Top investors can become legends, and few have achieved such status like Izzy Englander, the mastermind behind Millennium Management, a hedge fund boasting $69 billion in assets. Since launching in 1989, Englander has managed to turn a profit every single year – except for 2008 during the financial crisis. It’s a remarkable achievement, and one that investors can learn from.
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By observing Englander’s stock moves, both the ones he buys and sells, we can gain valuable insights. A review of his Q2 transactions reveals a particular interest in AI stocks, with a focus on industry leaders like Palantir (NYSE:PLTR) and Super Micro Computer (NASDAQ:SMCI).
Let’s dive deeper into these selections and explore the reasoning behind Englander’s latest moves. With help from the TipRanks database, we can also find out how the Street’s analyst community feels about his choices.
Palantir
The first stock on our list is Palantir Technologies, a high-tech firm co-founded in 2003 by the tech-inspired venture capitalist Peter Thiel. Thiel, also the co-founder of PayPal, is no stranger to innovative tech – and Palantir has always focused on bringing innovation to the field of data analysis. Today, Palantir works to combine both AI and human intuition, bringing the best of both realms to bear on data analytics – and making the field stronger as a result. That goal has benefited greatly from the advent of recent AI technical advances.
Palantir offers a wide range of products and services, designed to improve analytics by using AI tech to supplement human expertise. The company’s platform, AIP, lets users interact in their mother tongues, using an AI-powered natural language processor behind the interface. This is a major advance, as Palantir subscribers do not need expertise in coding or computer language to use the system; instructions can be entered in plain language, and results read out the same way.
These AI-powered analytic products have found use in a wide range of fields, including data protection, financial services, anti-money laundering and fraud protection, healthcare and hospital operations, government services – the list is long. Palantir’s use of AI and natural language allows users to realize the benefits of the system immediately on installation.
Palantir has benefitted immensely from the AI-driven bull market. Year-to-date, the stock has dramatically outperformed the broader markets, gaining 133% – compared to the 20.5% ytd gain on the S&P 500 index.
On the financial side, Palantir’s last earnings report – covering 2Q24 – showed a top line of $678 million, for 27% year-over-year growth and some $25 million-plus above the forecast. At the bottom line, the company listed earnings of 9 cents per share by non-GAAP measures, up 80% year-over-year and a penny better than expected. During the quarter, Palantir’s customer count showed y/y growth of 41%, and the company closed an impressive 27 deals valued at $10 million or more.
And yet, with all of that, Izzy Englander sold off more than 7 million shares of PLTR during the second quarter, reducing his stake by almost 60%. The billionaire hedge manager still holds more than 4.97 million shares in Palantir, valued at over $193 million.
5-star analyst Brian Gesuale, of Raymond James, may shed some light on why Englander would shed a holding in such an obviously successful company. In his recent coverage of Palantir, Gesuale downgrades his stance here, saying of the stock, “While we remain enthusiastic about Palantir’s longer term positioning in AI, we are downgrading our rating to Market Perform from Outperform given our view that shares need to consolidate stellar gains over the last couple of years… Valuation has expanded ~fivefold making it the richest software name amongst comps at 26.1x FY25 sales.”
The downgrade to Market Perform (Neutral) is not accompanied by a new price target; Raymond James is stepping back to see how this stock shakes out going forward. (To watch Gesuale’s track record, click here)
Overall, this is in line with the Street’s view of PLTR shares. The stock has a Hold consensus rating, based on 16 reviews that include 4 Buys and 6 Holds and Sells, each. The shares are priced at $38.89 and their $27.67 average target price implies a contraction over the coming year, of 29%. (See Palantir stock forecast)
Super Micro Computer
Next on the list is a leader in AI hardware, Super Micro Computer. Discussions of AI tech frequently revolve around the software and the platform interfaces, making it easy to lose sight of the fact that computer systems run on advanced hardware – high-performance computers, large-scale server stacks, and solid-state memory systems. Without these, we wouldn’t have AI. With them, we not only can support AI, but other advanced techs as well, such as cloud computing, data centers, edge computing, and 5G networking. Super Micro Computer is a leader in the development and build-outs of these top-end computer hardware systems.
With more than 30 years’ experience in high-tech, Super Micro has set itself up as the go-to place for high-end computing. The company boasts that it can design and build complex server stacks and high-performance computers to unique specifications in-house and can install such systems at any scale for any application. Super Micro fills these orders with both off-the-shelf parts and custom-made devices, and can meet both one-off design requests and large-scale orders. The company’s manufacturing footprint is large, and is capable of a high level of production – up to 5,000 AI, HPC, and liquid cooling rack solutions per month.
Like Palantir above, Super Micro has realized solid benefits from the AI boom of recent years. The company’s product lines, especially the high-performance computers and advanced server stacks, are well-suited to supporting AI technology and the data centers it depends on. As well, the company’s ability to provide custom-made, high-capacity memory systems is also amenable to AI uses and applications.
On the headwind side, however, Super Micro has seen some serious recent issues crop up. At the end of September, the company became the subject of a Justice Department investigation into potential accounting violations, and in relation to that notified the NASDAQ that it will be late in filing its 10-K for the second quarter. Super Micro has received a non-compliance notification letter from NASDAQ in regard to the missed filing deadline.
Meanwhile, Super Micro still went ahead with its scheduled 10-to-1 stock split on October 1. On that date, existing shareholders of record saw their holdings increase by a factor of 10, and the share price was reduced accordingly.
Looking at the company’s financial results, we find that Super Micro reported 2Q24 revenues – the last quarter reported – of $5.3 billion. That represented an impressive 143% year-over-year bump, and came in a modest $10 million over the forecast. The non-GAAP earnings, in pre-split numbers, were set at $6.25 per share, missing the forecast by $1.56 per share.
In the midst of all of this, Izzy Englander must have a bullish view of SMCI’s prospects. He purchased over 5.5 million shares of SMCI during Q2, significantly increasing his stake. His current holding in the stock stands at 6,219,170 shares, worth almost $297 million.
In his coverage of Super Micro for Needham, top-tier analyst Quinn Bolton sees the company’s AI exposure as key. He says of the firm and its stock, “As a first mover in the design of GPU-based compute systems and liquid cooled rack level solutions, we view Supermicro as a significant beneficiary from growing investment in AI infrastructure and forecast a revenue CAGR in excess of 55% from FY21 to FY26. Supermicro is currently involved in the deployment of some of the largest AI clusters in the world and entered FY25 with record high backlog.”
Looking ahead, Bolton goes on to explain why the risk-reward is favorable here, adding, “Though we model a GM recovery more conservative than management’s forecast, we believe the bear case that GM will trend towards the single digits is too pessimistic. Also, while we acknowledge the risk associated with the Board’s review of internal controls, we believe most of this risk may already be reflected in the current share price.”
Together, these comments back up Bolton’s Buy rating on SMCI shares; his price target, adjusted post-split to $60, implies a one-year upside potential of 26%. (To watch Bolton’s track record, click here)
That’s the bullish take. The Street view is somewhat mixed here, however, and the stock has a Hold rating based on 14 reviews with a breakdown of 3 Buys, 10 Holds, and 1 Sell. However, some analysts remain rather bullish; as such, the average target price of $64.36 suggests that SMCI will gain 35% over the next year. (See SMCI stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
