Altimeter Capital Management's 21 Stock Portfolio: Top 10 Holdings Analyzed - Sure Dividend

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Altimeter Capital Management’s 21 Stock Portfolio: Top 10 Holdings Analyzed


Updated on July 8th, 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 $13.9 billion worth of Assets Under Management (AUM).

Investors following the company’s 13F filings over the last 3 years (from mid-May 2018 through mid-May 2021) would have generated annualized total returns of 20.39%. For comparison, the S&P 500 ETF (SPY) generated annualized total returns of 18.60% 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 spectacular annualized returns over the past few years, significantly outperforming 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 20 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 86.8% of its total portfolio and consist of the following equities:

Source: 13F filings, author

Uber (UBER):

Uber is Altimeter’s largest holding, occupying around 24.5% 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, scrapping Uber’s plans for becoming profitable. Revenues took a significant hit, while Uber has lost nearly $4 billion over the past 4 quarters. Despite that, the forward P/S multiple has even grown over the past year, with investors valuing the company at 5.3 times its forward sales.

Altimeter held its Uber position constant based on its latest 13F filing, pausing its continuous buying.

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.

Facebook Inc. (FB):

Altimeter Capital CEO Brad Gerstner has been long on Facebook for years, with his fund doubling down on the stock on occasional dips, including the stock’s plunge during 2018’s scandal involving Cambridge Analytica. The company has not sold any of its 3,753,400 shares since, which has greatly paid off. It is currently the fund’s third-largest position.

Facebook is a tremendous cash cow, but with a problem. On the one hand, with strong financials, one of Wall St.’s healthiest balance sheets, and the best platform for advertisers to utilize, Facebook has been dominating the social media industry. The company has reported an all-time high bottom line of $33.7 billion over the past four quarters, amid great user growth, which remained in the double-digits once again in its latest report.

For these reasons, it would not be a complete surprise if Facebook 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 25 times its underlying earnings, despite its rapid growth.

With its ARPU (average revenue per user) still very strong, Facebook’s financials are more than likely to continue expanding rapidly. Facebook’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 Facebook continues to trade at a forward P/E of around 25, 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.

Facebook is Alimeter’s s 2nd largest position.

Microsoft (MSFT):

Found among the largest holdings of various funds we have covered, Microsoft’s diversified portfolio of tech products and services has ruled the tech sector’s digital infrastructure. The company’s CEO Satya Nadella has transformed the company into a cloud powerhouse. As a result, Microsoft has managed to accelerate its growth and post all-time high earnings in the last two years.

Microsoft is now a mega-cap stock with a market capitalization of over $2.0 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 $26B.

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 below 1%, investors should expect the majority of their future returns in the form of capital gains.

Despite that, Microsoft’s cash position has grown continually, with the company currently sitting on top of a massive $125 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 $55 billion as of its last report.

It is impressive that a stock with a market capitalization of $2 trillion, still has such a strong growth momentum. Shares are also trading a P/E ratio of around 32, which is quite reasonable for a dominating tech behemoth.

Altimeter likely continues to find Microsoft still attractive, as the position was hiked by 14% quarter-over-quarter. It is now Altimeter’s third-largest holding.

Expedia (EXPE):

Travel-industry service provider Expedia was hit hard by COVID-19. Travel restrictions and the stay-at-home economy collapsed the demand for booking hotels, car rentals, and table reservations.

As a result, the company saw its revenues more than halve during 2020. Signs of recovery have not been strong so far, as Q1 revenues declined once again by 43.4% to $1.25 billion, while bookings fell by 14% to $15.42 billion.

During the latest quarter, Altimeter trimmed its position in Expedia by 37%, dropping the stock to its fourth-largest position, which could potentially be explained by the company’s slower than expected recovery.

Salesforce (CRM):

Salesforce’s shares have massively recovered since March’s COVID-19 selloff. The company has been posting record revenues, with its most recent quarter turning over a record $5.96 billion. At around 5.7% of the total holdings, Salesforce has treated Altimeter well, as the company is taking the enterprise cloud-computing solutions market by storm.

For context, the company has incrementally grown its quarterly revenues for 73 consecutive quarters. While the stock’s forward P/E of around 69.1 may be seemingly hefty, the company has proven its ability to grow into its valuations. At the current rate of rapid profitability growth, the multiple is well-deserved.

The company recently announced its acquisition of Slack (WORK) for $27.7 billion, which should help the company’s profitability to accelerate amid cost-cuttings and synergy efficiencies. Salesforce should be able to integrate Slack in all of its consumers’ endpoints, which increases the chances of client conversion.

Altimeter slashed its Salesforce position by 50% during the quarter, likely in order to rebalance its portfolio and book some profits. It’s Altimeter’s fifth-largest holding.

Alibaba Group (BABA):

Altimeter initially bought Alibaba shares during Q2-2017, growing its position gradually. The company recently reported its Q1 results, smashing estimates by delivering revenues of $28.60 billion, a 64.0% growth year-over-year.

While Alibaba remains a highly profitable company, displaying net income margins that often surpass the 30%+ levels, its shares have been recently lagging due to the ongoing concerns surrounding Chinese equities. Jack Ma’s prolonged and mysterious disappearance was an unacceptable event for one of the largest publicly-traded companies in the world, while the Chinese government’s involvement in steering the company’s direction has also been raising questions among investors.

Hence, while those who are interested in investing in China’s tech world are likely to find Alibaba one of the most attractive investments out there, they should also consider the underlying risks involved.

Altimeter hiked its Alibaba position by 13% during the quarter, likely betting on the scenario that the stock’s rapidly growing will eventually have to attract higher investor interest going forward.

United Airlines Holdings, Inc. (UAL):

Holding the stock for nearly a decade (initially bought in Q4-2011), United Airlines is Altimeter’s seventh-largest holding. Airlines were one of the adversely impacted companies by COVID-19, while traveling remains restricted in many parts of the world even as vaccinations advance.

Revenues remain depressed, and the company is still unprofitable. Thankfully, United has a $12.97 billion cash position on its balance sheet, which is likely to temporarily sustain losses, by which time the company hopes traveling volumes will improve.

United Airlines is Altimeter’s seventh-largest holding despite the fund trimming its position by 13% during the quarter.

Zoom Video Communications, Inc. (ZM)

Zoom has massively benefited from the ongoing pandemic, which encouraged the work-from-home economy and greatly grew the demand for the company’s product. Revenues have been snowballing along with profitability.

Specifically, in Q1 revenues jumped by 191.4% to $956.4 million – a new all-time high. Concerns that the company’s success would not last and that revenue growth would slow down as the economy emerges from the pandemic have faded away.

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

Altimeter hiked its position by 317% during the quarter, boosting the stock to its ninth-largest position.

Farfetch (FTCH):

The U.K.-based online marketplace for luxury goods is a company Altimeter has been holding since its early IPO. Over the past year, the fund has tripled its position, but shares have yet to occupy more than 3.2% of the total holdings.

While the company is technology-focused, considering its innovative online marketplace, 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 becoming a cultural phenomenon, exploding in popularity.

Despite the rapid revenue growth (nearly 81% YoY), and the stock’s prolonged rally, the stock’s valuation is not entirely crazy at 7.4 times its forward sales. That is, assuming the current growth rate does not take a nosedive moving forward.

Altimeter grew its position by 15% quarter-over-quarter. Farfetch is now Altimeter’s tenth-largest holding.

Final Thoughts

Altimeter has been delivering some of the most impressive returns we have seen in hedge funds, outperforming the overall market indices by a solid 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:

Alkeon Capital Management’s 121 Stock Portfolio: Top 10 Holdings Analyzed

Appaloosa Management’s 40 Stock Portfolio: Top 10 Holdings Analyzed

Viking Global’s 69 Stock Portfolio: Top 10 Holdings Analyzed

Lone Pine Capital’s 32 Stock Portfolio: Top 10 Holdings Analyzed

Pershing Square: Bill Ackman’s 7 Stock Market-Beating Portfolio

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