Reading:Does billionaire Ken Griffin know something Wall Street doesn’t? Citadel Chief is selling 91% of its Palantir stock and buying back this fractional share in exchange.
Does billionaire Ken Griffin know something Wall Street doesn’t? Citadel Chief is selling 91% of its Palantir stock and buying back this fractional share in exchange.
Billionaire Ken Griffin left an indelible mark on Wall Street and is considered one of the most successful investors of all time. He is famous for predicting the 1987 stock market crash, known as “Black Monday,” and shorting stocks ahead of the crash, making a veritable fortune. His hedge fund, Citadel Advisors, returned 15% last year, posting profits of $7 billion, outpacing many of its peers. This follows his blockbuster performance in 2022, when Citadel earned $16 billion in profits, the “largest annual windfall in history,” according to CNN, and was dubbed “the most successful hedge fund in history.” It was.
Griffin is also a big proponent of the possibility of: Generative artificial intelligence (AI). “This area of AI will revolutionize the economy because it will do a huge amount of work currently done by humans in a completely different, highly automated and highly efficient way. ” Griffin said.
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Against this backdrop, it is worth noting that Mr Griffin has sold an eye-catching 91% stake in AI specialist Citadel. Palantir Technologies(NASDAQ:PLTR) Instead, they are being piled up in high-profile stock splits.
Image source: Getty Images.
Palantir has more than 20 years of experience in AI and was quick to respond when generative AI became popular early last year. The company has developed the Artificial Intelligence Platform (AIP), a cutting-edge AI tool that helps businesses solve real-world problems using their unique data. But Palantir’s biggest accomplishment was developing hands-on sessions called boot camps that pair customers with Palantir engineers to create AI-powered solutions.
The strategy was very successful. Palantir’s U.S. commercial revenue (including AIP) grew 54% year-over-year and 13% sequentially in the third quarter, and the segment’s customer count soared 77%. Furthermore, the sector’s remaining deal value increased by 73%, suggesting that its growth will continue.
This result helps explain why Palantir stock is up 295% over the past year and more than 1,000% since the beginning of 2023 (as of this writing). It wasn’t too bad that Palantir was like that. was recognized by S&P500 September 23rd.
Given the company’s continued winning streak and impressive stock price gains, it may seem surprising that Mr. Griffin went on a short sell, unloading more than 5 million Palantir shares and reducing his position by about 91%. However, the sharp rise in stock prices led to a commensurate rise in valuation, and Palantir ended its sell-off at a forward P/E ratio of 98 times in the third quarter. With such a valuation, it’s no wonder Mr. Griffin was bargain-hunting.
What’s interesting is that the citadels are stacked on top of each other. Chipotle Mexican Grill(NYSE:CMG) stock.
There’s little doubt that Griffin believed Chipotle presented an attractive opportunity in the third quarter. The billionaire investor increased his stake in Citadel by more than 7 million shares, increasing his position by 454%. This brings his total holdings to 8.64 million shares worth $552 million. Despite owning thousands of shares, Chipotle is Griffin’s 12th largest individual stock holding.
Chipotle has long been a pioneer in the fast-casual industry, bringing “honest food” to the mainstream. To drive demand, the company has implemented an industry-leading customer loyalty program, a robust digital strategy, and the development of drive-thru “Chipot Lanes” for mobile ordering with separate preparation lines to speed throughput. We have adopted many successful strategies.
It wasn’t all smooth sailing, as the company hit some issues in the third quarter. In early July, Chipotle announced that CFO Jack Hartung plans to retire in 2025. Just a few weeks later, the company received another bad news. Brian Nicol, the famous CEO credited with successfully reinvigorating the brand, was poached by someone unknown. starbucks. As uncertainty multiplied, fair-weather investors sought greener pastures and stock prices plummeted.
However, this news had no impact on Chipotle’s financial results. Third quarter sales were $2.8 billion, an increase of 13%, and diluted earnings per share (EPS) were $0.28, an increase of 22%. It’s usually a good sign when profits grow faster than sales, as it suggests a level of spending discipline. Additionally, Chipotle’s same-store sales increased 6% due to higher transaction volume and higher average checks.
The company’s consistently strong performance helps explain why Chipotle stock is up 46% over the past year and 103% over the past three years, despite economic headwinds. This also led to a 50-for-1 stock split earlier this year, which was completed on June 26th, bringing a whole new generation of investors into the stock.
I don’t know for sure when Griffin added Chipotle stock in the third quarter, but looking at the stock price chart is enough to make a good guess. At the height of the excitement surrounding the stock split, Chipotle hit a new all-time high, but the loss of two top executives brought the company back to normal. Over a five-week period from June to July, the stock price fell about 27%. Mr. Griffin probably decided the deal was too good to resist and piled into Chipotle stock to take advantage of the fire sale.
In hindsight, Griffin is obvious. I didn’t I know something that Wall Street doesn’t know. He was simply reacting to what he saw as a clear opportunity. Should investors follow suit?
Chipotle stock isn’t going to get cheap, and it’s currently selling for 58 times forward earnings, which may be off-putting to some investors. But during Chipotle’s recent downturn, Chipotle’s stock trades at a forward P/E ratio of 45 times, just below the average multiple of 46 times over the past five years, which may have prompted Griffin’s interest. expensive.
Looking ahead to 2025, Wall Street expects Chipotle to post $1.32 in EPS, which is 48 times future sales and not much more than what Griffin paid. To be clear, this is expensive compared to the S&P 500’s multiple of 31. That said, Chipotle stock is up over 300% in the past five years (as of this writing). That’s more than triple the 96% rise in the Chipotle stock index. wider market.
This helps explain why Chipotle stock deserves a premium and why it’s still a good buy.
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Danny Vena He has worked at Chipotle Mexican Grill, Palantir Technologies, and Starbucks. The Motley Fool has positions in and recommends Chipotle Mexican Grill, Palantir Technologies, and Starbucks. The Motley Fool recommends the following options: Short December 2024 $54 on Chipotle Mexican Grill. The Motley Fool has Disclosure policy.
