Altimeter Capital Management’s 14 Stock Portfolio | Updated Daily

Sure Dividend

High-Quality Dividend Stocks, Long-Term Plan
The Sure Dividend Investing MethodMember's Area

Altimeter Capital Management’s 14 Stock Portfolio | Updated Daily


Updated on December 9th, 2021 by Nikolaos Sismanis

Altimeter Capital Management is a Boston-based multi-billion dollar technology-focused investment firm managing a long/short public equity fund and private growth equity funds. The firm was initially founded by Brad Gerstner in 2008, in Menlo Park, California, and currently has around $13.2 billion worth of Assets Under Management (AUM).

Investors following the company’s 13F filings over the last 3 years (from mid-November 2018 through mid-November 2021) would have generated annualized total returns of 13.70%. For comparison, the S&P 500 ETF (SPY) generated annualized total returns of 18.51% over the same time period.

You can download an Excel spreadsheet with metrics that matter of Altimeter Capital Management’s current 13F equity holdings below:

 

Note: 13F filing performance is different than fund performance. See how we calculate 13F filing performance here.

Keep reading this article to learn more about Altimeter Capital Management.

Table Of Contents

Altimeter Capital Management’s Holdings

Altimeter has achieved satisfactory annualized returns over the past few years, though slightly underperforming the S&P 500. The fund’s success has been attributed to management’s superior skills in identifying and investing in companies in the ever-growing tech sector. Its holdings are allocated in major public equities and highly promising private companies before they eventually IPO.

Overall, while Altimeter is one of the largest hedge funds we have covered so far, in terms of assets, its public-equities portfolio is highly concentrated with a total of 14 holdings. The portfolio is almost exclusively focused on the technology and consumer discretionary sectors.

Source: 13F filings, author

During the quarter, Altimeter initiated or sold its position in the following stocks:

New Buys:

New Sells:

Altimeter’s top 10 holdings weigh around 94.4% of its total portfolio and consist of the following equities:

Source: 13F filings, author

Meta Platforms, Inc. (FB):

Altimeter Capital CEO Brad Gerstner has been long on Facebook (now Meta Platforms, or Meta for short) for years, with his fund doubling down on the stock on occasional dips. The company has not sold any of its 3,753,400 shares since, which has greatly paid off.

Meta is a tremendous cash cow, but with a problem. With strong financials, a healthy balance sheet, and the best social media platform for advertisers, Meta has been dominating the social media industry. The company has reported an all-time high bottom line of $40.3 billion over the past four quarters, amid great user growth, notwithstanding now decelerating to the single digits.

For these reasons, it would not be a complete surprise if Meta paid a dividend at some point in the future.

On the other hand, the stock has failed to attract a higher multiple, as the steep scrutiny it has faced over the past few years have had an impact on the valuation. The stock is only trading at around 22.6 times its underlying earnings, despite its rapid growth.

With its ARPU (average revenue per user) still very strong, Meta’s financials are more than likely to continue expanding rapidly. Meta’s investment case today does not only include the potential for a significant upside but also comes with a great margin of safety.

If such a valuation expansion never appears, and Meta continues to trade at a forward P/E of around 22.6, at an EPS growth rate of 20%-30% in the medium term (which the current user and APRU growth trajectory could easily sustain), investors should achieve equally satisfactory returns with a constant valuation multiple.

Meta is currently the fund’s largest position.

Uber (UBER):

Uber is Altimeter’s second-largest holding, occupying around 22.1% of the fund’s portfolio. The fund has been invested in the transportation disruptor before the company went public in May of 2019. The ongoing pandemic has reduced demand for constant transportation.

Revenues took a significant hit, while Uber has lost more than $2.3 billion over the past 4 quarters. Uber’s forward P/S multiple has now retreated to lower levels, with investors valuing the company at 2.9 times its forward sales.

Altimeter held its Uber position stable during the last quarter based on its latest 13F filing.

Altimeter’s faith in Uber through such a large stake is remarkable, considering that the company is frequently facing regulatory setbacks. At the same time, management has failed to convince the market of a clear profitability roadmap. It’s also striking that Altimeter does not hold a single share in Uber’s rival Lyft (LYFT), in an effort to hedge its large bet.

Microsoft (MSFT):

Found amongst the top holdings of the majority of the funds we have covered, Microsoft is Alitmeter’s third-largest holding, occupying ~12.3% of its portfolio. The fund left its position unchanged during the quarter.

Microsoft is a mega-cap stock with a market capitalization of $2.4 trillion.

Supported by the company’s strong profitability, management has been consistently raising buybacks over the past decade to further reward its shareholders. The amount allocated to stock repurchases has reached new all-time highs over the past four quarters, at nearly $28.3 billion.

Revenue growth remains in the double-digits, so it’s likely to see capital returns accelerating moving forward. The company is also growing the dividend at a double-digit rate, though at the current yield, which stands below 1%, investors should expect the majority of their future returns in the form of capital gains.

Despite that, Microsoft’s cash position has been growing continually, with the company currently sitting on top of a massive $130.5 billion cash pile.

Further, while many companies have chosen to utilize the current ultra-low interest rates to raise cheap debt and buy back stock, Microsoft’s approach has been prudent and thoughtful. Not only are current earnings extensively covering buybacks (59% buyback “payout ratio”), but long-term debt has been substantially reduced from $76 billion in mid-2017 to around $50 billion as of its last report.

It is impressive that a stock with a market capitalization of $2.2 trillion still has such a strong growth momentum. Shares are also trading a P/E ratio of around 34.6, which may be rich. However, due to Microsoft’s robust growth and financials, it’s likely that investors will continue pricing shares at a premium going forward.

Shopify (SHOP):

Shopify is Altimeter’s fourth-largest holding, comprising 6.9% of the total value of its portfolio. Shopify provides a cloud-based commerce platform, which enables merchants to adapt to the e-commerce era. The company clearly benefits from a secular trend, which has decades to run, namely the shift from brick-and-mortar purchases to online purchases. The pandemic has caused this long-term trend to accelerate at an enormous pace.

As a result, Shopify saw its revenues grow by 85.6% last year. Due to the company’s recurring revenues, accelerated growth, and positive catalysts surrounding e-commerce, the stock is currently trading a forward price/sales of 31.7 which is one of the highest valuation multiples in the industry.

Thanks to the tremendous growth potential of its business, Shopify is expected to keep growing its revenues and its earnings at a rapid pace for several more years. Nonetheless, the market has already priced in a large portion of future growth in the stock price. To provide a perspective, the stock is currently trading at 31.5 times its expected earnings in 2025.

Peloton Interactive, Inc. (PTON):

What has made Peloton successful over the past few years is its management’s execution, which has elevated the fitness company’s brand value. Peloton offers an end-to-end experience that begins with its high-end fitness products. It also offers supplementary accessories and video-streaming catalog, which is subscription-based.

In Q3, connected fitness subscription workouts increased 55% to 120.5 million, averaging 16.6 monthly workouts per user, versus 20.7 in the prior-year period. Revenues grew 6.2% to $805.2 million, however, raising concerns regarding the company potentially slowing down its rapid expansion.

Altimeter initiated a position in Peloton in Q1 and hiked its stake by 8% during Q3.

Zoom Video Communications, Inc. (ZM)

Zoom has massively benefited from the ongoing pandemic, which encouraged work-from-home and greatly grew the demand for the company’s product. Revenues have been snowballing along with profitability. However, in its latest results, Zoom Video showcased clearly that its rapid expansion is about to slow down.

Specifically, in Q3 revenue growth decelerated to 35.1%, with the top line reaching $1.05 billion. This makes for a new all-time high, but revenues only increased slightly from last quarter’s $1.02 billion. Management’s guidance was also underwhelming, forecasting total revenue in Q4 to be between $1.051 billion and $1.053 billion.

The company is also highly profitable, with net income margins close to 30%. Combined with its underlying growth, the stock’s rich valuation multiple could be justified.

Altimeter hiked its position by 5% during the quarter, boosting the stock to its sixth-largest position.

CrowdStrike Holdings, Inc. (CRWD):

CrowdStrike offers cloud-delivered solutions for next-generation endpoint. It also offers cloud workload protection that offers 19 cloud modules, as well as its Falcon platform via a software as a service (“SaaS”) subscription-based model.

The company has achieved tremendous growth over the past few years, though it remains unprofitable. All operating cash flows are reinvested back into the business.

The fund did not make any changes to its position in Q3. CrowdStrike is now Altimeter’s seventh-largest holding.

Alibaba Group Holding Limited (BABA):

Alibaba, the Chinese tech behemoth, has been in Altimeter’s portfolio since Q2-2017 and has since grown to its eighth-largest position. The company recently reported its Q3 results, smashing estimates by delivering revenues of $31.1 billion, a 31.4% growth year-over-year.

While Alibaba remains a highly profitable company, displaying net income margins that often surpass 30%, its shares have been lagging recently due to the ongoing concerns surrounding Chinese equities. Jack Ma’s prolonged and mysterious disappearance, for example, added to the riskiness of the stock.

Further, the Chinese government’s involvement in steering the company’s direction, combined with the ongoing crackdown in Big Tech, has also been raising questions among investors.

While those who are interested in investing in China’s tech sector are likely to find Alibaba one of the most attractive investments, they should also consider the underlying risks involved. Altimeter held its Alibaba position stable during the quarter.

Farfetch (FTCH):

The U.K.-based online marketplace for luxury goods is a company Altimeter has held since its early IPO. Over the past year, the fund has tripled its position, but shares have yet to occupy more than 3.6% of the total holdings.

While the company is technology-focused, its investment into Virgil Abloh’s Off-White has given it direct exposure to the fashion world by operating actual retail locations. Farfetch has yet to turn a profit (its positive bottom-line was a one-off event), but its sales are strengthening, as Off-White is exploding in popularity.

Despite the rapid revenue growth (33.1% YoY in Q3), and the stock’s prolonged rally, the stock’s valuation is not entirely crazy at 5.5 times its forward sales. That is, assuming the current growth rate does not take a nosedive moving forward.

Altimeter also held its Farfetch position stable during the quarter. It is now Altimeter’s ninth-largest holding.

Okta, Inc. (OKTA):

Okta offers an identity management platform for large enterprises, small and medium-sized companies, universities, non-profits, and government agencies in the United States and globally. The company has been growing rapidly, capitalizing on the cloud’s continuous expansion.

However, its bottom-line losses have also been widening. The stock has greatly rewarded Altimeter, with the fund accumulating shares since Q2-2017.

Altimeter kept its position steady during the quarter. Okta is its tenth-largest position.

Final Thoughts

Altimeter has been delivering robust returns amongst its hedge fund peers, but under-performing the overall market indices by a slight margin.

Its concentrated portfolio of high conviction equities has been greatly paying off and proven to be a viable strategy.

That said, investors looking to tap into Altimeter’s holdings should be wary of the fund’s lack of diversification and the tech sector’s sky-high valuations.

 

Additional Resources

See the articles below for analysis on other major investment firms/asset managers:

Thanks for reading this article. Please send any feedback, corrections, or questions to support@suredividend.com.


More from sure dividend
The Sure Dividend Investing MethodMember's Area