Englander’s Millennium Management sold close to 4.5 million shares of Palantir and practically tripled its stake in a high-octane electric-vehicle (EV) company in the September-ended quarter.
Two of the most-important data releases of the fourth quarter occurred last week. While most investors were laser-focused on the October inflation report on Nov. 13, the deadline for institutional investors to file Form 13F on Nov. 14 was just as important.
Following the end to every quarter, institutional investors with at least $100 million in assets under management (AUM) are required to file a 13F with the Securities and Exchange Commission. A 13F offers an under-the-hood look at which stocks Wall Street’s most-successful money managers bought and sold in the latest quarter. In this instance, the Nov. 14 filing deadline pertains to trading activity that occurred in the September-ended quarter.
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The third quarter was an especially active one for billionaire money manager Israel Englander and his investment team at Millennium Management. Millennium ended September with $210.9 billion in AUM spread across thousands of securities, including various put and calls options that often hedge its common-stock positions.
However, a few of these trades really stand out. Specifically, Englander sent shares of artificial intelligence (AI)-driven data-mining specialist Palantir Technologies (PLTR 0.49%) packing, while piling into an up-and-coming hypergrowth stock in the electric-vehicle (EV) space.
Englander’s Millennium slashes its stake in one of Wall Street’s most-prominent AI stocks
With the exception of Nvidia, there’s probably not a hotter AI stock on the planet right now than Palantir. Shares of the company have more than tripled on a trailing-12-month basis, and they’re up close to 690% over the trailing-two-year period. However, this didn’t stop Englander from overseeing the disposition of 4,492,425 shares of Palantir during the third quarter, which reduced his fund’s stake by 90.3%!
The are three reasons Palantir is such 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 aids with mission-planning and execution for federal entities, while its AI- and machine learning-inspired Foundry platform helps businesses makes sense of their data in order to streamline their operations. No company comes remotely close to what Palantir can offer at scale.
Secondly, Palantir firmly shifted 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 be profitable quarter after quarter.
The third reason investors are excited about Palantir Technologies is its still nascent but rapidly expanding Foundry segment. The company’s global commercial customer count soared 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, which has been Palantir’s primary profit driver, has a limited long-term ceiling. Though Palantir has landed numerous lucrative multiyear contracts from the U.S. government, this is a platform that only the U.S. and its allies have access to.
Perhaps the bigger issue for Palantir Technologies is its otherworldly valuation. While there’s no arguing that Palantir deserves some amount of valuation premium given its irreplaceability, shares of the company ended Nov. 15 at 43 times forecast sales for 2025 and a multiple of 140 times consensus forward-year earnings. These valuation multiples are consistent with previous bubble-bursting events in market-leading businesses.
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Englander nearly tripled his fund’s position in this hypergrowth EV stock
But while Englander and his top advisors were sending shares of Palantir to the chopping block during the September-ended quarter, they were absolutely piling into rapidly growing China-based EV stock Nio (NIO -3.10%). Millennium Management’s 13F shows that 9,309,333 shares of Nio were purchased, which increased the fund’s stake by 196.3% in three months.
To be upfront, building an auto company from the ground up to mass production isn’t easy. Like virtually all EV producers not named Tesla and BYD, Nio is losing quite a bit of money. Building out the infrastructure needed to increase output, as well as spending big bucks on innovation, likely means Nio will be losing money for years to come.
Nio has also been contending with margin pressure, which was stoked by Tesla slashing the price of its EV fleet on more than a half-dozen occasions since 2023 began. While increasing competition is great news for the consumer, it’s quickly dashed hopes that EV margins would be noticeably better than internal-combustion engine vehicles.
But just because Nio is facing its fair share of challenges, it doesn’t mean the company’s future isn’t bright.
The first discernable step Nio has taken in the right direction is to sustainably increase its production. Since China removed its COVID-19 mitigation measures in December 2022 and supply chains have, for the most part, returned to normal, we’ve witnessed Nio’s monthly output jump from well below 10,000 units to frequently north of 20,000 units.
Yet the biggest advantage Nio possesses is its innovation — both traditional and out-of-the-box. Nio has been introducing a least one new EV annually, and recently launched its Onvo brand, which is a less-expensive EV that should prove more price-competitive with Tesla in China. It also upgraded its fleet to the NT 2.0 platform, which offers improved driver assistance technologies.
In terms of out-of-the-box innovation, Nio has been aggressively investing in battery swap stations, which should give the company a distinct EV infrastructure edge over its peers. High-margin battery swaps can be done in mere minutes, and should go a long way in keeping buyers loyal to its brand.
The other undeniable positive for Nio is its robust cash position. It closed out the June quarter with $5.7 billion in cash, cash equivalents, restricted cash, and various short/long-term investments. With losses expected in the coming years, Nio has the capital necessary to continue innovating, increasing production, and expanding its EV infrastructure.