2021 Strategy Series: Palantir Technologies - PLTR (Post 2) + Thoughts On Investing
Warning: This post is not for you if you do not have an open mind.
Aside to the regulars readers, I don’t know what came over me recently. Maybe I am older now. So I am more confrontational. If I think I am right, unless proven I am wrong, then I think it is very important to stand by what I said.
On my last post, there are some hate coming from various channels on my observation and opinions on Palantir. I did not expect this much hate from my current post as compared to some of my previous posts.
Thus, I felt its important to clarify. But I am not trying to clarify to justify my piece. It is for (1) I think I need to record this down as a post for myself to remember and (2) I think its important to let people understand that ignorance is NOT bliss when it comes to investing.
Then again, if you are don’t mind being an average, you can continue to think ignorance is bliss.
And then again, if you want to be an average, why not just focus on the index funds or Ark Invest? Don’t waste the time on looking at shares. Really.
In my opinion, if you want to excel in investing in this current internet age, we should be open and ask around and try to understand stuff that we don’t understand. This will only allow you to make better decisions.
It is always easier to say or write that I want to invest in Amazon, Google, Facebook or even Tesla now.
But have you ever thought about why you did not invest in Amazon or Google years ago? Why invest only now? Why are you unable to see the potential when it is at the lows 10 years ago?
I remember looking at Amazon at almost S$1000+ per share and inform my participants of a seminar that I felt it was too high. Just look at the share price now. I was the ignorant one that time!
Furthermore, on the point of being ignorance, I personally felt it is fine if you are not investing in a company because (1) you understand the risk and it is not for you, (2) you still do not understand what the company is producing regardless how much you tried, (3) you are fully allocated and (4) you have a way that you invest that already made you A LOT OF MONEY.
But don’t go saying, because Buffet say to invest only in your core competencies then you don’t invest. Do you really know what is your core competencies?
Let me clarify on the term core competencies – If you are in finance, you should have a better understanding of CBA (a Singapore listed entity) and how it makes money, etc – this will probably give you more conviction of the company and allow you to hold better if the tough gets going.
If you are in the IT field, you will probably be able to understand the requirements of a company and you will probably have an easier understanding of the platforms by Palantir.
If you are… etc etc…
I hope you get my point.
Googling for answer is also NOT a Core Competency. Googling for answer and digging more in-depth is an important skill to have.
So back to Palantir, I like to clarify specially on the point of - No Competitor.
When I stated there is “No competition/competitor”, I meant that from my point of view. Obviously, there are definitely some competitors in the market such as Salesforce or Snowflake or Splunk, etc.
I don’t know every one of them. But I do know Salesforce first-hand cause I am a user of it at work.
Firstly, it is super expensive.
Secondly, the Salesforce that I used is sold through a vendor/consultant. For those whom have worked with a vendor models (correct me if I am wrong, because this is what I felt first hand), vendors only execute up to the point of what you require or stated. They do not know what you do not know/do not tell. They also do not try to experience/understand the requirements of your business.
Thirdly, when I use Salesforce, I felt that I am definitely under-utilizing it. Where is the big data? Where is the user-friendly UX? If we want to do analysis, it is actually much harder because data is everywhere and I do not know where to locate every single bit of it.
In the end, regardless how bright the user is, they are limited by the process within the platforms.
Oh…and I also used tableau before. It is just a big nice display application that excel can also do.
So what I want to say is, from my experience – platforms that have SaaS business model – tend to require clients to adjust their business models to suit them. It does not really make your work more efficient.
BUT I must also clarify that I do believe Salesforce or Tableau is definitely much more than how I am using them now. It is probably due to the limitations set by the users/corporate and how they interpret their requirements to the consultant/vendors, that limits the potential of these SaaS platforms.
Now that I have explain the above, I like to explain more on the positives of Palantir that make me deem that there are no competitors.
As per 10k, Palantir actually goes down to the frontline to understand the client’s issue. That is why they have Forward Deployed Engineers (FDE). This also allows for direct consulting with the clients and understand the industry more. Solving 1 main problem in the industry helps them engaged better with other clients in the same industry as well.
If you are interested in Palantir, do look up these 2 youtube videos (this and this). These 2 videos made me believe that Palantir’s Gotham has done what none of the other SaaS platforms will be able to do the same.
With that, I hope that I have clarified clearly why I believe there are no competitors out there.
Another point to clarify is on the Risk.
I understand the risk of the potential further dilution, the insider selling and potential “niche” market.
On dilution – I believe this is the same as Tesla putting up a share offering at the end of Dec 2020. If you believe the company can continue to increase its revenue, net profit, FCF over the next few years, I do not think this is an issue.
On Insider Selling – If you do not get bonus for MANY YEARS and only in the form of stock options, will you exercise them? Nevertheless, I do believe that the insider selling will stop soon but continue at a faster pace if the share price increases significantly in a short period of time. This is a risk one should consider if you are not a long term investor.
On Niche Market – If you really think about it, it is not that niche. If all US Allies work with Palantir, I believe the potential revenue is definitely MUCH GREATER. Think about it, if you are a US allies, do you think using Palantir’s Gotham could potentially be more efficient in terms of communication with the US government or US Army during exercises?
Before I end this post, I like to explain on some other points that people have commented –
(1) I am not stuck in this position. I don’t need you to buy for it to go up so I can sell. I really don’t care if you don’t buy. This is because I will be happier if you don’t buy. Because I have a better chance of buying at the current prices now.
(2) Even if Palantir is at $40 today, I will still say it is undervalued.
(3) If you are really bear on Palantir, I suggest we return to this article 1 year or 2 years later. I am very sure I will be correct.
(4) I see many bears out there and I am happy. This meant that when most of you are converted to Bulls. I will probably be UP in capital gains many folds now (just look at Tesla now). In addition, many of the bears’ comments are mostly on the share price and stating it is volatile, if one buy now, he/she will need to hold for many years. Not many of them have argued from the product or business point of view.
Finally, I like to thank everyone for this hate/negativity because it made me realise about my conviction on Palantir.
I have been reading up on 100 baggers. Its really great!
Hi, I like to say that I enjoyed and like the post you did on Palantir. It was informative and I learned a lot from it. I saw some of the comments on your article via Facebook (seedly) and I do find that many people are really quite critical on others, just want to let you know that there are people out there who appreciates your articles! Thank you:)ReplyDelete
Thanks for the comments. Appreciate!
Nice blog you have too!
Nice write-ups on PLTR. A few questions if you have the time to help clarify?
It's mainly from your previous post on this.
1) is Salesforce/Tableau really a competitor to them? I watched PLTR's recent Demo Day and it feels like they offer much more than Tableau, which is just a data visualisation tool. Caveat here is that I am not a user of any of the platforms so I am speaking as an outsider here.
2) In the previous post on PLTR,you mentioned this bit "There are 2 points that caught my attention. ...... I am like GIVE ME THE SHARES NOW". Can you share more on why this makes you excited to accumulate more?
3) In point 7 of your previous post, you mentioned "21 new deals that are more than $5m" can you share more on how they charge their customers? Is this 5m for example the expected revenue per year?
Thanks again for the great posts.
1) To me, they are not really the exact competitor in my opinion especially Tableau. To me, there is no competition. But there are many out there whom believe Salesforce could be a competitor.
2) Because the objective is different from many others. The purpose of SaaS companies are to improve efficiencies but this eventually result in the sacking of the lower tier employees. But Alex Karp do not look at it this way. He wants to even make sure the lower level employees can understand how to use the platform and ensures everyone has a job.
3) Nope. I do not think the S$5M is for 1 year. But it does not matter. To be it is very hard for companies to find so many deals worth S$5m so consistently. As for the way they charge - They have a strategy called acquire - expand - scale - go read up on its 10K. It makes you understand more.
Hope this help.
Thanks for the comment.