A little over three weeks ago, arguably the most important data release of the entire quarter occurred on Wall Street — and I’m not talking about the April inflation report or anything to do with earnings season.
Wednesday, May 15, marked the filing deadline for institutions with at least $100 million in assets under management to file Form 13F with the Securities and Exchange Commission. A 13F provides investors with an under-the-hood look at what Wall Street’s smartest and most-successful money managers bought, sold, and held in the latest quarter.
Even though 13Fs are filed up to 45 days following the end to a quarter (and can therefore contain stale information), they’re nevertheless helpful in identifying what stocks, industries, and innovative trends are piquing the interest of Wall Street’s greatest investors.
The latest round of 13Fs, which detail trading activity from the March-ended quarter, show that billionaire money managers were active buyers and sellers of some of Wall Street’s fastest-growing companies.
What follows are two hypergrowth stocks billionaires have been buying hand over first, as well as a widely held outperformer they’ve sent to the chopping block.
Hypergrowth stock No. 1 billionaire investors can’t stop buying: Palantir Technologies
The first high-octane growth stock that Wall Street billionaires can’t seem to get enough of is data-mining company Palantir Technologies (NYSE: PLTR). Palantir, which is forecast by Wall Street to grow its earnings per share (EPS) by an annual average of 85.2% over the next five years, had five billionaire investors purchasing its stock hand over fist in the first quarter, including (total shares purchased in parenthesis):
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John Overdeck and David Siegel of Two Sigma Investments (3,216,525 shares)
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Philippe Laffont of Coatue Management (1,368,832 shares)
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Stanley Druckenmiller of Duquesne Family Office (769,965 shares)
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Israel Englander of Millennium Management (481,634 shares)
The likely reason billionaires have been piling into Palantir stock has to do with its irreplaceability. The company’s Gotham platform is driven by artificial intelligence (AI) and helps governments collect data and oversee mission planning. Meanwhile, its up-and-coming Foundry platform helps businesses streamline their operations by making sense of large amounts of data. The services that Palantir provides simply aren’t available by any other company at scale.
Gotham has done a lot of the heavy lifting for Palantir. Since most government contracts are locked in for multiple years, Palantir has been able to count on predictable cash flow and steady double-digit growth.
However, Foundry is a considerably more compelling long-term growth story. Whereas Gotham’s reach is limited (e.g., Palantir’s management team won’t allow certain governments to access its AI platform), there is no ceiling for Foundry. In just three years, its U.S. commercial customer count has grown 12-fold. Meanwhile, its global commercial customer count has risen 53% year-over-year, as of the March-ended quarter. To use a baseball analogy, Foundry isn’t even out of the first inning yet.
Billionaires are probably also impressed with Palantir’s cash-rich balance sheet. It closed out March with nearly $3.87 billion in cash, cash equivalents, and marketable securities, with no debt, and has generated $654 million in operating cash flow over the trailing-12-month period. Palantir has plenty of financial flexibility, regardless of what’s happening with the U.S. or global economy.
Hypergrowth stock No. 2 billionaire money managers can’t stop buying: Broadcom
The second supercharged growth stock billionaire asset managers couldn’t get enough of during the first quarter is semiconductor kingpin Broadcom (NASDAQ: AVGO). With 41% sales growth expected in the current fiscal year, six billionaire investors piled in, including (total shares purchased in parenthesis):
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Steven Cohen of Point72 Asset Management (470,365 shares)
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Philippe Laffont of Coatue Management (416,460 shares)
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Israel Englander of Millennium Management (275,053 shares)
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Ken Griffin of Citadel Advisors (251,571 shares)
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Ken Fisher of Fisher Asset Management (38,940 shares)
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Ray Dalio of Bridgewater Associates (10,556 shares)
The fuel lighting a fire under Broadcom’s stock is the artificial intelligence revolution. While it might not be as direct of a beneficiary as graphics processing unit (GPU) developer Nvidia, Broadcom has found its niche in AI-accelerated data centers.
Last year, Broadcom unveiled its Jericho3-AI chip, which can connect up to 32,000 high-compute GPUs. Processing expediency is paramount to training large language models, overseeing generative AI solutions, and making the split-second decisions required of AI-powered software and systems. Jericho3 handles this while minimizing tail latency.
Broadcom is also a dominant player in the smartphone arena. It provides wireless chips and accessories used in next-generation smartphones. Wireless companies upgrading their networks to handle 5G speeds have encouraged a consistent device upgrade cycle that’s powering Broadcom’s cash flow higher.
These half-dozen billionaire money managers might also be anticipating a possible stock split in Broadcom’s future. Shares of the company did close at nearly $1,331 on June 4, which can be a lot of money for retail investors who don’t have access to fractional-share purchases with their online broker. Stock-split stocks have outperformed in recent years, with investors gravitating to these typically high-flying businesses.
The hypergrowth stock billionaires gave the heave-ho: Meta Platforms
However, not all hypergrowth stocks were necessarily on the buy radar for billionaires during the March-ended quarter. Following an astronomical move higher from its 2022 bear market low, social media colossus Meta Platforms (NASDAQ: META), which is expected to grow its EPS by annual average of 30% over the next five years, found itself on the chopping block. Nine billionaires dumped shares of Meta in the first quarter, including (total shares sold in parenthesis):
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Ole Andreas Halvorsen of Viking Global Investors (2,259,650 shares)
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Philippe Laffont of Coatue Management (1,313,528 shares)
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Ken Griffin of Citadel Advisors (1,164,151 shares)
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Steven Cohen of Point72 Asset Management (779,637 shares)
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Stephen Mandel of Lone Pine Capital (735,911 shares)
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David Tepper of Appaloosa Management (727,500 shares)
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John Overdeck and David Siegel of Two Sigma Investments (175,614 shares)
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Terry Smith of Fundsmith (29,157 shares)
One of the more logical reasons to sell shares of Meta, which I alluded to above, is to lock in some profits. Shares of Meta have more than quintupled from their 2022 bear market low.
The unpredictability of Meta’s capital expenditures (capex) is another potential catalyst for the selling we’ve witnessed from billionaires. Though Meta pared back its spending in 2023, which helped boost its operating cash flow and EPS, the company recently announced plans to increase spending on AI initiatives. Higher capex would be expected to adversely impact profits in the near term.
It’s also possible billionaires are concerned about near-term growth prospects for the U.S. economy. Even though economic data has been strong, factors like the first meaningful decline in U.S. M2 money supply since the Great Depression loom large. Since Meta generates close to 98% of its sales from advertising, and advertisers are often quick to reduce their spending at the first hint of trouble, it could endure short-term pain if the U.S. economy does an about-face.
While there are genuine reasons to be somewhat skeptical of Meta’s operating performance over the next couple of quarters, its competitive advantages continue to suggest it’ll head higher over the long run.
Meta is sitting on a boatload of cash that allows the company to aggressively invest in high-growth initiatives, such as augmented/virtual reality devices, the metaverse, and AI. Even though these investments are unlikely to bear significant fruit anytime soon, Meta CEO Mark Zuckerberg has a rich history of monetizing new platforms when they’re good and ready. In other words, I expect these nine billionaires to eventually regret their decision to sell.
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Sean Williams has positions in Meta Platforms. The Motley Fool has positions in and recommends Meta Platforms, Nvidia, and Palantir Technologies. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
2 Hypergrowth Stocks Billionaires Are Buying Hand Over Fist, and 1 They’ve Sent to the Chopping Block was originally published by The Motley Fool
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