Hard Lessons: Stan Druckenmiller: Invest, then investigate

Druckenmiller: I think contrarianism is overrated. I do like it when I have extreme conviction and no one else

believes it. It gives me even more conviction. Narrator: For Morgan Stanley, this is Hard Lessons

where iconic investors reveal the critical moments that have shaped who they are today.

Today on the show, the legendary macro investor Stan Druckenmiller in

conversation with Iliana Bouzali, Morgan Stanley's Global Head of Derivatives Distribution and Structuring,

Druckenmiller ran Duquesne Capital Management with roughly 30% annualized returns

and no losing years from 1981 to 2010. He now leads the Duquesne family office, managing his own

capital and is a philanthropist, championing education, medical research and the fight against poverty.

Bouzali: Stan, thank you very much for doing this. Druckenmiller: I'm thrilled to be here. I think the world of

Morgan Stanley, so it's the least I can do. Bouzali: Oh, that is, it's a privilege for us to have you here.

I've been privy to some of your equity trades over the past year or so, where it did feel you

were early. And I'm curious if you can maybe, take us through 1 or 2 and how they came together.

Druckenmiller: I'll pick one that might surprise you because it's not very sexy and it's not AI or anything,

but I think it's a good example of our process at Duquesne. In the middle of last summer,

and toward the fall, the AI thing started to get, let me say,

disturbingly heated and started at least to have some rhyme with what I went through in

'99, 2000 and we were looking for other areas.

The group brought in a company, Teva Pharmaceuticals. So Teva was this

apparently if you didn't know what was going on, boring generic drug company out of Israel.

Selling at six times earnings. So, we met with the company.

Big transition going on. Richard Francis had come in who ran the same playbook at Sandoz.

Very impressed with him-- knew how to take low-hanging fruit in terms of operating efficiency.

But, much more importantly, he was taking them from a generic drug company to a growth company

by embracing biosimilars, replacing the the generic drugs, which

that's why they were six times earnings with biosimilars and even some, some actual drugs.

The amazing thing is, the investor base were value investors, so they hated it.

So, the stock sat there at six times earnings, while you could see this incredible

management initiative going on. And, no one really believed him. And again, growth investors

didn't want it because they had made the transition yet. Value investors didn't want it

and were actually selling it because he was doing a growth strategy. So that was about six or seven months ago

when the stock was $16. And today it's $32 and not much has happened. Other than he's

proved biosimilars, they've come up with a drug that's not a generic. So it's re-rated from

six times earnings to, I guess, 11.5 or 12 times earnings. So, it was a

whole different set of circumstances but it encapsulates what we look at. If you look at today,

you're not going to make any money. If you try and look ahead and what might change and how

investors might perceive something ahead. This one happened a little more quicker than I thought,

but that would be a recent name. Bouzali: Fascinating and very intriguing. I say

it's intriguing because I think many people, maybe people not in the market, but

certainly many people, when they think of Stan Druckenmiller, they think of a huge macro investor.

And I have seen you dabble-- more than dabble--

really go into areas of the market, especially in equities, that are much more niche, such as

healthcare or biotech. And my question is, do you have to be an expert,

an analyst, someone that understands the whole pipeline of drugs to get that right?

Druckenmiller: Thank God the answer is an emphatic no. But I've got to have an expert at Duquesne

who is, and trust his judgment, and then I've got to have a feel for how the market will

embrace the change he's describing. But we did make a big move into biotech.

I could sense that there was a potential leadership change just

because of the phobia around AI. And, I knew because I've been on the board of