Just over three weeks ago, perhaps the most important release of the entire quarter took place on Wall Street – and I’m not talking about the April inflation report or anything related to 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 gives investors an under-the-hood look at what Wall Street’s smartest and most successful money managers bought, sold and held last quarter.
Although 13Fs are filed up to 45 days after a quarter’s end (and therefore may contain outdated information), they are nevertheless helpful in identifying which stocks, sectors and innovative trends are capturing the interest of Wall Street’s biggest investors.
The latest round of 13Fs, which detail trading activity from the quarter ending in March, shows that billionaire money managers were active buyers and sellers of some of Wall Street’s fastest-growing companies.
What follows are two hyper-growth stocks that billionaires bought first, and a widespread outperformer that they sent to the chopping block.
Hypergrowth Stocks The 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 a data mining company Palantir Technologies (NYSE:PLTR). Palantir, which according to Wall Street, increased its earnings per share (EPS). annual average of 85.2% over the next five years, five billionaire investors had handed over their shares in the first quarter, including (total shares purchased in brackets):
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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 why billionaires have piled into Palantir stock has to do with its irreplaceability. The company’s Gotham platform is powered by artificial intelligence (AI) and helps governments collect data and oversee mission planning. Meanwhile, the emerging Foundry platform helps companies streamline their operations by making sense of large amounts of data. The services Palantir provides simply aren’t widely available by any other company.
Gotham has done a lot of work for Palantir. Because most government contracts are fixed for several years, Palantir has been able to rely on predictable cash flow and steady double-digit growth.
However, Foundry is a significantly more compelling longer-term growth story. While Gotham’s reach is limited (for example, Palantir’s management team won’t give certain governments access to its AI platform), there is no ceiling for Foundry. In just three years, the number of commercial customers in the US has increased twelvefold. Meanwhile, the global number of commercial customers increased 53% year-on-year from the quarter ending in March. To use a baseball analogy, Foundry isn’t even out of the first inning yet.
Billionaires are also likely impressed by Palantir’s cash-rich balance sheet. It ended March with nearly $3.87 billion in cash, cash equivalents and marketable securities, net of debt, and has generated $654 million in operating cash flow over the past twelve months. Palantir has plenty of financial flexibility no matter what happens to 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 during the first quarter, the king of semiconductors Broadcom (NASDAQ:AVGO). With expected revenue growth of 41% in the current fiscal year, six billionaire investors piled in, including (total shares purchased in brackets):
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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 the fire under Broadcom’s stock is the artificial intelligence revolution. Although it may not be as direct from a beneficiary as the developer of a graphics processing unit (GPU). NvidiaBroadcom 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-performance GPUs. Fast processing is critical for training large language models, overseeing generative AI solutions, and making the split-second decisions required by AI-powered software and systems. Jericho3 handles this while minimizing tail latency.
Broadcom is also a dominant player in smartphones. It offers 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 boosts Broadcom’s cash flow.
These six billionaire money managers may also be anticipating a possible stock split in Broadcom’s future. The company’s shares closed at nearly $1,331 on June 4, which could be a lot of money for retail investors who don’t have access to partial share purchases from their online broker. Stock-split stocks have outperformed in recent years, with investors attracted to these typically high-flying companies.
The hyper-growth stock billionaires made the decision: Meta Platforms
However, not all hyper-growth stocks were necessarily on the buying radar for billionaires during the quarter ending in March. After an astronomical rise from the 2022 bear market low, the social media giant Metaplatforms (NASDAQ: META), which is expected to grow its earnings per share by an average of 30% per year 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 brackets):
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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 are up more than fivefold from their 2022 bear market lows.
The unpredictability of Meta’s capital expenditures (capex) is another potential catalyst for the sales we’ve seen from billionaires. While Meta has scaled back its spending in 2023, which has helped boost operating cash flow and earnings per share, the company recently announced plans to increase spending on AI initiatives. Higher capital investments are expected to have a negative impact on earnings in the short term.
It’s also possible that billionaires are concerned about the near-term growth prospects for the US economy. While the economic data is strong, factors like the first meaningful decline in the US M2 money supply since the Great Depression are significant. Because Meta generates nearly 98% of its revenue from advertising, and advertisers are often quick to cut spending at the first sign of trouble, it could hurt in the short term if the U.S. economy turns around.
While there are real reasons to be somewhat skeptical about Meta’s operating performance in the coming quarters, its competitive advantages continue to suggest it will head higher in the long term.
Meta has a tremendous amount of cash at its disposal, allowing the company to aggressively invest in high-growth initiatives such as augmented/virtual reality devices, the metaverse, and AI. While these investments are unlikely to bear significant fruit anytime soon, Meta CEO Mark Zuckerberg has a rich history of monetizing new platforms when they are good and ready. In other words, I expect these nine billionaires will eventually regret their decision to sell.
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Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Sean Williams holds positions in Meta Platforms. The Motley Fool holds positions in and recommends Meta Platforms, Nvidia, and Palantir Technologies. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
2 Billionaires’ Hyper-Growth Stocks Are Buying Hand Over Fist, And 1 They’ve Sent to the Chopping Block was originally published by The Motley Fool
