You can learn a lot by watching the moves of billionaire investors. That's because they have a proven track record of success, having built a fortune through investing over the long term. You may pick up ideas from their buys and sells, with the goal of scoring your own investing victories. And the great news is you don't have to be a billionaire to follow in their footsteps; with even a small amount of money invested today, you can make moves that might set you along the path to wealth down the road.
So, what are billionaires doing right now? You may be surprised to learn that many of them have decided to sell shares of a very well-known stock. This technology player has soared in the triple digits this year after posting earnings gains quarter after quarter. In spite of this top performance, Philippe Laffont of Coatue Management, Ray Dalio of Bridgewater Associates, Israel Englander of Millennium Management, and Jeff Yass of Susquehanna International all sold shares of this popular stock in the second quarter, according to their 13F filings. Let's find out more -- and whether you should follow their lead this time.
Image source: Getty Images.
A 20-year-old company
What top stock am I talking about? A company that's been around for more than 20 years but has leaped into the spotlight in recent times thanks to its position in the artificial intelligence (AI) market. And this player is Palantir Technologies (NYSE: PLTR). The software company helps its customers aggregate all of their data and use it to make improvements in efficiency, solve problems, and even launch game-changing decisions.
In the recent quarter, billionaires made the following moves:
Coatue's Laffont closed his Palantir position, selling 4,816,195 shares.
Bridgewater's Dalio reduced his position by 19% to 86,280 shares.
Millennium's Englander cut his position by 59% to 4,973,308 shares.
Susquehanna's Yass lowered his position by 31% to 998,191 shares.
We don't know the exact reason for the investors' moves, and even a complete closing of a position -- as in the case of Coatue's Laffont -- doesn't necessarily mean the investor no longer believes in the company's long-term potential. In some instances, investors may need cash to broaden into other investment areas, for example, so they might cut stocks that have had an excellent run. Laffont initially bought Palantir in last year's Q3, and in the last quarter of last year through the end of this year's Q1, the stock surged more than 40%.
More expensive than Nvidia
The idea is, after such gains, a particular player may find itself richly valued, and that could weigh on the potential for further increases, at least in the coming months. This may be the element that's prompted some billionaires to reduce or close positions in Palantir in recent times. After the stock's showstopping performance, it now is trading at more than 122 times forward-earnings estimates, which makes it more expensive than AI market giant Nvidia.
PLTR PE Ratio (Forward) data by YCharts.
So now let's get back to our question. Should you follow these billionaires and sell shares of Palantir? This depends on your investment horizon and goals. First, it's important to note that Palantir, even though it's been around for many years, could be in the early days of its growth story. Originally known for its government contracts, Palantir now is starting to see tremendous growth from its commercial business too. In fact, both businesses brought in double-digit revenue growth in the most recent quarter.
More growth ahead?
Palantir launched its Artificial Intelligence Platform (AIP) only last year, and business has taken off, even driving the company to its biggest quarterly profit ever in the most recent quarter. All of this signals Palantir could deliver considerably more growth in the quarters to come.
Of course, this story won't unfold overnight, and since stocks don't climb nonstop, the shares could take a pause after the tremendous performance of the past several months. This means if you've generated a big gain and need the cash to expand into other stocks, you, like the billionaires, may consider selling some shares. Or if you've held onto Palantir for a long while and today are interested in exploring other investment opportunities, you might also cut your position.
But, as mentioned above, over time, Palantir could deliver another huge wave of gains, meaning now is a great time for long-term investors to stick with this top-tech player.
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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia and Palantir Technologies. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
