlying stock and call options, which became a new position last quarter.

So far, the investment has been successful. On October 22nd, Philip Morris announced strong quarterly profits. Shipments increased by 2.9% year-on-year, sales increased by 11.6%, and profit margin expanded. Unlike other tobacco companies, Philip Morris actually increases sales volumes because of its greater exposure to fast-growing new products like Zyn nicotine pouches.

This growth shows no signs of slowing down. In addition to the introduction of pricing rights for traditional cigarette products, Philip Morris International has a large amount of room to grow volumes and profits in the coming years. The company currently trades at a price-to-earnings ratio of 23 times, lower than the S&P 500. You should be able to grow profits much faster than the market average.

Additionally, this stock has a dividend yield of 4.11%. No wonder Druckenmiller added the company’s stock to its portfolio last quarter. This is a blue-chip stock with a lot of upside potential over the next 10 years.