Meet The Genius Mathematician That Owns ALOT of Palantir Stock
They usually say "follow the smart money." If smart people are buying a certain company, then it makes sense to follow them, right!?
Obviously this is not universally true. There have been plenty of smart people in the world that were horrible stock pickers. No one should follow an investing philosophy of just investing based on how others invest.
However, it always is interesting to know the backgrounds of people who own certain stocks.
Meet Jim Simmons, the founder of Renaissance Technologies, a quantitative hedge fund based in East Setauket, New York.
I became aware of Jim from a reader of the website bringing to my attention of the firms that has a sizeable position in Palantir, Renaissance Technologies. As of December 2021, the firm owns 15M shares in the company.
So, I wanted to dig deeper and understand who Jim is. Obviously he has conviction in Palantir to the tune of 15M shares and believes it can be an amazing company, but I was curious to dive deeper into his background and why someone so quantitively focused was also buying heavy into Palantir.
He's Pretty Decent At Math
From his Wikipedia page,
Simons' mathematical work has primarily focused on the geometry and topology of manifolds. His 1962 Berkeley PhD thesis, written under the direction of Bertram Kostant, gave a new proof of Berger's classification of the holonomy groups of Riemannian manifolds.
He subsequently began to work with Shing-Shen Chern on the theory of characteristic classes, eventually discovering the Chern–Simons secondary characteristic classes of 3-manifolds. Later, a mathematical physicist Albert Schwarz discovered early topological quantum field theory, which is an application of the Chern–Simons form.
It is also related to the Yang-Mills functional on 4-manifolds, and has had an effect on modern physics. These and other contributions to geometry and topology led to Simons becoming the 1976 recipient of the AMS Oswald Veblen Prize in Geometry. In 2014, he was elected to the National Academy of Sciences of the USA.
So, the guy understands math at a level most people never do. He not only studied it academically throughout his early life, but worked on particular physics problems that his contributions in geometry helped him add research to.
While he is a genius in math, according to the Bloomberg Billionaires Index, Simons' net worth is estimated to be $25.2 billion, making him the 66th-richest person in the world.
His Hedge Funds
When you look back at his life, it makes sense his hedge funds would own Palantir. Palantir is an incredibly complex company because it truly has no competition for it's product. Some companies can try to offer similar features, but very few can do what Gotham, Foundry, or Apollo are able to provide to an enterprise.
In order to do this, Palantir needs the best talent in the world. These are people who are creative but also extremely analytical. Product developers must be able to see a product outside of how the current industry understands it while also being technical enough to code it into existence.
His funds are rooted in computer models that attempt to predict price changes via massive amounts of data at scale, and they've been relatively successful at it:
"Renaissance uses computer-based models to predict price changes in financial instruments. These models are based on analyzing as much data as can be gathered, then looking for non-random movements to make predictions.
Medallion, the main fund which is closed to outside investors, has earned over $100 billion in trading profits since its inception in 1988. This translates to a 66.1% gross return or a 39.1% average net return between 1988 – 2018."
The poetry of Jim owning Palantir is that he realized the complex math he used to break codes and better understand the world could help explain patterns on wall street. Using math and data analytics, he was able to build an entire firm that better predicted stock price movements and led to massive upside for clients.
Palantir's entire thesis on modernizing enterprises is being able to implement tools within organizations that can effectively centralize and make sense of patterns within data, resulting in upside on time saved and revenue generated.
Alex Karp, CEO of Palantir, was quoted during the latest earnings call in response to a question, "If you are smart enough to invest in Palantir...." and then he followed by explaining Palantir's long term version.
Karp believes smart people are betting heavily on the company because they understand something the rest of the world doesn't.
Jim seems to have understood patterns that Wall Street didn't for his whole life. Hopefully his pattern recognition skills are also right, on Palantir.
If you want to dig deeper, Jim did an interview here with TED.