Billionaire Ray Dalio Increased Bridgewater's Stake in Palantir by More Than 500% and Completely Exited His Position in a Premier Media Stock

Investors rarely have to hunt for clues about the health of corporate America during earnings season. For a period of six weeks each quarter, a majority of Wall Street's most-influential businesses lift their proverbial hoods for investors.

But what you might not realize is that one of the most important data releases of the fourth quarter occurred last week during the heart of earnings season. On Nov. 14, institutional investors with at least $100 million in assets under management (AUM) were required to file Form 13F with the Securities and Exchange Commission. A 13F is the filing that breaks down which stocks Wall Street's top money managers bought and sold in the latest quarter (in this case, the September-ended quarter).

Image source: Getty Images.

While Warren Buffett at Berkshire Hathaway has Wall Street's most-faithful following, there are plenty of other billionaire money managers whose 13Fs are closely monitored. This includes Ray Dalio of Bridgewater Associates, who ended the third quarter with almost $17.7 billion in AUM.

What's particularly noteworthy about Dalio's active hedge fund is that he was the only prominent purchaser of shares of cloud-based data-mining specialist Palantir Technologies (NYSE: PLTR) in the September-ended quarter.

Dalio's Bridgewater increased its stake in Palantir by more than 500%!

Though Bridgewater opened 79 new positions and added to 260 existing stakes during the third quarter, perhaps none is going to raise more eyebrows than the 437,268 shares Dalio purchased of artificial intelligence (AI)-inspired stock Palantir Technologies. While billionaire investors have been cashing in their chips on Palantir, Dalio's fund increased its stake by 507% from the June-ended quarter.

Shares of Palantir have skyrocketed by more than 725% over the trailing-two-year period, ended Nov. 19, with four well-defined catalysts leading the charge.

To begin with, Palantir's software-as-a-service (SaaS) operating model isn't replicable at scale by any other company. Its AI-powered Gotham platform is tailored to federal governments and aids with everything from data collection to mission planning and execution. Additionally, Palantir's Foundry platform leans on AI and machine-learning capabilities to help businesses make sense of their data. Companies that have sustainable moats are often given a valuation premium on Wall Street.

Secondly, there's a level of consistency in Palantir's operating results that few other fast-growing tech stocks can deliver. Palantir is profitable on a recurring basis, and it generates significant profits and operating cash flow from the contracts it signs with the U.S. government. These contracts are often four or five years in length, leading to predictable operating results year after year.

The third catalyst for Palantir Technologies is its Foundry platform. Whereas Gotham's ceiling is naturally limited by the fact that it's only accessible to the U.S. and its immediate allies, Foundry's big-data analytics platform can be useful for a broad spectrum of businesses. Worldwide commercial customer growth clocked in at 51% during the third quarter (498 in Q3 2024 vs. 330 in Q3 2023) and represents just the tip of the iceberg for Foundry.

Lastly, Palantir is flush with cash. It closed out the September-ended quarter with close to $4.6 billion in cash, cash equivalents, and marketable securities, with no debt. This treasure chest gives Palantir the flexibility to make deals or comfortably navigate short-lived periods of economic turbulence.

While there's no questioning that Dalio is sitting pretty after increasing his fund's stake in Palantir, there are serious question to be answered concerning the company's valuation. Interest income on Palantir's cash has accounted for roughly 35% of the $408.6 million in pre-tax income the company has generated through the first nine months of 2024. With Palantir recently hitting a $150 billion market cap, pacing only $400 million in pre-tax income, sans interest income, makes for a really pricey stock.

Image source: Walt Disney.

No goofing around: Dalio dumps his stake in the "Happiest Place on Earth"

On the other end of the spectrum, billionaire Ray Dalio oversaw the complete sale of 183 stocks, as well as reductions in 428 others, during the third quarter. Among the most surprising is the 195,086 shares Bridgewater Associates sold of media goliath Walt Disney (NYSE: DIS). This selling activity removed Disney stock from Dalio's fund.

Walt Disney has certainly endured its fair share of struggles since this decade began. Though the COVID-19 pandemic was challenging for most businesses, it temporarily crippled two key revenue segments for Disney. The company was forced to close some of its theme parks, while studio production slowed to a crawl as movie theater attendance cratered.

Furthermore, ongoing cord-cutting by consumers coerced Disney to spend big bucks on building out its content library and aggressively marketing its streaming service, Disney+. Although Netflix has been profitable for years, legacy media companies like Walt Disney discovered that building a streaming segment from the ground up can be costly.

But in spite of these struggles, there are reasons to believe Dalio will regret giving up on the House of Mouse.

Most notably, Disney's streaming segment has successfully shifted to recurring profitability. In fact, Disney's streaming services, which also includes Hulu, became collectively profitable a full quarter ahead of schedule. Given the company's exceptional pricing power, it should have no trouble improving this segment's profit potential in the years to come.

Another reason Walt Disney is such an impressive company is its irreplaceability. Just as Palantir's operating model can't be replicated at scale, Disney's entertainment moat is in a league of its own. No other media company comes close to matching its storytelling or depth of characters. This adds to the company's brand appeal and its strong pricing power.

The other factor that really stands out as Disney finds its footing in a post-pandemic world is the relative cheapness of its shares. Opportunistic investors can purchase shares of Walt Disney right now for less than 19 times forecast earnings per share (EPS) in fiscal 2026 (the company's fiscal year ends toward the end of September). This represents a 29% discount to Disney's average forward price-to-earnings ratio over the trailing-five-year period.

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Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway, Netflix, Palantir Technologies, and Walt Disney. The Motley Fool has a disclosure policy.