While I invest in ETF’s for the majority, I also wanted to pick some individual stocks. I decided I will allow this for about 5%-10% of my portfolio.
Apart from the Galapagos stock I purchased recently there is as second stock that I’ve had my eyes on for a while and that is Palantir.
Palantir might not have much in common with Galapagos at first sight, however they do have one thing in common and that is that they are both growth stocks. That means they are taxed only when you sell them, unlike dividend stocks that are taxed yearly. Since I plan for the long term, and will not sell, I prefer growth stocks over dividend stocks.
Should these stocks ever pay out dividends then I should still be okay, as in Belgium the first 600 EUR of dividend payouts / year are free. Its just that I would want to avoid having to much dividend stocks.
Palantir has been highly hyped. It only made its IPO near the end of 2020 and was valued first at $9.5 / stock. This year the stock reached peaks up to $45! The stock has been extremely bullish and somewhat volatile while its trying to search its price range.
Palantir had its IPO in the same year Snowflake did, and also Flowflake had great first months. It seems any company with big data / AI is in fashion right now, but is it also a good stock for the long term?
What is the company About?
What exactly Palantir does has bit secretive so far, before the IPO it worked on top classified US Government Defense projects.
Now that Palantir is more public we have a bigger chance to find out what exactly they do.
Their business is around big data, although they state not to be a data company. The data they work with always remains inside that one company and does not go outside that company. They don’t collect or sell data.
They basically build digital infrastructure for data-driven operations and decision making. Their products serve as the connective tissue between an organization’s data, its analytics capabilities, and operational execution.
In other words they help company manage and analyze their data and make better use of all the data, wherever it is coming from.
Top 7 reasons to buy Palantir
#1 Cathie Woods bought the stock
Cathie Woods her ARK portfolio has managed to outperform the market by a long shot last year. She has an eye for stocks with a large growth potential and she took a huge position in this stock so it now has about 0.5% of some of het ETFs.
Not long after Cathie bought the stock the lock up period expired and the stock went down from 30$ to about 23$, partly driven by the news that the owners sold a large position in the stock they owned.
I don’t really blame the owners for taking some profit though, and I decided to ignore this when I purchased a position for myself. I was not the only one thinking this way as very close after me CathyieWoods decided to buy another 3 Million of the stock! Meaning just like me she believes in the long term potential of this stock.
#2 The company works with Big Data
As a Data expert myself I know how valuable Big Data is, and even more valuable if you have a simple way to make sense of data of big companies. Data of big companies is often a mess, if Palantir can furfill that promise they make then what they are doing is groundbreaking and could be a huge help.
#3 Palantir is working for the US Defense
The advantage of working for the US defense is that, while you can work in secret, while you work you can still create patents for the public market later on. Furthermore the budget of the US Defense is pretty much unlimited. Whatever you need you will get as long as it fulfills what it needs to do.
In 2020 they got a $823 million contract with the US Defense department.
This does also mean they are limited in what countries they can supply their tech to. For example they are not allowed to supply Palantir software to China.
#4 Palantir has a track record of signing large contracts across sectors
Apart from a huge contract with the US Defense department Palantir is signing contracts with huge companies all over the place. But what I really like is that these contracts are not bound to one sector. They signed contracts with the NHS in the UK for example, but also a multi year contract with the mining Giant company Rio Tinto which shows their tech is applicable almost anywhere.
#5 Great long term investment
With such a great track record in such a short time and with a lot of growth potential this is a great Tech / Data / AI stock. Its just a market where you should be in, and I believe that in the next decade Palantir’s tech will play a big role in this market.
#6 Increase in revenue
Palantir’s revenue has had an amazing growth spurt in recent years. It grew 25% in 2019 and even 47% in 2020. Expectations for Q1 2021 is another 45% compared to Q1 2020.
While some solutions might be scalable and Palantir is more bespoke work for their customers, this also means that customers will have a harder time to turn away from Palantir then with certain easy to scale up solutions. As what is easy to scale up, is also easy to scale down.
For Palantir this is all solid income for a long time to come.
#7 Fair price compared to similar stocks that IPO’d the same year
While Palantir went up from 9.5$ to the now 23$ its at, its valuation is around 41B $. Snowflake is currently at 73B $. Do I claim the stocks are worth the same? Hard to say. Snowflake has the big advantage that it can scale much much easier and this shows since it has been reporting faster revenue growth. At the same time Palantir is more profitable per customer.
At the same time I do feel Palantir has a more unique selling point, I don’t really see much competition in their level of technology.
I have a hard time comparing Palantir to any other stock, and its being so unique is exactly the reason why its so interesting.
Reasons not to buy Palantir
There is also reasons why you shouldn’t buy Palantir. Firstly a lot of their operations are still secretive, so it is hard to estimate the value of this stock.
Secondly stock has been very bullish. I generally am cautious about bullish stocks because they could go either way very fast. At the same time, I do like bullish stocks because they do have a great upside potential.
The top of $PLTR was around 45$ , right now its around 24$. Does this mean you are getting an amazing stock in discount or are you catching a falling knife?
Considering Cathy Woods is also investing, I don’t think you are catching a falling knife, but it did came from 10$ in a very short time. Although if you invest for the long term, like I am it doesn’t really matters what this stock will do in the short term.
Should you buy the stock?
I must stress that I am not a financial advisor. I am not qualified to give Financial Advise. I recommend you do your own research and do your own due diligence. What I can say is that I took a position in Palantir at 0.6% of my portfolio just Friday at about 23$.
I do feel as if this stock has seen its low points for now and the recent dip was in part to blame to the general market pull back, so I think we might have seen the bottom here, but only time will really tell us.
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