😨 Why Cathie Wood Sold Palantir from ALL ARK Invest Funds

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cathie wood just finished selling out of
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palantir this is kind of a big deal
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because just a few months ago arc invest
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was holding over a billion dollars of
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palantir stock making it their 12th
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biggest position overall not only that
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but pound here was one of just two
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stocks inside all six arc invest funds
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that's actually what made me start
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researching the company in the first
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place and i ended up really liking what
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i saw i still do especially now that
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palutear is at a lower market cap than
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at almost any other point since it went
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public that's great but i think there's
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a real opportunity here to learn to
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predict arc invest's trading patterns in
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the future and explain why cathy wood
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may have sold so much pound your stock
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today even at such low prices then i'll
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leave it up to you if you want me to
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keep covering pound tier or focus more
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on the stocks that arch invest is still
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buying and holding your time is valuable
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so let's get right into it kathy wood
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really started buying palantir stock in
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mid-february of 2021 when the market
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began rotating from growth stocks to
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value from february to may pounce your
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stock dropped from about 38
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down to 19 which is about a 50 percent
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drop in price when that happened kathy
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would added around 40 percent more
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shares when palencia bounced back to
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around 27 at the end of june kathy wood
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didn't really sell too many shares for
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what could have been a nice 50 gain
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since kathy wood was accumulating at
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basically every price i decided to do a
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deep dive on the stock in late july that
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was perfect timing because just two
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weeks later kathy wood added palantir
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stock to all six arc invest funds at the
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same time which is something that can't
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be said for almost any other stock even
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stocks like apple and google and nvidia
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which cathy would treat like cash-like
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positions only pop into one or two funds
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at a time even though they have business
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units in every area of innovation that
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arc invest focuses on google apple and
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nvidia are all awesome stocks to hold
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whether arkhamvest has them in their
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funds or not that's why i decided to
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cover palantir regularly according to
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arc invest data there clearly must be
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something special about the stock well
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on september 23rd palantir stock was
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archinvest's 12th biggest position
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overall with about 1 billion dollars
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held in total this is where things get
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really interesting here's what happened
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inside all six arc invest funds during
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that drop palantir was added to arcg arc
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f rq and arc x in mid august kathy would
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also made big buys in arcade and rw over
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the next five months from the end of
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september to today palantir stock price
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dropped from around 28 dollars to 12 a
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collapse of over 60 percent marked in
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the lines in green in rk where most of
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kathy wood's palantir holdings were the
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amount of shares stayed relatively
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steady as palantir's price continued to
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drop arcg is archanvest's second biggest
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fund by assets under management the
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amount of pallentier shares in rg stayed
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relatively flat suggesting that kathy
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wood was diamond handing her shares and
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waiting for the right price arc w is arc
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invest's next generation internet fund
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which focuses on themes like ai and big
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data so it's the fund where pounders
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should be the best fit for thematically
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but kathy wood was slowly selling pounds
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to your stock out of that fund over time
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which is a big red flag when ark invest
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starts selling a position out of one of
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the pure play funds that that stock
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belongs in it must mean that kathy wood
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doesn't think that that is a pure play
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company in that category we can see the
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same type of behavior in arc f which
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should have been the second best
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thematic fit for palantir i called out
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these red flags a bit in my episode
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covering arkhanvest's january trades but
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the reason i wasn't worried about it was
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because kathy wood was adding palantir
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shares to rk rq and arc x at the same
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time so my thought was that arkhamvest's
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investment thesis around pound tier was
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more about computing at the edge which
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kathy wood has specifically talked about
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in her interviews so what's the big
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lesson here either arkhamvest is
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aggressively buying the dip on a company
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in the pure play fund that it belongs in
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or they're not when pound tier crashed
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from 28 dollars per share down to 12 but
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arkhanvest didn't buy that dip in arc w
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that was a sign that something was up
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knowing what i know now i probably would
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have flagged palantir as a potential
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cash like position for arc invest
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anywhere between november and the end of
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december when the stock went down to 18
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per share and they simply didn't buy the
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dip
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now over the last few trading days
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argentvest went from having over 30
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million shares of palantir stock to just
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2500 and palantir went down from being
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their 17th biggest position overall to
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basically being their smallest at the
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time of this recording arkhamvest
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actually has a bigger position in
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peloton than palantir yikes there's no
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question that arkhamvest has actually
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lost their conviction in palantir the
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only question now is why and i think i
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have the answer which really has two
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parts let's focus on the palantir part
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first arkhamvest comes out with a weekly
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stock commentary email that talks about
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any stock that they hold that goes up or
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down more than 15 percent in a single
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trading day that week in last week's
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email they said that palantir has
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reported a significant deceleration in
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growth in their larger government
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division suggesting perhaps a change in
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government procurement behavior if we
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look at palantir's latest earnings
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presentation we can see that government
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revenue grew by 76
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year-over-year in quarter one of 2021
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but in quarter four it only grew by 26
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my explanation for this is because the
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government fiscal year starts on october
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1st that's when government agencies get
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their new budget which means they have
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to figure out and allocate that budget
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internally then once they know their
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numbers they can go out and negotiate
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contracts accordingly those contracts
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take time to renegotiate and sign it
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doesn't sound crazy for all those things
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together from the moment the new budget
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arrives to the final signatures on
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palantir's government contracts to take
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more than 90 days combined if that's the
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case those contracts would fall into q1
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for palantir which means more government
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agencies are actually spending more
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budget with palantir earlier in their
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fiscal year now that palantir has proven
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its worth that said pouncer's government
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customer count has stayed flat year over
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year so palantir didn't acquire any net
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new customers on the government side
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what we do know for sure is that
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volunteers government customers are
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spending 46 percent more money with them
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year over year but did they lose a
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couple small customers and add a couple
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bigger ones or did they lose a couple
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big customers and add a couple smaller
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ones another factor that we have to talk
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about is palantir stock-based
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compensation and how they're constantly
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diluting shareholders since the
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beginning of 2021 palantir has increased
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their shares outstanding by well over 10
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percent from 1.8 billion shares
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outstanding to over 2 billion that means
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that each share of pound tier we hold
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becomes a smaller and smaller chunk of
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the company over time and so palantir's
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market cap has to grow by that same
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amount just for shareholders to break
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even compare that to a huge artificial
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intelligence company like google which
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is actively buying back its shares as
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its market cap continues to grow when
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you compare those two stocks the
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opportunity cost of holding palantir
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starts to look pretty high again just
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because arc invest doesn't hold google
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doesn't mean it isn't a great company
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here's where the second part of the
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answer comes in in today's macro
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environment of supply chain issues high
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inflation high interest rates and low
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customer sentiment all growth stock
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prices have been hit very hard including
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the ones that are invest always had
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higher conviction and then pound here in
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this kind of environment any negative
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piece of information in a growth
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company's earnings call means its share
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price gets slashed by percent thirty
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percent or even more that's exactly what
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happened to shopify and roku which are
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positions that arc invest has been
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buying up at the same time that they've
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been selling pounds here now the
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opportunity cost of holding pounds here
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looks especially high to arc invest
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because a dollar locked in palantir is a
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dollar that wouldn't be going to shop a
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fire roku after these additional 20
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discounts what we need to realize here
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is that ark invest has very different
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investing goals than us retail investors
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i'm not talking about the five year time
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horizon or sticking to certain
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innovation themes i mean that kathy wood
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has to manage a set of portfolios as
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real financial products arc invest cares
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about other things beyond price action
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like how their portfolios correlate to
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the indices over time not holding a lot
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of cash having to think about the total
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number of stocks in each portfolio and
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justify a dollar spent on one stock over
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the others all these little factors add
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up to pretty big differences in how
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kathy wood behaves versus how us buy and
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hold retail investors invest for
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ourselves speaking of which is probably
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worth pointing out that kathy wood isn't
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sitting at some desk with a bunch of
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spreadsheets trying to figure out all
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this stuff stocked by stock i'm pretty
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sure that arc invest has a system for
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evaluating the stocks they hold given
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all of their five-year price targets and
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assumed multiples and other financial
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metrics not just individual stock
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performance but how these stocks compare
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to each other so when big macro forces
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like the pandemic interest rates or the
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russia ukraine conflict push everything
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down in general arc invest can probably
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see which specific stocks got pushed
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down more than they should have been if
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one of their highest conviction stocks
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like a roku or a shopify got pushed down
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way more than other stocks on average it
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makes sense for them to raise cash and
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take advantage of the deal even if the
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cash-like position is sold at a loss the
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assumption here is that the future gains
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of the stock that they just bought will
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exceed the present losses that they just
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realized to buy them emphasis on the
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word assumption i think one thing that i
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can be doing better is mention these
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differences between arc and best and the
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average individual investor more often
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the way we should be using archives
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trading data is to narrow down our
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search for innovative companies the way
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we should be using their research is to
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understand how certain advanced
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technologies are evolving and the market
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opportunities that could exist as a
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result then we should follow up on that
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ourselves check our other sources even
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ones that are bearish on those same
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technologies look at similar stocks that
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archives doesn't hold or really talk
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about what we shouldn't do is blindly
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mirror some of kathy wood's trades
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without understanding the big picture
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and inner workings of their funds
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including things like cash-like
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positions i first started researching
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palantir because of arc invest but it's
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a top five position in my own portfolio
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because of my due diligence and my
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decisions and again arkhanvest uses some
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of the best companies on the planet as
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cash-like positions google and apple and
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nvidia it's not such a bad thing for
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palantir to fall into that camp one
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thing i think that arc invest can do
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that would add a lot of value is be a
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lot more open and specific about some of
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these big changes to their holdings they
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already do this sometimes for example in
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a previous episode of her monthly in the
10:19
know series kathy wood explained her
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thoughts on illumina which was a top 10
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holding in rk and arcg back in 2020
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before getting sold out of those funds
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entirely arkanvest's analysts also write
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articles over on their website as well
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as medium.com where they talk a lot
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about individual companies also like i
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showed you earlier they send out emails
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whenever a stock makes a big move up or
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down so i think it would be awesome if
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they could come out with content
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explaining what they see in a company
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when they make massive purchases in it
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especially during an ipo like with
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robinhood i also think it would be
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awesome if they came out with content
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explaining when they sell a massive
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position like illumina or palantir those
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two types of content would really be a
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big value add comment below with your
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thoughts on palantir now that arc invest
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has sold out of it do i keep covering it
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since it's a stock that i personally
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believe in or do i no longer cover it
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because i tend to focus on arching best
11:10
research and trading data i want to make
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sure that i'm adding value in the right
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ways here speaking of adding value if
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this episode helped you understand a
11:17
little more about archingvest's trading
11:19
patterns in general and their pallets
11:20
you're holding specifically consider
11:22
liking this video and subscribing to the
11:24
channel with all notifications turned on
11:26
that's a great way to invest in the
11:28
channel that invests in you and if you'd
11:30
like to learn why i'm so confident in
11:31
palantir and why it's a top five holding
11:33
in my public portfolio this playlist
11:36
right here has all the answers or if
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you've been wanting to learn more about
11:39
the future of artificial intelligence
11:41
and some other great stocks in the
11:42
industry this episode here is for you
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either way stay long stay strong and
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thanks for watching until next time this
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is ticker symbol you my name is alex
11:52
reminding you that the best investment
11:54
you can make is in you