Inside the Buy-Side No. 11

This week’s highlights:

● Reasons I didn’t short $PLTR ( ▲ 4.87% )   in the Variant View Checklist
● Why you always feel 10-20% underpaid
● Top 10 unfiltered quotes from my career
● Hydra Host on-demand webinar with the “GPU Whisperer” Aaron Ginn presented by AlphaSense
● Buy-side career advice for first timers

In the pipeline:

🔜  $TUSK ( ▼ 2.43% ) : Deep value: 20% below cash, 60% below NAV, and pivoting to higher return industrials — we sit down with the CFO of Mammoth Energy Services, Mark Layton. Subscribe on YouTube for drop notifications. Our first Buffett Punchcard
🔜 Top 5 Learnings from the GOAT HF trader — Steve Cohen’s Goldman Sachs interview.
🔜 From Fidelity PM to Hilliards Chocolate — inspired by a car ride with chauffeur Warren Buffett
🔜 What is alpha?

Why I didn’t short PLTR

Here’s a recap of the episode:

1. What action do I want the portfolio manager to take?
Sell or short PLTR. Parker argues it's the most overvalued stock he's seen in his multi-decade career and believes the risk-reward skews heavily negative in the short term due to index rebalancing.

2. Do I understand this business?
Parker admits he isn’t a fundamental expert on Palantir’s operations but understands the key drivers of its valuation—mainly government contracts, AI positioning, and retail enthusiasm.

3. Is the stock available at a reasonable price today?
No. He emphasizes that PLTR trades at an extreme multiple of future revenue, with enterprise value/sales far above any rational historical benchmark.

4. Why is this stock mis-priced?
Because of index fund mechanics, “forced” buying from mid-cap PMs, strong retail momentum,  exposure to the AI theme and government contracts.  

5. What is the variant view vs. the street?
Most investors are buying due to momentum or index requirements or risk-management (to own at least part of a large index component). Parker’s view is rooted in historical data: no company of Palantir’s size has ever grown fast enough to justify such a valuation.

6. What is the evidence?
Historical analysis of EV/revenue multiples and historical growth comparisons. Palantir’s implied growth rate is historically unprecedented for a company of its size.

7. What are the catalysts for the street to realize the view?
The June 28 Russell rebalance, where Palantir will be removed from mid-cap indexes. This will likely trigger large-scale forced selling, especially from passive and mid-cap growth funds.

8. What is it worth if the bet is right?
If PLTR re-rates to the second most expensive company instead of the first, Parker estimates a 50% downside—possibly more if sentiment shifts.

9. What is the other side of the bet?
Continued retail inflows, AI enthusiasm, government contract momentum, or a broad market rally could keep the stock elevated or even push it higher. Parker discusses MSTR and APP as possible hedges to isolate the negative impact of the PLTR index imbalance.

10. Is management aligned with ownership?
To some degree — CEO Alex Karp holds around $1 billion in stock, but the company is also heavily owned by large passive managers. Parker sees no immediate red flags but also doesn’t weigh alignment heavily in this short thesis.

Why you always feel 10-20% underpaid

My experience throughout my career until I started to manage risk, was that I was paid just enough so that I wasn't thrilled, but just annoyed a little so as not to jump ship and cause a disruption in the business and a costly hiring process. After all, that is the job of HR to compensate you enough to retain you, but not give away unnecessary profit.

In my first job, I recall, they brought in a second Research Associate and paid him more than me (maybe 10-20%) - not sure why my Sr. Analyst told me this. It bugged me, but into didn't really matter at that part of my career. Throughout my career, I always felt as though I was 10-20% underpaid...my advice let it go...DO THE JOB YOU LIKE FOR THE LEARNING - DO NOT JUMP SHIP UNTIL YOU HIT A CEILING - not for 10%, not for 20%.

When you start to manage risk as an Analyst, typically there is some understanding or formula with your PM - still have netting risk though. This is typically in an email at best backed by your PM's handshake.

When you get to be a PM, it's typical to have an official arrangement with your division head with a set number or formula on the PnL. This is where it gets interesting: What is a top-line expense (pre bonus pool) vs bottom-line expense (from the bonus pool), who pays for Analyst deferred comp buy-outs? When is the comp paid? How much is deferred? Is there a clawback? If you leave do you get the PnL already generated? etc...Each one of these items might be specific to the firm or PM. It's negotiated at this level, well, if you are senior enough.

Happy Hunting.

P.S. Ping Ryan, he knows far more about this than I do (let me know if you connect)

Top 10 unfiltered quotes from my career

Ever wonder what it really sounds like behind the scenes at a hedge fund?

I pulled together 10 of the most unfiltered quotes from my career. This is the kind of feedback you actually get in the room.

Career
“Stay [at Citadel] as long as you can.”
— Advice from a former equity division COO, one year after he left.
He later sold a public company for a couple of billion dollars.

Performance
“You’re only as good as your last trade.”
— Founder of a multi-manager hedge fund at the year-end holiday party after a strong year.

Stock Pitching
“I want to see the whites of your eyes when you pitch me.”
— Long/short PM to a prospective analyst.

Performance
“You get one bad year. You don’t get two.”
— Offhand comment from HR at a multi-manager hedge fund.
Color: Fair rule of thumb. Sometimes treading water isn’t enough either.

Stock Pitching
“Go home for the day.”
— Said to me after I voiced uncertainty about a name I’d just added to the book.
Color: Being unsure doesn’t help the PM. Do the work, have conviction. If new info comes in later, update your thesis.

Stock Pitching
“I hope you’re right.”
— A top hedge fund founder to an analyst before hanging up.
Color: If you’re wrong, you’re gone.

Interviewing
“What are your main roles?” I asked.
“I fire people.”
— #2 in charge at a multi-manager, during a final-round “check-the-box” interview.

Interviewing
“If you lie to me [about your numbers], I’ll blacklist you from the industry.”
— Comment from a multi-manager business development analyst during recruiting.

Risk Models
“The risk models are for the firm, not for the pods.”
— A former colleague and multi-manager BD analyst.

Sell-Side Management
“I’d rather be a pre-Madonna than manage them.”
— Former bulge-bracket director of research who returned to being an II analyst.

Hydra Host with the “GPU Whisperer”

Hydra Host on-demand Webinar with the “GPU Whisperer” Aaron Ginn. 

Have $NVDA ( ▼ 0.23% )’s margins peaked? 50% is still good for a semi company, but not good for NVDA shareholders vs. the 75% consensus expectation.

Check-out the Alpha Sense webinar now for the details. Click the image below for access: