Altimeter Capital Management’s 15 Stock Portfolio | Top Holdings Analyzed

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Altimeter Capital Management’s 15 Stock Portfolio | Top Holdings Analyzed


Updated on June 21st, 2022 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 $17.9 billion worth of Assets Under Management (AUM).

Investors following the company’s 13F filings over the last 3 years (from mid-May 2019 through mid-May 2022) would have generated annualized total returns of -6.1%. For comparison, the S&P 500 ETF (SPY) generated annualized total returns of 16.1% 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 underperformed the S&P 500 over the past three years, with the fund generating particularly weak returns since the start of the pandemic. This is due to its holdings being concentrated toward growth stock in the tech sector, which has suffered considerably since the start of the year. The company has also allocated to promising private companies, which the fund holds 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 15 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 95.4% of its total portfolio and consist of the following equities:

Source: 13F filings, author

Uber (UBER):

Uber is Altimeter’s largest holding by far. The stock is currently occupying around 25.1% of the fund’s portfolio. The fund was invested in the transportation disruptor before the company went public in May of 2019. While the pandemic reduced the demand for regular transportation, Uber has found its footing again amid gradual recovery.

Uber’s revenues took a significant between 2020-2021. The company was losing billions per quarter in the midst of the pandemic. Following an increased demand for everyday transportation, the company reported record revenues in its latest quarterly report. while delivering a positive bottom line. Then again, the company recorded a massive loss of $5.9 billion. This included a $5.6 billion headwind associated with Uber’s equity investments, largely due to aggregate unrealized losses connected to the revaluation of Uber’s Grab, Aurora, and Didi stakes. Further, the net loss includes $359 million in stock-based compensation expenses. In that regard, the company broke even on a non-GAAP basis. Still, it also means that the company overpaid massively for its previous investments. And while stock-based compensation may be a non-cash item, it still means that investors are getting diluted, with no value creation whatsoever amid a lack of real profits.

Nevertheless, Altimeter boosted its Uber position by 47% 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, and its GAAP losses continue to persist at high levels. 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.

Meta Platforms, Inc. (META):

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. After having never sold any of its then 3,753,400 shares, the fund trimmed its position for the first time ever in Q4-2020 by 37%. It now holds 2,350,000 shares, with the stake remaining stable in Q1-2o21.

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 reported an all-time high bottom line of $19.37 billion in FY2021, 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. Speculation over the company’s huge spending toward “The Metaverse” has also spurred uncertainty. The stock is only trading at around 16.0 times its underlying earnings, despite its consistent profitability and future growth prospects.

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 16.0, at an EPS growth rate of 10%-15% in the medium term (which the current user and APRU growth trajectory and ongoing stock repurchases could reasonably sustain), investors should achieve equally satisfactory returns with a constant valuation multiple.

Meta Platforms stock currently accounts for 16.1% of the fund’s total holdings.

Microsoft (MSFT):

Found amongst the top holdings of the majority of the funds we have covered, Microsoft is Alitmeter’s third-largest holding, occupying 15.9% of its portfolio. The fund left its position unchanged during the quarter.

Microsoft is a mega-cap stock with a market capitalization of $1.85 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 $31.1 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 $104.6 billion cash pile.

Further, while many companies had chosen to utilize the ultra-low interest rate environment over the past several years to raise cheap debt and buy back stock, Microsoft’s remained prudent and thoughtful. Not only are current earnings extensively covering buybacks (~60% buyback “payout ratio”), but long-term debt has been substantially reduced from $76 billion in mid-2017 to around $48.1 billion as of its last report.

It is impressive that a stock with a market capitalization of $1.85 trillion still has such a strong growth momentum. Shares are also trading at a forward P/E ratio of around 23.3, which could signal an opportunity against the company’s strong growth velocity, especially from Azure. Due to Microsoft’s robust growth and financials, it’s likely that investors won’t let shares trade at much of a discount going forward, despite the underlying shaky macroeconomic environment.

Toast, Inc. (TOST)

Toast runs a cloud-based and digital technology platform for the restaurant industry. The company offers several products and services, including Toast Point of Sale, Toast Order & Pay, which allows customers to order and pay from their mobile devices, and Toast Flex which is utilized for on-counter order and pay, amongst other tools. The company IPOed as recently as September of 2021.

Toast managed to increase its revenues substantially last year, though growth appears to have slowed down lately. Further, the company’s profitability appears rather thin, with gross margins hovering below 20%.

At first glance, Toast looks like a speculative pick, especially considering that even after the stock’s correction, it still trades at a rather expensive P/S of 2.8 (considering how thin the margins are). Still, Altimeter may have formed a more comprehensive investment case than the average investors, so who knows. It’s still quite early for us to tell whether this pick is worth taking seriously, in any case.

Altimeter kept its equity stake in Toast steady during the quarter.

Sea Limited (SE):

Singapore-based Sea Limited is involved in the digital entertainment, e-commerce, and digital financial service businesses primarily in Southeast Asia. The company offers Garena, a digital entertainment platform for users to access online games and eSports events. Sea also runs the Shopee e-commerce platform, a mobile-focused marketplace that delivers integrated payment and logistics infrastructure and seller solutions.

Sea is one of the fastest-growing companies in the space, retaining triple-digit growth metrics with little to no signs of slowing down. However, similar to many of Altimeter’s picks, the company remains unprofitable.

Altimeter trimmed its equity stake by 7% during Q 2022. However, note that the fund had boosted its position by a massive 316% in the prior quarter. It is now the Altimeter’s fifth-largest holding, accounting for 7.7% of its total holdings.

Snowflake Inc. (SNOW):

Snowflake is Alitmeter’s sixth-largest holding. It currently makes up around 5.7% of the fund’s public-equity portfolio, illustrating the fund’s high conviction towards the data-consolidation disruptor.

Snowflake offers a cloud-based data platform, the Data Cloud. Data Cloud is an ecosystem that allows customers to capsulize data into a single source of truth to drive significant business insights, create data-driven applications, and share data.

The company’s business model is highly regarded as it is margin-rich and incredibly scalable. However, the sky-high hype driving the stock resulted in shares trading at extremely high valuation multiples during much of 2021. The stock corrected significantly lately as a result. While revenues are growing close to the triple-digits, the still stock trades at a crazy forward P/S of ~17, even following the recent correction.

Altimeter left its SNOW mostly unchanged during the past quarter. The fund still owns about 5.56% of the company’s total shares outstanding, indicating that it may be looking to have an active influence on the hyper-growth company.

Opendoor Technologies Inc. (OPEN):

Opendoor Technologies manages a digital platform for U.S.-based residential real estate. The company’s platform allows consumers to purchase and sell a home online through a frictionless, fast process while avoiding most of today’s middle-man fees.

While the company has been gaining robust traction lately, its razor-thin margin business model hardly allows for noteworthy profitability prospects. Hopefully, this will change as the company scales its operations.

Opendoor Technologies is Altimeter’s seventh-largest holding, making up 4.8% of its total holdings. The fund boosted its equity stake in the company by 37% during the previous quarter.

UiPath Inc. (PATH):

UiPath offers an end-to-end automation platform that enables a range of robotic process automation (RPA) solutions. The company’s suite of interrelated software allows enterprises to develop, manage, operate, engage, and control automation within the organization. The business model appears promising, while with gross margin north of 80%, the company’s bottom-line prospects could be rater juicy over the long term. However, with R&D expenses and stock-based compensation remaining at high-level levels during UiPath’s early growth phase, the company remains quite unprofitable still.

Altimeter trimmed its equity stake by 91% during the previous quarter, yet the stock remains its eighth-largest holding.

United Airlines Holdings, Inc. (UAL):

With the travel industry improving in light of COVID-19 fading away, Altimeter has likely chosen to play the rebound through United Airlines. The stock is an entirely new position for the fund, initiated within Q1 2021. While the company’s revenues have indeed rebounded to some extent, they still remain rather depressed compared to their pre-pandemic levels. The airline continues to lose money as well, though positive net income will likely reemerge once scaling economies start kicking in with higher revenues.

Following Altimeter’s purchase of 2,250,000 shares, United Airlines is the fund’s ninth-largest holding and comprises around 4.4.% of its total portfolio.

Unity Software Inc. (U):

Unity Software develops and manages an interactive real-time 3D content platform. The company’s platform offers software solutions to build, manage, and monetize interactive, real-time 2D and 3D content for all the relevant electronic devices.

Unity’s platform is considered the pinnacle software in the real-time content creation space. Consequently, the company has managed to rapidly grow its revenues quarter-over-quarter. However, amid reinvesting the majority of cash flows back into the business, as well as due to high stock-based compensation expenses, Unity’s GAAP losses have also been widening. Due to quite juicy gross margins, its future net income prospects remain strong, nonetheless.

Altimeter kept its position in Unity unchanged during the quarter. It’s now the fund’s tenth-largest holding, making up 4.8% of Altimeter’s total holdings.

Final Thoughts

Altimeter has been lately under-performing the overall market indices by a notable margin. This is due to hyper-growth equities similar to the ones the fund is holding, suffering spectacular losses in their stock prices lately.

As exhibited by the ongoing market sell-0ff, 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, which can lead to heavy losses during periods of high uncertainty.

Additional Resources

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

If you are interested in finding more high-quality dividend growth stocks suitable for long-term investment, the following Sure Dividend databases will be useful:

The major domestic stock market indices are another solid resource for finding investment ideas. Sure Dividend compiles the following stock market databases and updates them monthly:

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