Billionaire Israel Englander Dumped 90% of Millennium’s Stake in Palantir in Favor of This Hypergrowth Electric-Vehicle (EV) Stock

By Investor Empires On Nov 19, 2024

Two of the most important fourth-quarter data were released last week. While most investors were keenly focused on the October inflation report due on November 13, which is the deadline for institutional investors to submit their report. Form 13F November 14 was no less important.

After the end of each quarter, institutional investors with at least $100 million in assets under management (AUM) are required to file a 13F application with the Securities and Exchange Commission. The 13F offers a look under the hood Which are bought and sold by the most successful money managers on Wall Street In the last quarter. In this case, the November 14 application deadline relates to trading activity that occurred in the quarter ending in September.

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The third quarter was particularly active for billionaire money manager Israel Englander and his investment team at Millennium Management. Millennium ended September with $210.9 billion in assets under management spread across thousands of securities, including various call and put options that often hedge common stock positions.

However, there are a few of these deals that really stand out. Specifically, Englander sent shares to the artificial intelligence (AI)-based data mining specialist. Palantir Technologies (NYSE: BLT) packaging, while accumulating into a bullish hyper-growth stock in the electric vehicle (EV) space.

except NvidiaThere’s probably no hotter AI stock on the planet right now than Palantir. The company’s shares have more than tripled on a 12-month basis, and are close to 690% over the trailing two-year period. However, this did not prevent Englander from supervising the disposition of 4,492,425 Palantir shares during the third quarter, which led to a decrease in his fund’s stake by 90.3%!

There are three reasons why Palantir is a hot commodity right now. At the top of the list, it’s an irreplaceable company with a fairly secure moat. Palantir’s AI-driven Gotham platform helps plan and execute missions for federal entities, while its AI- and machine-learning-inspired Foundry platform helps companies understand their data to streamline their operations. No company comes even remotely close to what Palantir can offer at scale.

Second, Palantir has pivoted aggressively to recurring profitability, based on generally accepted accounting principles (GAAP). It’s not uncommon for Wall Street to reward fast-growing companies when they prove they can turn a profit quarter after quarter.

The third reason investors are excited about Palantir Technologies is the foundry sector, which is still nascent but rapidly expanding. The company’s global commercial customers rose 51% to 498 by the end of September.

However, there are also two very tangible catalysts, beyond simple profit taking, which may help explain why Englander and his team are headed for the exit.

For starters, Gotham City, which has been Palantir’s main profit driver, has limited long-term cap space. Although Palantir has secured several lucrative multi-year contracts from the US government, this is a platform accessible only to the US and its allies.

Perhaps the biggest problem for Palantir Technologies is its lowly valuation. Although no one would argue that Palantir deserves some amount of valuation premium given its irreplaceability, the company’s shares ended Nov. 15 at 43 times projected 2025 sales and a multiple of 140 times consensus forward year earnings. These valuation multiples are consistent with previous bubble bursting events in market leading companies.

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But while Englander and his top advisers were sending Palantir shares to the chopping block during the quarter ending in September, they were just piling into China’s fast-growing electric vehicle stocks. New (NYSE: NEO). Millennium Management’s 13F report shows that 9,309,333 Nio shares were purchased, increasing the fund’s stake by 196.3% in three months.

To be frank, building an automobile company from the ground up to mass production is no easy feat. Like almost all unnamed electric car producers Tesla and BYDNio loses a significant amount of money. Building the infrastructure needed to ramp up production, combined with spending large sums on innovation, likely means Nio will lose money for years to come.

Nio is also facing margin pressure, fueled by Tesla reducing the price of its fleet of electric vehicles on more than a half-dozen occasions since the start of 2023. While the increased competition is great news for the consumer, it has quickly dashed hopes that EV margins would be significantly better. Noticeable from vehicles with internal combustion engines.

But just because Nio is facing its fair share of challenges, doesn’t mean the company’s future isn’t bright.

The first clear step that Neo has taken in the right direction is to increase its production sustainably. Since China removed its COVID-19 mitigation measures in December 2022 and supply chains returned, for the most part, to normal, we’ve seen Nio’s monthly production jump from well below 10,000 units to often north of 20,000 units.

However, Nio’s biggest advantage is its innovations – both traditional and unconventional. Nio introduces at least one new electric car a year, and recently launched its Onvo brand, a less expensive electric car that is supposed to be more price competitive with Tesla in China. It has also upgraded its fleet to the NT 2.0 platform, which offers enhanced driver assistance technologies.

In terms of unconventional innovation, Nio has been investing heavily in battery swapping stations, which should give the company a distinct advantage in EV infrastructure over its peers. These high-margin battery swaps can be done in just minutes, and should go a long way in keeping buyers loyal to their brand.

Another undeniable positive for Nio is its strong cash position. It ended the June quarter with $5.7 billion in cash, cash equivalents, restricted cash, and various short- and long-term investments. With losses expected in the coming years, Nio has the capital needed to continue innovating, increasing production and expanding its EV infrastructure.

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Sean Williams He has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia, Palantir Technologies, and Tesla. The Motley Fool recommends BYD. The Motley Fool has Disclosure policy.

Israeli billionaire Englander has divested 90% of Millennium’s stake in Palantir in favor of this super-growth electric vehicle stock. Originally published by The Motley Fool