When you need some investing ideas, it's always a good idea to consider the moves of people who have proven their expertise. A perfect example is Ray Dalio, a self-made billionaire who got started by investing $300 in a stock at age 12 and tripling his money. Since then, he has had a flourishing career, and in the 1970s, launched Bridgewater Associates. He grew that firm into the world's largest hedge fund, with about $100 billion in assets under management today.
Dalio believes in long-term investing -- holding onto stocks for a number of years and benefiting from their growth rather than moving in and out of positions over days or weeks. But he also knows when it's time to lock in profits. He has emphasized the importance of selling stocks when they are fully valued and reallocating those funds into stocks that still have room to run.
Historically, Dalio's moves haven't necessarily gone along with the crowd. That was again the case with two of his maneuvers during the third quarter. Bridgewater sold what remained of its stake in cybersecurity leader CrowdStrike (CRWD +1.25%), which Wall Street analysts generally predict will rise in the coming 12 months. At the same time, Bridgewater opened a new position in an S&P 500 artificial intelligence (AI) player that has soared 300% so far this year -- and that Wall Street thinks is headed for a 40% decline. Does Dalio know something Wall Street doesn't?
Image source: Getty Images.
Dalio's latest moves
So, let's consider the details of those moves. Dalio's firm closed out its position in cybersecurity powerhouse CrowdStrike -- selling 7,140 shares -- after gradually decreasing its stake over the past year. Bridgewater originally bought CrowdStrike in the third quarter of 2022. Since the start of that quarter through the start of this year's third quarter, the stock has climbed about 118%, suggesting the billionaire locked in profits on the investment.
Now, let's take a look at the new S&P 500 AI stock Bridgewater bought in the recent third quarter. That's Palantir Technologies (PLTR 0.32%), a company offering AI-powered software to help clients make better use of their data. Bridgewater increased its position by more than 500% to 523,548 shares. This was after it originally bought the stock in the first quarter of 2022. Palantir has proven to be a winning investment so far, heading for a gain of more than 400% since the end of that quarter.
NASDAQ: PLTR
Key Data Points
From today's price levels, Wall Street's average analyst forecast calls for CrowdStrike to advance by about 2.5% over the coming 12 months -- not a big increase, but positive movement all the same -- and for Palantir to drop by about 40%. Has Dalio made the right move by locking in his profits from CrowdStrike and increasing his bet on Palantir?
Pressure on CrowdStrike
It's still too early to know for sure. But it's true that CrowdStrike could face some pressure in the months to come. The company's faulty software update in July unleashed the biggest information technology outage ever, and CrowdStrike has said it expects the costs of packages to compensate customers for the losses that caused will weigh on its growth in the coming quarters. It's possible this also will limit the stock's near-term performance, though the company still represents a top long-term investment.
NASDAQ: CRWD
Key Data Points
As for Palantir, yes, the stock's valuation has skyrocketed -- it trades for 184 times forward earnings estimates right now. But some investors -- including Dalio -- may be willing to accept that since Palantir is in the early stages of its AI growth story. The S&P 500 invited Palantir to join this fall, showing that it has entered the ranks of the companies that drive the modern economy.
Palantir's AIP demand
Palantir launched its Artificial Intelligence Platform (AIP) a year ago, and demand for it is soaring. The company's commercial customer growth has taken off in recent times, but with only about 300 U.S. commercial customers right now, Palantir still has plenty of room to expand. Finally, forecasts that today's $200 billion AI market is on track to grow to $1 trillion by the end of the decade suggest more growth ahead for today's top AI players. Palantir's recent earnings results support this optimism, with the company reporting its highest profit ever in the third quarter.
All of this means that Dalio may have the right idea about investing in this high-flying AI stock today -- even if Wall Street isn't as optimistic about how it will perform in the coming months. It's also important to remember that long-term investing can mean holding onto a stock for five to 10 years or even longer. That means that no matter what happens over the first few months you own an investment, it still could be a winner for you over the long run.
