Investing guru Stanley Druckenmiller has struck gold once again in the bull market, this time with a big bet on small caps that has turned out to be the hottest trade of the summer. Druckenmiller, who runs Duquesne Family Office, revealed his strategic move at the end of the first quarter by purchasing call options on 3.16 million shares of the iShares Russell 2000 ETF (IWM), making it his single largest bet at the time with a stake worth $664 million.
The timing of Druckenmiller’s move couldn’t have been better, as the Russell 2000 index recently experienced a unprecedented five-day run, reaching its highest level since January 2022. This surge in small caps came amid a market rotation away from mega-cap tech stocks and into undervalued small companies, driven by the hope that smaller businesses will benefit from lower Federal Reserve interest rates.
For those unfamiliar with call options, they give investors the right to purchase a security at a set price within a certain time frame. Essentially, investors profit from call options when the underlying asset’s price increases. Druckenmiller’s bet on small caps was made when they were underperforming large-cap stocks, but has since paid off handsomely with the small-cap benchmark up 12.8% over the past month, three times the gain in the S&P 500.
Druckenmiller’s success in the investing world is well-known, with his previous big win on Nvidia being a prime example. After first buying the chipmaker in 2022 and seeing it soar to over $900 per share, Druckenmiller decided to trim his stake by more than 70% in the first quarter. His foresight and ability to capitalize on market trends has solidified his reputation as a savvy investor with a keen eye for profitable opportunities.
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