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Globe and Mail
2 days ago
- Business
- Globe and Mail
Prediction: Palantir Has 4 Wall Street Sell Ratings, and This Figure Will More Than Double in the Coming Months
Key Points Wall Street analysts have an overwhelming "buy" bias, with only 4.9% of the 12,319 ratings on S&P 500 stocks (as of late June) representing sell ratings. Analysts have been bullish on artificial intelligence (AI) juggernaut Palantir Technologies due to the irreplaceability of its platforms and its recurring profits. Though only four out of 24 Wall Street analysts rate Palantir stock the equivalent of a sell, its inexplicable valuation premium is likely to send this figure notably higher. 10 stocks we like better than Palantir Technologies › History has taught investors that being a long-term optimist is a smart decision. The analysts at Crestmont Research examined more than a century of rolling 20-year total returns, including dividends, for the benchmark S&P 500 and discovered that all 106 rolling 20-year periods they analyzed would have generated a positive annualized total return. This realization that the stock market's major indexes have a propensity to climb in value over time has led to an overwhelming"buy" bias for Wall Street analysts. According to data from FactSet Insight, there were 12,319 ratings on stocks in the S&P 500, as of late June. A whopping 56.4% of these ratings were the equivalent of "buy," 38.7% were "hold," and only 4.9% were the equivalent of "sell." Despite this buy bias on Wall Street, history also tells us that not all stocks climb in value, nor do they rise in a straight line when increasing in value over time. Although sell ratings are exceedingly rare, there's one high-flying stock, which has returned 2,130% since the end of 2022, that could be a sell rating magnet for Wall Street analysts in the coming months: Palantir Technologies (NASDAQ: PLTR). Palantir Technologies blows away Wall Street's loftiest expectations Based on analyst ratings aggregated by LSEG Data & Analytics (formerly Refinitiv), 24 Wall Street analysts have weighed in on Palantir Technologies. Five rate it as the equivalent of a strong buy or buy, 15 list it as a hold or market perform, and four have it rated the equivalent of underperform or sell. There's a reason analysts have been overwhelmingly bullish on Palantir -- and it has to do with more than the historical precedent of Wall Street's major stock indexes rising over long periods. To begin with, analysts appreciate Palantir's unique positioning and sustainable moat. The company's two premier artificial intelligence (AI) - and machine learning-driven operating platforms, Gotham and Foundry, have no large-scale competitors. When Palantir lands a client, it tends to hang onto them. To build on this point, Palantir is capable of producing highly predictable operating cash flow quarter after quarter. Its Gotham platform aids federal governments with military mission planning and execution, as well as data collection and analytics. The contracts signed for this segment commonly stretch out four or five years. Meanwhile, Foundry is a subscription-based model geared at businesses that often leads to high retention rates. Palantir also dazzled Wall Street by flipping into the recurring profit column ahead of expectations. While Gotham accounts for the lion's share of its operating income, shifting to recurring profits demonstrates the validity of Palantir's AI-focused, dual-platform model. To round things out, Wall Street analysts have likely anticipated strength in Palantir's operations following Donald Trump's November victory and Republicans winning both houses of Congress. Historically, Republicans haven't been shy about increasing defense spending. President Trump's focus on internal AI innovation and protecting America's security interests plays right into the hands of Gotham. Prediction: Wall Street sell ratings on Palantir are about to become commonplace But there's also the real possibility Wall Street's love affair with Palantir is going to end sooner rather than later. Even though Palantir offers a sustainable moat and, thus far, a sales growth rate that's hovered in the 25% to 35% range on an annual basis, there are a few headwinds Wall Street analysts won't be able to overlook. Firstly, there's the realization that all game-changing innovations need ample time to mature. Despite all the hoopla surrounding artificial intelligence and AI stocks like Palantir, there's a strong possibility that investors have, once again, overestimated how quickly this new technology will gain mainstream adoption and/or utility. If an AI bubble were to form and burst, Palantir stock wouldn't be immune. While its multiyear government contracts (via Gotham) and subscriptions (via Foundry) would insulate its revenue from falling off a cliff, investor sentiment during bubble-bursting events would make Palantir stock a target. Secondly, there's only so much growth that can be squeezed out of Gotham with a limited list of potential clients. Though it's great having the U.S. government as a core customer, only the U.S. and its immediate allies can access this sensitive platform. As time passes, this is going to limit Gotham's growth potential. But the No. 1 reason sell ratings on Palantir can more than double in the coming months is the company's inexplicable valuation. To be clear, I absolutely do believe Palantir stock is worthy of a valuation premium. Any company that can deliver double-digit sales growth with a sustainable moat deserves a valuation premium, relative to its peers. But there's a limit as to how far this premium can carry a stock. PLTR PS Ratio data by YCharts. PS Ratio = price-to-sales ratio. Prior to the bursting of the dot-com bubble in the late 1990s and early 2000s, leaders like Microsoft, Cisco Systems, and Amazon peaked at price-to-sales (P/S) ratios ranging from 31 to 43. Throughout history, this P/S ratio range of 30 to 40 has commonly served as a top for market-leading businesses on the cutting edge of a next-big-thing innovation. As of the closing bell on July 9, Palantir Technologies' P/S ratio clocked in at 114! That's one hundred and fourteen, with no missing decimal points! No megacap stock in the history of Wall Street has ever been able to maintain a premium P/S multiple of this magnitude. Even if Palantir were able to grow its sales by 30% annually through 2029, its P/S ratio would still be 31 heading into the turn of the decade. This is how far out of whack Palantir's valuation is at the moment. The vast majority of hold ratings on Palantir have attached price targets that are significantly below the $143.13 per share it closed at on July 9. I believe these analysts will struggle to justify any additional increase in their respective price target given Palantir's inexplicable P/S premium. It's simply a matter of time before the valuation-based sell ratings from Wall Street begin to stream in. Should you invest $1,000 in Palantir Technologies right now? Before you buy stock in Palantir Technologies, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Palantir Technologies wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $671,477!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,010,880!* Now, it's worth noting Stock Advisor 's total average return is1,047% — a market-crushing outperformance compared to180%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of July 7, 2025 John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Sean Williams has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Cisco Systems, FactSet Research Systems, Microsoft, and Palantir Technologies. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Yahoo
19-02-2025
- Business
- Yahoo
Warren Buffett Just Sold 2 of Berkshire's Most Surefire Investments -- the Time to Be Fearful When Others Are Greedy Has Arrived
For some Americans, Feb. 14 (Valentine's Day) represents the ideal opportunity to show your significant other how much you care about them. But for the investing community. Feb. 14 marked one of the most important data releases of the first quarter: Form 13F deadline day. A 13F is a required filing no later than 45 calendar days following the end to a quarter for institutional investors with at least $100 million in assets under management (AUM). These filings allow investors to look over the proverbial shoulders of Wall Street's leading money managers to see which stocks they bought and sold in the latest quarter. There isn't a 13F filing that garners more attention than that of Berkshire Hathaway's (NYSE: BRK.A)(NYSE: BRK.B) billionaire CEO Warren Buffett. The aptly named "Oracle of Omaha" oversees nearly $299 billion in AUM and has absolutely run circles around the benchmark S&P 500 (SNPINDEX: ^GSPC) during his 60-year tenure as Berkshire's chief. Professional and everyday investors have taken Buffett's advice to heart when putting their money to work on Wall Street -- and this includes being "fearful when others are greedy, and greedy when others are fearful." Warren Buffett and his top advisors, Ted Weschler and Todd Combs, were busy bees during the December-ended quarter. Five existing positions were added to, one new purchase was made, nine existing positions were reduced, and three holdings were given the heave-ho. While some investors are likely to focus on the biggest-dollar moves made in the fourth quarter, such as the continued aggressive selling of No. 3 holding, Bank of America, the more telling action might be Berkshire's complete exit from the Vanguard S&P 500 ETF (NYSEMKT: VOO) and SPDR S&P 500 ETF Trust (NYSEMKT: SPY). These two index funds, which attempt to mirror the performance of the benchmark S&P 500, weren't large holdings. At the end of September, they combined to account for a little north of $45 million in market value for Berkshire Hathaway's portfolio. However, these two index funds have historically been surefire investments for long-term investors. While Buffett shies away from giving specific investment advice, he proclaimed during Berkshire's 2020 annual shareholder meeting that, "In my view, for most people, the best thing to do is to own the S&P 500 index fund." According to an extensive analysis from Crestmont Research, buying and holding an S&P 500 index fund has been a pathway to riches. Crestmont's analysts calculated the rolling 20-year total return (including dividends) of the S&P 500 dating back to 1900. Even though the S&P was incepted until 1923, its components were tracked in other major indexes back to 1900. The end result was 106 rolling 20-year periods, with ending years ranging from 1919 to 2024. What Crestmont Research found was that all 106 rolling 20-year periods produced a positive total return. Hypothetically, if an investor had purchased an S&P 500-tracking index at any point since 1900 and simply held this position for 20 years, they'd have generated a positive total return. But despite being historically flawless investments, Berkshire's chief dumped the Vanguard S&P 500 ETF and SPDR S&P 500 ETF Trust in the December-ended quarter. The eyebrow-raising move to jettison two undeniably successful investment vehicles is part of a bigger theme of selling activity for Warren Buffett. Even though the Oracle of Omaha remains an unwavering long-term optimist and would never bet against America, he's now been a net seller of stocks for nine consecutive quarters (dating back to Oct. 1, 2022). Excluding the fourth quarter of 2024, Buffett has overseen $166.2 billion more in stocks sold than purchased over a two-year span. During Berkshire Hathaway's annual meeting in 2024, Buffett alluded to the corporate income tax rate being unusually low as an impetus for locking in some of his company's sizable unrealized gains in Apple. While tax-advantaged selling might account for some of this greater-than-$166 billion in cumulative selling since October 2022, what's far more likely is we're witnessing the Oracle of Omaha being fearful when others are greedy. In addition to never betting against America, Warren Buffett is an unwavering value investor. No matter how wonderful or time-tested the company, he's not going to buy if he doesn't believe he's getting a good deal. At the moment, the stock market is at one of its priciest valuations in history, when back-tested 154 years. Whereas most investors focus on the traditional price-to-earnings (P/E) ratio, the S&P 500's Shiller P/E Ratio, which is also known as the cyclically adjusted P/E Ratio, or CAPE Ratio, is a far better measure of value and allows for apples-to-apples comparisons. The S&P 500's Shiller P/E, which is based on average, inflation-adjusted earnings over the previous 10 years, closed Feb. 14 at a multiple of 38.54. To put this figure into context, it's a stone's throw from the highest reading (38.89) during the current bull market, more than double the average reading of 17.21 since January 1871, and the third-highest reading during a continuous bull market spanning 154 years. When back-tested to January 1871, there have only been six instances, including the present, where the Shiller P/E Ratio has surpassed 30 for any notable length of time. Following the prior five occurrences, the S&P 500 and/or Dow Jones Industrial Average lost 20% to 89% of their value. Likewise, the "Buffett Indicator" recently hit an all-time high. Named after the Oracle of Omaha himself, the Buffett Indicator divides the total market cap of all publicly traded companies into U.S. gross domestic product. While this ratio has averaged 85% (0.85) since 1970, it reached an all-time peak of 207% in January 2025. In other words, Buffett is selling historically surefire index funds because the stock market is historically pricey and value is becoming difficult to find. If there's a silver lining here, it's that Berkshire's chief has regularly used short-lived periods of panic and price dislocations as an opportunity to put his company's capital to work. This tried-and-true method of waiting until valuations make sense has been working for decades -- and Buffett has plenty of dry powder at the ready to take advantage of the next meaningful stock market correction. Before you buy stock in Vanguard S&P 500 ETF, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Vanguard S&P 500 ETF wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $850,946!* Now, it's worth noting Stock Advisor's total average return is 959% — a market-crushing outperformance compared to 178% for the S&P 500. Don't miss out on the latest top 10 list. Learn more » *Stock Advisor returns as of February 7, 2025 Bank of America is an advertising partner of Motley Fool Money. Sean Williams has positions in Bank of America. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy. Warren Buffett Just Sold 2 of Berkshire's Most Surefire Investments -- the Time to Be Fearful When Others Are Greedy Has Arrived was originally published by The Motley Fool Sign in to access your portfolio
Yahoo
18-02-2025
- Business
- Yahoo
This Investment Strategy Has Been Foolproof Since 1900, and It's the Closest Thing You'll Get to a Guarantee on Wall Street
For more than two years, the bulls have been running wild on Wall Street. The ageless Dow Jones Industrial Average, benchmark S&P 500 (SNPINDEX: ^GSPC), and growth stock-dominated Nasdaq Composite have all, respectively, reached multiple record-closing highs. But there are also reasons to believe this epic rally in equities could come to an abrupt halt. The first notable drop-off in U.S. M2 money supply since the Great Depression in 2023, the longest yield-curve inversion in history, and the S&P 500's Shiller price-to-earnings ratio hitting one of its highest multiples in 154 years, are all examples of historic precedent and correlations coming into play. Investors regularly look to these historic markers to decipher which direction the stock market might head next. Nevertheless, there is no concrete way to forecast short-term directional movements with 100% accuracy. There is, however, one investment strategy that's been foolproof since the start of the 20th century, and it's closest thing you're going to get to a guarantee as an investor on Wall Street. The one factor that can swing the outcome pendulum for investors more than anything else is their investment horizon. Looking at things through a narrow lens or stepping back and examining at the big picture can have dramatically different results. For instance, the economic cycle teaches us that periods of expansion and recession are both perfectly normal and inevitable. But while downturns in the economy can be scary at times, they're historically short-lived. Since the end of World War II in September 1945, the U.S. economy has navigated its way through 12 recessions. The average length of these recessions is only 10 months. In comparison, the typical economic expansion has stuck around for roughly five years. While pessimists are, eventually, going to be correct, investors who wager on the U.S. economy to expand over time are more likely to grow their wealth on Wall Street. We see this same cyclical disparity at work in the stock market. In June 2023, the analysts at Bespoke Investment Group released a data set that calculated the average length of every bull and bear market for the S&P 500 dating back to the beginning of the Great Depression in September 1929. Whereas the average bear market was resolved in 286 calendar days (about 9.5 months), bull markets endured for an average of 1,011 calendar days (roughly two years and nine months). Perspective is everything when putting your money to work on Wall Street -- and it's a necessary trait to take advantage of the most foolproof investment strategy. Among Wall Street correlations, none is more powerful than the long-term performance of the benchmark S&P 500. Every year, the analysts at Crestmont Research update their data set that examines the rolling 20-year total returns (including dividends) of the S&P 500. Even though the S&P didn't officially exist until 1923, Crestmont was able to track the performance of its components in other major indexes prior to 1923. This allowed researchers to back-test their total return data to the start of the 20th century. Crestmont Research examined the 20-year total annualized return for 106 periods (1900 to 1919, 1901 to 1920, and so on, through 2005 to 2024). What this data showed was that all 106 timelines generated a positive annualized total return. Hypothetically -- I say "hypothetically," because index funds that attempt to mirror the performance of the S&P 500 didn't exist prior to 1993 -- if an investor had purchased an S&P 500 tracking index at any point since 1900 and simply held onto their position for 20 years, they would have made money. It doesn't matter if they purchased at a recent stock market high or held through the Great Depression, Black Monday, the dot-com bubble, or Great Recession, they would have ended the 20-year rolling period with far more than their initial investment. It's worth pointing out that these weren't small gains, either. Roughly 90% of these rolling 20-year periods produced an annualized total return of at least 6%, while half yielded annualized 20-year total returns ranging from 9.3% to 17.1%. In other words, investors would have been doubling their money in less than eight years in half of these 106 rolling 20-year periods. The great news is investors can fully take advantage of this nearly guaranteed moneymaking opportunity thanks to exchange-traded funds (ETFs). As of this writing, there are two dozen ETFs that attempt to mirror the performance of the broad-based S&P 500. The two that have rightly garnered the most attention (and assets) are the SPDR S&P 500 ETF Trust (NYSEMKT: SPY) and Vanguard S&P 500 ETF (NYSEMKT: VOO). Both the SPDR S&P 500 ETF Trust and Vanguard S&P 500 ETF purchase all 503 securities that comprise Wall Street's benchmark index. Although the S&P 500 is comprised of 500 companies, three businesses have two classes of stock, which is why there are 503 components to this prized index. What differentiates these two index funds is their net expense ratios -- i.e., the management fees investors pay, minus any discounts or fee waivers. The SPDR S&P 500 ETF Trust has a net expense ratio of roughly 0.09%. On the other hand, the Vanguard S&P 500 ETF sports a net expense ratio of just 0.03%. On paper, six basis points doesn't amount to much. But when you're talking about investing a large amount of money, or holding over a 20-year period, this six-basis-point difference can add up. For instance, if you hypothetically invested $1 million into each of the SPDR S&P 500 ETF Trust and Vanguard S&P 500 ETF and generated an annualized return of 7% over 20 years, you'd have $3,805,105 with the SPDR S&P 500 ETF Trust's higher net expense ratio and $3,848,043 with the Vanguard S&P 500 ETF's lower net expense ratio. This six-basis-point difference would equate to almost $43,000! Considering both ETFs serve the same purpose, the Vanguard S&P 500 ETF is the smartest way to take advantage of the closest thing you have to a moneymaking guarantee on Wall Street. Before you buy stock in Vanguard S&P 500 ETF, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Vanguard S&P 500 ETF wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $850,946!* Now, it's worth noting Stock Advisor's total average return is 959% — a market-crushing outperformance compared to 178% for the S&P 500. Don't miss out on the latest top 10 list. Learn more » *Stock Advisor returns as of February 7, 2025 Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy. This Investment Strategy Has Been Foolproof Since 1900, and It's the Closest Thing You'll Get to a Guarantee on Wall Street was originally published by The Motley Fool Sign in to access your portfolio
