Let’s get one thing straight. I don’t know where the stock market is going next. I never do. Because investing in the stock market has never been about guessing which direction it will go next. That’s why I love horse racing, because I can bet $1 at a time if I want, and I find out quickly if I was “right” or not.
But the stock market is a much more serious endeavor for most of us. As such, guessing is not a great strategy. Unfortunately, so much of what passes for “analysis” these days is really just an overwhelming amount of guessing.
I have always approached investing as a quest to make as much as I can, but without losing very much along the way. That’s why risk management is first, second, and third in my top-3 investing tips for myself. And, why when a stock or exchange-traded fund has flown higher, my first instinct is to protect those gains.
Sure, we can sell a stock that’s up as much as Palantir (PLTR), but that can lead to bigger regrets than holding something that drops 50%. PLTR was trading at $24 a year ago. Now? How about $158 as of Monday morning. What a move!
PLTR has treated investors very well. But it also had a little 50% “dip” along the way to where it is now. That was part of the overall market malaise that ran from February to April. Again, rather than predict the future, I always lean toward more of the weight of the evidence, balancing further growth in the stock price with the risk of a major decline. On that latter point, I refer to a “sustainable” decline, one that doesn’t come right back.
So with that in mind, let’s look at the mighty PLTR, with an eye toward having our cake and eating it too. Because if you rode this one up this far, you probably are not selling it. But you could protect it, while maintaining all or nearly all of your upside potential. Risk management does not have to mean small returns. In fact, it can often lead to higher long-term returns.
PLTR has become a nearly $400 billion dollar market cap stock despite producing less than $500 million in net income in 2024. It is all about future growth expectations. As a technician, I let the market and fundamental analysts grapple with that aspect of the stock’s attractiveness. But it must be said, a “normal” version of this table below would have a price-earnings to growth (PEG) Ratio perhaps one-fifth of what it is, and a forward P/E ratio of maybe one-tenth of PLTR’s 423x. So this ain’t cheap.
