Cathie Wood is known for choosing innovators early in their stories and holding them for the long term. As founder and chief executive officer of Ark Invest, she doesn't mind going against the crowd and buying a stock Wall Street advises selling, or ignoring a favorite of the general market. This may not result in instant gains, but Wood believes that over time, this strategy will score a major win.
Today, some of her biggest holdings include cutting-edge players such as Tesla, Roku, and Coinbase Global, which are the top three in her flagship Ark Innovation fund. Investors hoping to get in on companies with big dreams and the technology to accomplish them often look to Wood as a guide and are eager to copy some of her moves.
Wood's latest move was to decrease her position in a stock that was the S&P 500's top performer last year. The famous investor sold shares of this technology player during several recent trading sessions. Should you follow her and stay away from this player in 2025?
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A stock that soared 340%
Which stock has Wood been selling in recent days? I'm talking about Palantir Technologies (PLTR 1.43%), a stock that soared 340% in 2024 as customers flocked to the company for its artificial intelligence (AI)-driven software.
Palantir offers a platform that helps customers aggregate their data and make better use of it. This may sound dull, but it's actually a key step that could lead to game-changing decisions, helping customers make major gains in efficiency and even develop new processes and products.
In the past, Palantir's biggest customers were governments, but in recent times, another type of customer also has been driving growth -- the commercial customer. Today, government and commercial customers each are growing revenue in the double digits. This is a positive because Palantir is now seeing strength in both of these businesses. In the recent quarter, U.S. government revenue climbed 40%, while U.S. commercial advanced 54%.
What we've seen in the commercial market offers us reason to be optimistic about the future. Palantir only had 14 U.S. commercial customers just four years ago, and now has about 300. Progress has been rapid, and the number of commercial customers today leaves plenty of room for growth.
Palantir's latest major product -- its Artificial Intelligence Platform (AIP) -- introduced a little more than a year ago, also could drive growth in both government and commercial customers in the quarters to come. The platform powers AI-driven decision-making and has been in high demand, thanks to Palantir's genius way of connecting with potential customers by designing AIP boot camps. These sessions help the future customer go from zero to a possible use case in a matter of hours.
Boot camps equal signed deals
Importantly, boot camps have resulted in signed deals. For example, in the most recent quarter, three commercial customers signed seven-figure deals less than two months after their boot camps.
All of this means the record quarterly profit of $144 million in the most recent period may have much farther to go.
Should you follow Cathie Wood's move? She's been selling shares of Palantir, but the company still remains one of her top holdings. It's the fifth-largest position in Ark Innovation, with a weight of more than 5.7%. So it doesn't look like Wood has lost faith in the company. Instead, it looks like she might have been locking in some profit.
Palantir stock today isn't cheap from a forward price-to-earnings ratio (P/E) perspective, trading for 136x forward earnings estimates, and this could weigh on near-term performance. It's therefore no surprise that holders of a great deal of Palantir shares would sell some today, thinking that the stock may not immediately soar from here.
That said, thanks to demand for its products and ongoing growth potential, Palantir still represents a solid buy in 2025 for long-term growth investors. Even if you get in on the stock at today's level, you could score a win over time.
