We recently compiled a list of the 10 Best High Growth Stocks To Buy. In this article, we are going to take a look at where Palantir Technologies Inc. (NYSE:PLTR) stands against the other high growth stocks.
At Wall Street, long-standing investment strategies are being reshuffled as the monetary and political landscape evolves. Reallocation is the name of the game in a week where the S&P 500 and Nasdaq experienced declines of 1.97% and 3.65%, respectively, marking their largest weekly losses since April. Conversely, the Dow advanced 0.72%, and the small cap-focused Russell 2000 climbed 1.68%. A few tech mega-caps—led by Apple Inc., NVIDIA Corporation, Meta Platforms, Inc., and Amazon.com, Inc.—have dominated stock market returns, especially over the last 18 months, a trend that is evident in the diverging performances of the largest 50 stocks in the S&P 500, weighted by market capitalization. This trend, however, seems to have reversed sharply recently, with mega-caps selling off while the average stock holds close to record levels.
Investors are grappling with this sudden shift, and one possible explanation is that mega-caps may have become too expensive. “The stock market is experiencing a long overdue rotation,” said Glen Smith, chief investment officer at GDS Wealth Management. “Investors are pulling money out of high-performing big tech stocks and reallocating it to other market areas.” Notably, tech giants like NVIDIA Corporation, previously popular among options traders, saw a notable shift in sentiment, with demand for bearish puts surpassing calls at the highest rate in five months. “It signals a different regime,” said Erika Maschmeyer, a portfolio manager at Columbia Threadneedle Investments. “The market could be choppier and more volatile, with more dispersion than we have seen.”
This divergence has reassured some Wall Street experts who had been concerned about the rally’s dependence on a few massive tech stocks. Additionally, rising optimism about forthcoming interest rate decreases from the Fed has bolstered smaller and more cyclically oriented names. In that regard, the Fed’s battle against inflation might be nearing its end after U.S. consumer prices unexpectedly fell in June. Chicago Fed President Austan Goolsbee considers the latest inflation data “excellent” and describes persistent housing inflation improvement as “profoundly encouraging.” However, Scott Rubner of Goldman Sachs is skeptical about buying the dip. The tactical strategist believes the S&P 500 has little room for upward movement from its current position. He points out that historically, July 17 has marked a turning point for the equity benchmark, with data dating back to 1928 supporting this claim. Rubner notes that August typically sees the worst outflows from passive equity and mutual funds.
On another note, the U.S. economy added slightly more jobs than expected in June. Nonfarm payrolls increased by 206,000 for the month, surpassing the Dow Jones forecast of 200,000 but falling short of the revised May gain of 218,000, which was significantly reduced from the initial estimate of 272,000. However, the unemployment rate unexpectedly rose to 4.1%, matching the highest level since October 2021 and presenting a mixed signal for Federal Reserve officials considering their next monetary policy move. The jobless rate was forecasted to remain steady at 4%. Although June job creation exceeded expectations, much of this growth was driven by a 70,000 surge in government jobs. Additionally, the health care sector, a consistent leader, added 49,000 jobs, while social assistance contributed 34,000 and construction increased by 27,000.
The 2024 presidential election is heating up, with President Joe Biden opting not to run for re-election and Republican nominee and former President Donald Trump continuing his campaign after surviving an assassination attempt. Historically, presidential election years have often brought strong returns for stock investors, influencing short-term economic policy. However, recent events suggest that this election year may be far from typical.
Our Methodology
To compile our list of the best high growth stocks to buy, we identified companies with strong sales growth over the past five years. These companies were then ranked based on the number of hedge fund investors in the first quarter of 2024, out of a total of 919 hedge funds. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A software engineer manipulating a vast network of code on virtual monitors.
Palantir Technologies Inc. (NYSE:PLTR)
Number of Hedge Fund Holders: 45
Annual Sales Growth Over the Past 5 Years: 30.67%
Palantir Technologies Inc. (NYSE:PLTR) is a leading developer of data mining and AI software that helps businesses and governments analyze large datasets to drive data-backed decisions. Its product lineup includes Palantir Gotham, Palantir Apollo, and Palantir Foundry. With the launch of its Artificial Intelligence Platform (AIP), Palantir Technologies Inc. (NYSE:PLTR) has become one of Wall Street’s favorite stocks, with shares surging 65% since the beginning of the year.
Palantir Technologies Inc. (NYSE:PLTR) started off as a provider of security software for the US government and its major customers included the United States Intelligence Community (USIC) and United States Department of Defense. It won the CIA as its first customer back in 2005 and later won contracts from the FBI, NSA, and NYPD. Back then, there was just Palantir Gotham which was being used by law enforcement and intelligence agencies to combine structured data such as spreadsheets with unstructured data like images to draw connections
In 2016, the Colorado-based software company launched “Foundry”, which was specifically designed for commercial customers to help them analyze large amounts of data to drive business decisions such as optimizing their supply chains using real-time data and analytics. In 2020, Palantir Technologies Inc. (NYSE:PLTR) launched the Apollo platform, its continuous delivery system that schedules automated updates for the Gotham and Foundry platforms, with little human intervention, and makes their maintenance less costly.
For the first quarter of the fiscal year 2024, Palantir Technologies Inc. (NYSE:PLTR) reported robust results with a notable rise in revenue and customer acquisition, especially within the US commercial sector. The company’s revenue reached $634 million, reflecting a 21% year-over-year increase, fueled by the success of its Artificial Intelligence Platform (AIP) and a strong US commercial business. Palantir added 41 new customers in the US commercial sector and recorded $81 million in GAAP operating income, a company record. Despite challenges in Europe, Palantir remains optimistic, citing the increasing demand for AIP and its essential global market contributions.
Palantir Technologies Inc. (NYSE:PLTR) core business is also picking up pace and the company became the first software company to win a contract with the U.S. army. Its US government business revenue grew 8% quarter on quarter, up from 3% quarter on quarter in Q4 2023.
On June 18, analysts at Argus initiated coverage on Palantir Technologies Inc. (NYSE:PLTR) with a Buy rating and a price target of $29 per share. The investment firm highlighted the company’s substantial improvements in profitability and cash flow over the past year. Argus noted that Palantir Technologies Inc. (NYSE:PLTR)’s government business accounted for 55% of its revenue in 2023, but they anticipate the commercial segment, particularly in the U.S., to drive future growth.
A review of 919 hedge fund portfolios by Insider Monkey for the March quarter of 2024 revealed that 45 held stakes in Palantir Technologies Inc. (NYSE:PLTR). The leading investor was D. E. Shaw, with 13.48 million shares valued at $310.23 million.
Palantir Technologies Inc. (NYSE:PLTR) is one of the largest pure-play data analytics companies that has a diverse client base comprising both government and commercial customers. It has the potential to gain further share using its technological prowess as artificial intelligence penetrates military applications and as it simultaneously wins commercial customers in the US.
Overall PLTR ranks 10th on our list of the best high growth stocks to buy. You can visit 10 Best High Growth Stocks To Buy to see the other high growth stocks that are on hedge funds’ radar. While we acknowledge the potential of PLTR as an investment, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PLTR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
