In Q2, Ken Griffin of Citadel Advisors offloaded nearly half of his position in PLTR, selling about 640,000 shares at an average price of $117.40. The sale, the latest in a long line of Griffin’s transactions in the stock, added about $75 million to Citadel’s coffers.
Why did Ken Griffin sell Palantir, and does Griffin’s decision to severely pare back his own position in PLTR act as a warning sign for other investors?
Is Griffin Locking In Profits?
One of the most interesting factors about Griffin’s sale of Palantir is that it’s the latest in a long line of buying and selling rounds Citadel has undertaken since first getting into PLTR in 2021.
Historically, Griffin has added to his Palantir position in large chunks, then gradually sold parts of it as the price has risen before bulking up his stake again. The last round of buying prior to the Q2 sale occurred in Q1, when Citadel acquired about 902,000 shares at an average price of $87.75.
As such, one of the simplest explanations for Griffin’s latest round of selling is that he may simply be engaging in some profit-taking. With a roughly $30 spread between his average buying price in Q1 and selling price in Q2, Griffin may simply be using Palantir’s rapid appreciation to generate cash, which can then be invested elsewhere.
By buying and then selling for handsome profits as Palantir quickly rises, Griffin may be locking in significant gains while reducing the risk of his PLTR holdings suddenly falling.
To a large degree, this conclusion seems to track with past rounds of buying and selling at Citadel. In Q2 of 2024, for instance, Griffin acquired about 5.2 million shares of PLTR for an average price of $22.52. Over 90 percent of those shares were sold the very next quarter for an average price of about $30.63. Past large purchases of PLTR have been followed by similar selling patterns.
Palantir’s Extreme Valuation
Another point to keep in mind when it comes to Palantir is that shares of the business have been trading at sky-high valuations for quite some time. Between the end of Q1 and the end of Q2, the stock’s P/E ratio rose from about 367 to about 454.
Today, Palantir’s valuation is even more astronomical at over 600x trailing 12-month earnings, 133 times sales, 268 times operating cash flow and about 73 times book value. Although it’s important to acknowledge that Palantir’s price gains have been accompanied by very impressive fundamental improvements, the price of PLTR shares has likely gone far above its intrinsic value.
Griffin’s PLTR Activity
While simple profit-taking likely plays a role in Griffin’s frequent buying and selling in Palantir, it probably isn’t the whole story. Ken Griffin’s investment strategy focuses on a blend of quantitative trading and careful risk management. This, combined with his known penchant for following large macro trends, could provide a somewhat more complete picture of his PLTR trading activity.
As noted above, Griffin has gone through multiple cycles in which he has bought Palantir, allowed its soaring prices to deliver substantial gains and then, instead of holding out for even higher prices, sold to realize those gains.
Given Palantir’s price jump of more than 300 percent in the last year alone, the stock would seem to naturally suggest itself as a target for trend-driven quantitative investors like Griffin. The periodic selling, meanwhile, likely allows Griffin to limit his risk and lock in gains against the very real possibility of a value-driven correction in Palantir’s share prices.
What Is Griffin Buying?
Given the amount of cash he has been able to pull out of Palantir recently, it’s also worth looking at what Ken Griffin is buying to see how he’s deploying that cash. In Q2, despite selling Palantir, Griffin massively increased Citadel’s stakes in NVIDIA, Amazon and Microsoft. Of particular note was the Microsoft buy, which increased Citadel’s MSFT holdings by over 1,600 percent.
As such, it seems that Ken Griffin is allocating much of his capital toward other high-growth tech businesses that are trading at far more reasonable valuations than Palantir. Other large purchases in Q2 included JPMorgan Chase, Home Depot, McDonald’s and Coca-Cola. These purchases may indicate a growing preference for longstanding value stocks that have proven their ability to preserve and build capital in both positive and negative market conditions.
Is Palantir a Buy Today?
While there’s little doubt that Citadel has been successful in generating significant cash from Palantir on its way up, the stock still appears extremely risky due to its high valuation. Indeed, when compared to its earnings and sales, PLTR is far more expensive today than it was during Griffin’s buying spree in Q1.
In fact, Palantir has managed to run well beyond even a fairly optimistic set of analyst price forecasts. The average projected target price for PLTR is $154.20, more than 15 percent lower than the most recent price of $181.59. Analyst ratings have also soured somewhat, with 17 of the 22 analysts covering PLTR rating it as a hold and only three rating it as a buy.
Palantir is also heavily exposed to what seems to be the growing risk of a bubble forming around AI stocks. Indeed, Palantir itself is often used as an example of bubble-like trends in AI stocks. Specifically, Palantir’s seemingly unjustifiable valuation, prices that rise far faster than actual financial metrics and the heavy involvement of retail investors could be warning signs that the stock is primed for a downward correction.
Despite Griffin’s success in generating cash from his successive rounds of buying and selling Palantir, the stock may not be particularly attractive for investors today.
With its P/E ratio now well over 600, Palantir would have to deliver many years of exceptional performance to come anywhere close to justifying its price tag. Even with earnings per share expected to grow at a compounded rate of roughly 35 percent over the next five years, Palantir could still prove to be substantially overvalued.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.