Investing Insights: Israel Englander’s Bold Moves in Nvidia and Walgreens Boots
Just under two weeks ago, investors received crucial information from Wall Street that goes beyond the October inflation report. Institutional investors with at least $100 million in assets are required to submit Form 13F to the Securities and Exchange Commission (SEC) within 45 days after a quarter ends. These filings allow average investors to track the buying and selling activities of prominent money managers during the previous quarter—specifically, the quarter that ended in September.
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The spotlight during 13F season often shines on Warren Buffett’s Berkshire Hathaway, but billionaire investors like Israel Englander of Millennium Management also attract attention. His firm manages nearly $211 billion across a diverse array of securities, including options and common stocks.
Within Millennium’s numerous trades, two significant strategies emerge. On one hand, Englander has aggressively sold shares of Nvidia (NASDAQ: NVDA), a leader in the artificial intelligence (AI) sector. On the other, he has invested heavily in a struggling healthcare stock with an eye-popping dividend yield nearing 12%.
Millennium Reduces Nvidia Stake by Over Two-Thirds
Since the start of 2023, Nvidia shares have soared astonishingly, climbing 871% and pushing the company’s market cap over $3.1 trillion by the close of trading on Nov. 22. Such rapid appreciation is unparalleled in Wall Street history, likely contributing to Millennium’s decision to sell off a significant portion of its Nvidia holdings.
According to the 13F filings, Englander’s fund has offloaded 26,371,575 shares of Nvidia over the past year, reducing his stake by 70%. After a historic 10-for-1 stock split that occurred on June 7, the remaining shares held amount to 11.15 million.
Nvidia’s growth has been powered by its dominance in AI-driven data centers, particularly with the high demand for its H100 graphics processing units (GPUs). As a result, Nvidia enjoys remarkable pricing power, which culminated in a record 74.6% gross margin at the end of the third fiscal quarter (October 27, 2024).
The company’s GPUs have outperformed competitors, maintaining customer loyalty through its CUDA software platform. However, potential challenges could impact Nvidia’s future performance, prompting Englander’s strategy to divest.
A key indicator that Nvidia’s stock may have peaked is its declining gross margin. After reaching over 78% in the first fiscal quarter, it has since lessened to 75.1% and 74.6% in subsequent quarters. Nvidia’s forecast for the fourth quarter indicates a gross margin between 73% and 73.5%. This trend suggests waning scarcity of AI-GPUs and diminishing pricing power.
Furthermore, competition from rivals, especially from major clients within the “Magnificent Seven,” poses a significant threat. Many of these companies are developing AI-GPUs internally, offering alternatives that are more cost-effective despite Nvidia’s technical advantages.
History supports Englander’s cautious stance. Over the past three decades, technologies like the internet and 3D printing have often experienced bubbles. If the AI sector follows suit, Nvidia could face severe repercussions.
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Englander Increases Stake in Walgreens Boots Alliance
In contrast to his Nvidia sales, Englander has aggressively increased his holdings in Walgreens Boots Alliance (NASDAQ: WBA), a chain of pharmacies that is currently priced similarly to its levels from the late 1990s and offers a dividend yield exceeding 11.5%.
During the September-ended quarter, Millennium acquired 5,138,342 shares of Walgreens, a dramatic increase of 953% over three months. It’s notable that Millennium typically manages its stock positions with options, including both puts and calls, regarding both Nvidia and Walgreens Boots Alliance.
Walgreens has encountered formidable challenges, such as competition from Amazon in the online pharmacy sector, costly writedowns from failed healthcare initiatives, and theft-related issues that have impacted operations in certain markets. Despite these setbacks, Englander has shown confidence in the company’s potential.
One major factor encouraging this investment is the recent appointment of Tim Wentworth as CEO in October 2023. Unlike his predecessor, Rosalind Brewer, who was a retail expert, Wentworth boasts extensive healthcare experience, suggesting a new direction for the company. He has undertaken assertive measures to streamline costs and focus on higher-margin strategies.
As Walgreens aims to navigate its obstacles, Englander’s investment strategy could signal a belief in the potential for recovery and future growth.
Walgreens Boots Alliance Strategizes for Turnaround Amid Store Closures
Company Plans to Cut Costs and Shift Focus
Walgreens Boots Alliance will close 1,200 of its approximately 8,500 U.S. stores over the next three fiscal years. This decision aims to reduce operating expenses while allowing the company to concentrate on promising areas for growth.
In addition, the company is committed to advancing its healthcare services. Although its substantial investments in VillageMD have resulted in large writedowns, Walgreens’ leadership remains optimistic about achieving ongoing profitability through its co-located primary care clinics.
Currently, Walgreens Boots Alliance boasts a yield of 11.5%. Yet, as the company pursues cost-cutting measures and a lengthy turnaround strategy, it is possible that this dividend may either decrease or be suspended entirely to conserve cash.
Challenges Ahead for Walgreens Boots Alliance
While there is potential for a successful turnaround at Walgreens Boots Alliance, it’s important to recognize that the path forward will be gradual and fraught with challenges.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, serves on The Motley Fool’s board of directors. Sean Williams holds positions in Amazon and Walgreens Boots Alliance. The Motley Fool has investment positions in and recommends Advanced Micro Devices, Amazon, Berkshire Hathaway, and Nvidia. The Motley Fool maintains a disclosure policy.
The views expressed in this article are those of the author and do not necessarily reflect the opinions of Nasdaq, Inc.
