Does billionaire Ray Dalio know something Wall Street doesn’t? He just sold off all his CrowdStrike stock and is jumping into this new S&P 500 artificial intelligence stock, which is up 300% this year.
When you need investment ideas, it’s always a good idea to consider the moves of people who have proven their expertise. A perfect example is Ray Dalio, a self-made billionaire who started by investing $300 in stocks at age 12 and tripling his money. Since then he has had a flourishing career and in the 1970s he founded Bridgewater Associates. He grew that firm into the largest hedge fund in the world, currently with approximately $100 billion in assets under management.
Dalio believes in long-term investing: holding onto stocks for a number of years and profiting from their growth, rather than switching positions over days or weeks. But he also knows when it’s time to lock in profits. He has emphasized the importance of selling stocks when they are fully valued and reallocating those funds to stocks that still have room to run.
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Historically, Dalio’s movements have not necessarily gone with the crowd. That was the case again on two of his maneuvers in the third quarter. Bridgewater sold what was left of his stake in the cybersecurity leader CrowdStrike(NASDAQ: CRWD)which Wall Street analysts generally predict will rise over the next twelve months. At the same time, Bridgewater opened a new position in an S&P 500 artificial intelligence (AI) player that is up 300% so far this year – and that Wall Street thinks is headed for a 40% decline. Does Dalio know something that Wall Street doesn’t?
Image source: Getty Images.
So let’s look at the details of those moves. Dalio’s company closed its position in cybersecurity giant CrowdStrike (by selling 7,140 shares) after gradually reducing its stake over the past year. Bridgewater originally bought CrowdStrike in the third quarter of 2022. Since the beginning of that quarter through the beginning of the third quarter of this year, the stock has risen about 118%, indicating that the billionaire has retained profits on the investment .
Now let’s take a look at the new S&P 500 AI stock that Bridgewater bought in the recent third quarter. That is Palantir Technologies(NASDAQ:PLTR)a company that offers AI-powered software to help customers use their data better. Bridgewater increased his position by more than 500% to 523,548 shares. This was after it originally purchased the shares in the first quarter of 2022. Palantir has proven to be a winning investment so far, on track for gains of more than 400% since the end of that quarter.
Based on current price levels, the average Wall Street analyst forecast is that CrowdStrike will rise about 2.5% over the next twelve months—not a huge increase, but a positive move nonetheless—and that Palantir will fall about 40%. Did Dalio make the right move by locking in his CrowdStrike winnings and increasing his stake on Palantir?
It’s still too early to know for sure. But it’s true that CrowdStrike could face some pressure in the coming months. The company’s faulty software update in July caused its largest IT outage ever, and CrowdStrike has said it expects the cost of packages to compensate customers for the losses caused by it will depress growth in coming quarters . It’s possible that this will also limit the stock’s short-term performance, although the company still represents a top long-term investment.
As for Palantir, yes, the stock’s valuation has skyrocketed; it currently trades for 184 times forward earnings estimates. But some investors – including Dalio – may be willing to accept that, as Palantir is in the early stages of its AI growth story. The S&P 500 invited Palantir to join this fall, demonstrating that the company has joined the ranks of those powering the modern economy.
Palantir launched its Artificial Intelligence Platform (AIP) a year ago and demand for it is skyrocketing. The company’s commercial customer base growth has taken off recently, but with only about 300 commercial customers in the US currently, Palantir still has plenty of room to expand. Finally, predictions that the current $200 billion AI market is on track to grow to $1 trillion by the end of the decade indicate that even more growth lies ahead for today’s top players in the field of AI. Palantir’s recent earnings results support this optimism, with the company reporting its highest-ever profit in the third quarter.
All this means that Dalio may have the right idea to invest in this high-flying AI stock today – even if Wall Street isn’t so optimistic about how it will perform in the coming months. It’s also important to remember that long-term investing can mean holding a stock for five to 10 years or even longer. That means that no matter what happens in the first few months of owning an investment, it could still be a winner for you in the long run.
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Adria Cimino has no positions in the stocks mentioned. The Motley Fool holds and recommends positions in CrowdStrike and Palantir Technologies. The Motley Fool has a disclosure policy.
Does billionaire Ray Dalio know something that Wall Street doesn’t? He just sold off all his CrowdStrike stock and is jumping into this new S&P 500 artificial intelligence stock, which is up 300% this year. was originally published by The Motley Fool
