[ad_1]
No beating about the bush: It’s been a tough year for investors. Historically high inflation, a weakening US economy, and escalating geopolitical tensions (eg, Russia’s invasion of Ukraine) have pushed both infrastructures. S&P 500 and technology oriented Nasdaq Composite Strictly a bear market.
However, you wouldn’t know that the stock market is suffering one of its worst years in decades because of the actions of Wall Street’s most successful investors. Instead of retreating to the sidelines, billionaire money managers have been buying stocks as the market declines. In particular, billionaires really like tech stocks that focus on forward-looking innovation.
Here are four next-generation tech stocks billionaires just can’t stop buying.
Image source: Getty Images
Upstart Holdings
At least one billionaire money manager can’t stop buying the first innovative powerhouse cloud-based lending platform. Upstart Holdings (UPST 8.64%). During the second quarter, billionaire Philippe Lafont of Coatue Management acquired approximately 2.36 million shares.
What puts Upstart at the forefront of the industry is its use of Artificial Intelligence (AI) to screen loan applications. Instead of relying on a traditional (and slow) credit screening process, Upstart leverages predictive technologies and approvals on pre-screened credit data to fully automate nearly three-quarters of its processes. This Upstart saves six dozen financial institutions tied up in time and money.
However, what stands out even more about Upstart is that a wider pool of applicants is being approved. A typical credit applicant to be approved by Upstart has a lower average credit score than would be approved through the traditional screening process. Yet, the delinquency rate between Upstart’s AI-based process and traditional screening process is similar. The implication here is that Upstart can expand borrower capacity for banks and credit unions without negatively impacting their credit-risk profile.
Lafont must have been encouraged by the upstart’s push to new heights. After handling personal loan applications for years, it has begun handling auto loan and small business loan originations. On a combined basis, auto and small business loans are more than 10X the market size of personal loan originations.
Snowflake
A second-generation tech stock billionaires can’t seem to get enough of is a cloud data storage company. Snowflake (Snow 4.69%). In the quarter that ended in June, billionaire Jim Simmons’ Renaissance Technologies added more than 1.25 million shares to the fund’s existing position (which now stands at more than 2 million shares).
The answer is “Why Snowflake?” It can be defined by the company’s specific operating model. For example, following the Covid-19 pandemic, businesses are moving data to the cloud at an accelerated pace. However, sharing that data across competing cloud infrastructure platforms can be challenging. The Snowflake platform solves this by building its infrastructure on top of cloud service providers. In other words, Snowflake clients can seamlessly share and move data easily.
Moreover, Snowflake reports that push subscription is a very common practice among cloud providers. Instead, Snowflake offers a fee-based service that charges based on the amount of data stored and snowflake calculation credits used. This provides more price transparency to the company’s customers than a one-size-fits-all subscription package.
Arguably the biggest obstacle for Snowflake is the company’s own assumptions. Even after a significant stock price cut, the company is valued at 27 times Wall Street’s sales of roughly $2 billion in fiscal 2023. But if Snowflake brings its net sales to $10 billion by March 2029 (calendar year 2028), billionaires like Simmons may be happy to pay a premium to own a share of Snowflake.
Image source: Getty Images
Palantir Technologies
The third technology edge billionaires could not stop buying is a data mining company Palantir Technologies (PLTR 1.51%). During the second quarter, billionaire Israeli-British company Millennium Management bought about 1.9 million shares of Palantir. To begin with, Simmons Renaissance Technologies more than doubled its stake by buying about 15.69 million shares.
Billionaires love Palantir because its technology hasn’t been replicated at scale by any other company. In another context, Palantir has no direct competitors to replace the services it provides to the federal government and primarily to large businesses.
The company’s Gotham operating system is an AI-driven platform for the federal government to gather data, plan missions, and accelerate decision-making. A major contract with the US government tied to Gotham explains why Palantir has maintained sales growth of 30% or more over the past two years.
However, Gotham has a limited ceiling. This is because Palantir management does not deploy the Gotham operating system to certain governments, such as China. In the long run, the company’s foundry software is its golden ticket to continued double-digit growth. Foundry helps businesses grow their business by visualizing big data. In the quarter ended in June, Palantir’s commercial customers more than tripled year-over-year to 119. In short, Foundry is in the early stages of development.
CrowdStrike Holdings
The fourth and final next-generation tech stock billionaires can’t stop buying is the cybersecurity giant. CrowdStrike Holdings (CRWD 0.47%). Billionaire Steve Cohen of Point72 Asset Management bought more than 819,000 shares of CrowdStrike in the second quarter, ultimately increasing his stake in Point72 to 955,234 shares.
What makes CrowdStrike tick is the company’s AI-powered Falcon security platform. Falcon handles over 1 trillion events per day, enabling the platform to be adept at detecting and responding to potential threats to the end user. While CrowdStrike doesn’t offer the cheapest cyber security solutions, having an overall retention rate of around 98% clearly shows that Falcon is effective.
Something to consider about CrowdStrike and the cybersecurity industry as a whole is that cybersecurity has evolved into a basic on-demand service. No matter how weak the stock market or the US economy, bad actors never take a day off from trying to steal enterprise or customer data. This creates a level of demand for a company like CrowdStrike.
But the best thing about CrowdStrike might just be that it encourages its existing customers to spend more. Over a five-year period, the percentage of customers with four or more cloud-module subscriptions jumped from 9% to 70%. Getting existing customers to purchase additional services is CrowdStrike’s golden ticket for nearly 80% of total subscription tickets.
[ad_2]
Source link
