Grow Funds short Palantir as valuation concerns outweigh growth
Grow Funds’ GROW Small Cap Equity Long/Short Fund delivered a 4.18% return in the first quarter of 2026, outperforming major indices. The fund’s investor letter details a strategic short position in Palantir Technologies, citing excessive valuation multiples and market exuberance despite the company’s robust revenue growth.
Grow Funds released its first-quarter 2026 investor letter for the GROW Small Cap Equity Long/Short Fund, reporting a total return of 4.18 per cent. This performance significantly outpaced the Russell 2000 Growth Index, which fell 2.80 per cent, as well as the HFRI Equity Hedge Index at -0.24 per cent and the HFRI Fundamental Growth Index at 0.47 per cent. The fund noted that long positions, hedges, and short positions helped safeguard the portfolio against volatility driven by geopolitical tensions, specifically referencing the Iran War.
The letter highlighted a specific bearish strategy regarding Palantir Technologies, a software firm that provides data analytics platforms for governments, militaries, and large corporations. While acknowledging the company’s utility and strong financials, Grow Funds identified the stock’s valuation as a primary risk. The fund noted that Palantir traded at 66 times enterprise value to revenues based on 2026 expectations, describing it as by far the most expensive software company in the market.
Despite Palantir’s revenue growing 85 per cent year-on-year and 16 per cent sequentially to $1.633 billion in the first quarter, the fund executed defensive measures. Grow Funds stated it purchased put options on the stock multiple times due to overvaluation and what it termed AI market exuberance. Additionally, the fund shorted Palantir outright during the quarter, arguing that other AI stocks offered greater upside potential with less downside risk.
Market data reflects the pressure on the stock. As of June 22, 2026, Palantir closed at $119.50 per share, with a market capitalisation of $286.48 billion. The stock had lost 12.52 per cent over the one-month period leading up to that date and was down 16.57 per cent over the past 52 weeks. Notably, Palantir was not included in Grow Funds’ list of the 40 most popular stocks among hedge funds heading into 2026.
Contrary to the fund’s bearish stance, broader hedge fund interest in the company has risen. Database records indicate that 96 hedge fund portfolios held Palantir Technologies at the end of the first quarter, an increase from 89 in the previous quarter. The fund’s decision to short the stock underscores a divergence between general institutional accumulation and Grow Funds’ view on the sustainability of the current valuation multiples.
