In this article, we discuss the 10 biggest losers in Gabriel Plotkin’s Melvin Capital portfolio.
Reddit investors made it their mission to bludgeon Gabriel Plotkin’s Melvin Capital in their battle with the hedge fund over GameStop Corp. (NYSE:GME) which started back in 2021. Melvin Capital increased its GameStop Corp. (NYSE:GME) puts to 5.4 million, raising its stakes by 58% during the third quarter of 2021. The hedge fund also revealed short positions via puts on more than a dozen other names during the period, and their prices also rose just like GameStop Corp. (NYSE:GME).
Redditors and day traders, to hurt Melvin, aggressively purchased call options on GameStop Corp. (NYSE:GME) and Gabriel Plotkin’s Melvin Capital consequently suffered tremendous losses. Ken Griffin’s Citadel Group and Steve Cohen’s Point72 Asset Management attempted to bail out Gabe Plotkin from the deep losses by investing $750 million and $2 billion into Melvin Capital in 2021, respectively. They remained confident in the hedge fund’s ability to trump its bad luck given the solid history of outperformance under its belt.
Gabriel Plotkin’s Melvin Capital is Closing
However, in May 2022, Gabriel Plotkin disclosed that he is shuttering his $7.8 billion hedge fund in the wake of tremendous losses so far. Melvin Capital tumbled more than 23% through April 2022 and consequently Gabe Plotkin announced that he is stepping back from managing external capital entirely in light of recent performance.
Among the most prominent losers that weighed down Gabriel Plotkin’s Melvin Capital portfolio were Uber Technologies, Inc. (NYSE:UBER), Amazon.com, Inc. (NASDAQ:AMZN), and Snowflake Inc. (NYSE:SNOW).
Our Methodology
We used Gabriel Plotkin’s Q1 2022 Melvin Capital portfolio for this analysis, picking the companies that posted the greatest share price drops year-to-date as of May 25.
Biggest Losers in Gabriel Plotkin’s Melvin Capital Portfolio
10. Datadog, Inc. (NASDAQ:DDOG)
YTD Share Price Decline as of May 25: 45.85%
Number of Hedge Fund Holders: 82
Datadog, Inc. (NASDAQ:DDOG) is a New York-based company that offers a SaaS monitoring and analytics platform for enterprises in North America and internationally. Gabriel Plotkin’s Melvin Capital trimmed its Datadog, Inc. (NASDAQ:DDOG) stake in Q1 2022 by 20%, holding 2.65 million shares worth $401.70 million. The Datadog, Inc. (NASDAQ:DDOG) position represents 4.07% of the total Melvin Capital holdings, and it is one of the biggest losers in the portfolio, with a year-to-date share price decline of almost 46% as of May 25.
On May 23, Jefferies analyst Brent Thill lowered the price target on Datadog, Inc. (NASDAQ:DDOG) to $125 from $170 and maintained a Buy rating on the shares. Thill has slashed estimates across 28 software companies he oversees due to the tough economic backdrop and the looming fears of recession. The multiples embedded in his new price targets are 25% lower, though he warns investors of further downside to multiples if fundamentals continue to weaken.
According to Insider Monkey’s Q1 data, Datadog, Inc. (NASDAQ:DDOG) was part of 82 hedge fund portfolios, compared to 73 funds in the prior quarter. The total stakes owned in Q1 amounted to $4.8 billion, down from $5.6 billion in Q4 2021. Stephen Mandel’s Lone Pine Capital reported the largest stake in the company in Q1, with almost 3 million shares worth $449.15 million.
In addition to Uber Technologies, Inc. (NYSE:UBER), Amazon.com, Inc. (NASDAQ:AMZN), and Snowflake Inc. (NYSE:SNOW), Datadog, Inc. (NASDAQ:DDOG)’s stock price has slipped significantly as of late.
Here is what Baron Global Advantage Fund has to say about Datadog, Inc. (NASDAQ:DDOG) in its Q1 2022 investor letter:
“Another example is Datadog, the leading infrastructure monitoring, application performance monitoring and log management software platform. Datadog’s stock declined 15% during the quarter, despite reporting sparkling operational results, with revenues accelerating to a growth rate of 84% year-over-year with 33% free cash flow margins, while guiding for 2022 significantly above expectations. Datadog added 4,600 new customers in the quarter, while existing customers continued to increase their spending on Datadog products at a rapid pace with the number of customers using four or more products increasing to 33% from 22% last year. While Datadog’s stock was down, its intrinsic value has undoubtedly increased. This is enabled by rapid innovation (Datadog released 13 new products in 2021) into a market that is benefiting from the secular growth in cloud, digital transformation, and the explosion in complexity as the number of vendors, diversity of technologies and related infrastructure continued to expand.”
9. Snowflake Inc. (NYSE:SNOW)
YTD Share Price Decline as of May 25: 60.29%
Number of Hedge Fund Holders: 81
Snowflake Inc. (NYSE:SNOW) is a Montana-based company that offers a cloud data platform, enabling data consolidation and sharing, derivation of business insights, and development of data-driven applications. Gabriel Plotkin held 952,727 shares of Snowflake Inc. (NYSE:SNOW) in Q1 2022, worth $218.2 million, representing 2.21% of his total 13F portfolio. Plotkin’s hedge fund trimmed its Snowflake Inc. (NYSE:SNOW) position by 20% in Q1, and it was one of the biggest losers in its portfolio. The share price declined over 60% year-to-date as of May 25.
On May 24, BTIG analyst Gray Powell slashed the price target on Snowflake Inc. (NYSE:SNOW) to $183 from $359 amid “substantial downward re-rating in software growth multiples” but maintained a Buy rating on the shares ahead of the Q1 earnings. According to the analyst’s survey in the cloud data analytics space, there are no signs of slowdown in usage growth so far this year and companies are yet to see any pressure on their cloud budgets.
According to Insider Monkey’s first quarter database, 81 hedge funds were bullish on Snowflake Inc. (NYSE:SNOW), down from 84 funds in the last quarter. Brad Gerstner’s Altimeter Capital Management is the leading shareholder of the company, with more than 17 million shares worth $3.90 billion.
Here is what Baron Global Advantage Fund has to say about Snowflake Inc. (NYSE:SNOW) in its Q1 2022 investor letter:
“Snowflake grew revenues…106% (to $1.2 billion — while new bookings in the fourth quarter alone were $1.2 billion in contract value) with 12% margins. The stock was down 32% in the first quarter. We believe that these companies, along with many others that we own, are the long-term beneficiaries of digital transformation, a multi-decade paradigm shift sweeping global economies today. Frank Slootman, Snowflake’s CEO, explained it this way in his most recent earnings call with investors:
“Snowflake’s growth is driven by digital transformation and long-term secular trends in data science and analytics, enabled by cloud-scale computing and Snowflake’s cloud-native architecture. Snowflake is a single data operations platform that addresses a broad spectrum of workload types and incredible performance economy and governance. As a platform, Snowflake enables the data cloud, a world without silos and the promise of unfettered data science.”
In plain English it means that we want to make better decisions and we have all this data available to us. Snowflake will enable businesses to utilize all their data to improve their decision-making. (Click here to read full text)
8. Floor & Decor Holdings, Inc. (NYSE:FND)
YTD Share Price Decline as of May 25: 44.94%
Number of Hedge Fund Holders: 30
Floor & Decor Holdings, Inc. (NYSE:FND) was founded in 2000 and is headquartered in Atlanta, Georgia. The company operates as a multi-channel specialty retailer, selling commercial flooring and related accessories. Gabriel Plotkin’s Melvin Capital slashed its Floor & Decor Holdings, Inc. (NYSE:FND) stake by 50% in Q1 2022, holding a total of 605,535 shares worth $49 million. Floor & Decor Holdings, Inc. (NYSE:FND) stock has declined by about 45% year-to-date as of May 25.
On May 13, Citi analyst Steven Zaccone reduced the price target on Floor & Decor Holdings, Inc. (NYSE:FND) to $106 from $137 and reaffirmed a Buy rating on the shares ahead of the Q1 results. The analyst took a proactive “first cut” at FY 2023 earnings estimates and updated his “Bear Case scenarios” to account for increasing recession risk at nine retailers.
According to Insider Monkey’s data, 30 hedge funds were bullish on Floor & Decor Holdings, Inc. (NYSE:FND) at the end of March 2022, down from 36 funds in the last quarter. Warren Buffett’s Berkshire Hathaway is the largest shareholder of the company, with 4.78 million shares worth $387.18 million.
Here is what Headwaters Capital has to say about Floor & Decor Holdings, Inc. (NYSE:FND) in its Q1 2022 investor letter:
“Floor & Decor (“FND”) -38%. The sell-off in Floor and Décor was driven by general concerns around slowing consumer discretionary spending as stimulus benefits wane and consumers shift their spend toward services. More specifically, there is also concern that slowing home sales due to higher mortgage rates will negatively impact home remodel spending. I believe a lot of this remodel concern is misplaced given that the US housing stock continues to age and consumers are sitting on record levels of home equity due to recent home price appreciation, which should support continued strong remodel activity. As of FND’s analyst day on March 14th, management had not yet seen signs of slowing consumer spending given that the company reiterated guidance for same store sales growth of at least 10% for 2022. FND is currently trading at a 20% discount to its pre-COVID multiple, which represents an attractive valuation for a competitively advantaged specialty retailer with a long runway for new store growth.”
7. Uber Technologies, Inc. (NYSE:UBER)
YTD Share Price Decline as of May 25: 49.72%
Number of Hedge Fund Holders: 144
Uber Technologies, Inc. (NYSE:UBER) stock has declined about 50% year-to-date as of May 25. Gabriel Plotkin’s hedge fund owned 7.72 million shares of Uber Technologies, Inc. (NYSE:UBER) in the first fiscal quarter of 2022, worth $275.58 million, representing 2.79% of the total 13F holdings.
Uber Technologies, Inc. (NYSE:UBER) is one of the biggest losers in the Melvin Capital portfolio. On May 4, Uber Technologies, Inc. (NYSE:UBER) reported its Q1 financial results. The company posted a non-GAAP loss per share of $0.10, above consensus by $0.02. The GAAP loss per share came in at $3.04, missing analysts’ estimates by $2.76.
Bernstein analyst Nikhil Devnani on May 23 assumed coverage of Uber Technologies, Inc. (NYSE:UBER) with an Outperform rating, slashing the price target to $35 from $45. The stock is “beaten up”, but the company is gaining momentum on the back of three consecutive solid quarters, the analyst told investors. He sees “significant” long-term potential in the platform due to its scale and market leading position across mobility and delivery.
Elite hedge funds pulled out of Uber Technologies, Inc. (NYSE:UBER) in the first three months of 2022. Among the hedge funds tracked by Insider Monkey, 144 funds were bullish on Uber Technologies, Inc. (NYSE:UBER) at the end of Q1 2022, down from 153 funds in the preceding quarter. Ken Fisher’s Fisher Asset Management is the biggest shareholder of the company, with a position worth $849 million.
Here is what ClearBridge Large Cap Growth Strategy has to say about Uber Technologies, Inc. (NYSE:UBER) in its Q3 2021 investor letter:
“We have also been looking for multi-year secular trends outside of the IT and Internet sectors to help us maintain a portfolio that can perform well in markets with varied sector or factor leadership. In particular, electrification of the global economy and the transition to electric vehicles (EVs) are areas where we continue to add exposure. We are investing in the brains behind EVs through NXP in the control center and Aptiv for safety features. Global rideshare leader Uber will also be a key player in the transition from internal combustion engines to EVs.”
6. Charles River Laboratories International, Inc. (NYSE:CRL)
YTD Share Price Decline as of May 25: 38.79%
Number of Hedge Fund Holders: 44
Charles River Laboratories International, Inc. (NYSE:CRL) is an American research organization, assisting in drug discovery, non-clinical development, and safety testing services across the United States, Europe, Canada, the Asia Pacific, and internationally. Charles River Laboratories International, Inc. (NYSE:CRL) shares are down about 39% year-to-date as of May 25. Securities filings for Q1 2022 reveal that Gabriel Plotkin’s Melvin Capital boosted its stake in the company by 20%, holding 790,956 shares worth $224.60 million.
On May 23, Guggenheim analyst Sandy Draper initiated coverage of Charles River Laboratories International, Inc. (NYSE:CRL) with a Neutral rating and no price target. The company has become the “clear leader in early stage biopharma R&D” and should offer low double digit organic revenue growth for the next few years, the analyst told investors in a research note. However, a Neutral rating “best captures the near-term risk/reward profile” considering the broader macro backdrop, wrote the analyst.
Insider Monkey’s Q1 database suggests that 44 hedge funds held long positions in Charles River Laboratories International, Inc. (NYSE:CRL), down from 49 funds in the prior quarter. Billionaire Andreas Halvorsen’s Viking Global disclosed a leading position in the company, comprising 521,653 shares worth over $148 million.
Charles River Laboratories International, Inc. (NYSE:CRL) was one of the biggest losers in the Melvin Capital portfolio, just like Uber Technologies, Inc. (NYSE:UBER), Amazon.com, Inc. (NASDAQ:AMZN), and Snowflake Inc. (NYSE:SNOW). But the biggest losses the hedge fund suffered came from its short positions in GameStop Corp. (NYSE:GME), which ultimately led to its closure.
Here is what ClearBridge All Cap Growth Strategy has to say about Charles River Laboratories International, Inc. (NYSE:CRL) in its Q4 2021 investor letter:
“Health care also provides a good example of industry diversification as we look beyond our historical foundation in biotechnology and pharmaceutical companies to other promising areas like life sciences, tools and lab services. We recently added Charles River Laboratories, a leading drug discovery, non-clinical development and manufacturing organization which serves a large and growing market that is being driven by research & development/biologics manufacturing and increased outsourcing. The company is also well-positioned to benefit from rapid growth in cell and gene therapies on the heels of recent M&A activity. The business is a solid free cash flow generator and should continue to see further operating leverage on the back of top line growth.
5. Bill.com Holdings, Inc. (NYSE:BILL)
YTD Share Price Decline as of May 25: 52.82%
Number of Hedge Fund Holders: 58
Bill.com Holdings, Inc. (NYSE:BILL) is a California-based company that offers an AI-powered cloud software to simplify, digitize, and automate back-office financial operations for businesses worldwide. As of May 25, Bill.com Holdings, Inc. (NYSE:BILL) stock has tumbled about 53% year-to-date, making it one of the biggest losers in Gabriel Plotkin’s Melvin Capital portfolio. The hedge fund dumped 46% of its Bill.com Holdings, Inc. (NYSE:BILL) shares in Q1, owning 1.6 million units worth $367.8 million.
On May 24, Piper Sandler analyst Brent Bracelin cut the price target on Bill.com Holdings, Inc. (NYSE:BILL) to $205 from $300 and reiterated an Overweight rating on the shares. After meeting with company management, the analyst had a better appreciation for automation as a cost saver and back-office resiliency “that differs from front-office apps more tied to new company formations”.
According to Insider Monkey’s Q1 data, Bill.com Holdings, Inc. (NYSE:BILL) was part of 58 public hedge fund portfolios, down from 65 funds in the preceding quarter. Stephen Mandel’s Lone Pine Capital held a prominent stake in the company, consisting of 1.3 million shares worth $309.6 million.
Here is what Alger Mid Cap Focus Fund has to say about Bill.com Holdings, Inc. (NYSE:BILL) in its Q4 2021 investor letter:
“Bill.com Holdings, Inc., was among the top detractors from performance. Bill.com provides cloud-based software solutions that simplify, digitize, and automate complex back-office financial operations for small and medium size businesses. Its software helps customers to generate and process invoices, streamline approvals, send and receive payments, synchronize data with their accounting system and manage their cash.”
4. PagSeguro Digital Ltd. (NYSE:PAGS)
YTD Share Price Decline as of May 25: 52.24%
Number of Hedge Fund Holders: 27
PagSeguro Digital Ltd. (NYSE:PAGS) is a provider of financial technology solutions to consumers, small entrepreneurs, micro-merchants, and medium-sized companies in Brazil and internationally. The company was established in 2006 and is headquartered in São Paulo, Brazil. As of May 25, the stock has plunged over 52% and is one of the biggest losers in Gabriel Plotkin’s portfolio. The hedge fund slashed its stake in PagSeguro Digital Ltd. (NYSE:PAGS) by 71% in Q1, and the remaining position consists of 2.8 million shares worth $57.7 million.
New Street analyst Soomit Datta downgraded PagSeguro Digital Ltd. (NYSE:PAGS) on May 9 to Neutral from Buy with an $18 price target after slashing long-term market estimates to account for risks from debit volumes, the central bank’s instant payment system, installment profitability concerns, and Buy-Now-Pay-Later schemes in Brazil. The analyst was already concerned that PagSeguro Digital Ltd. (NYSE:PAGS)’s credit is slowing and said it is “hard to see a positive catalyst” currently.
According to Insider Monkey’s data, 27 hedge funds were long PagSeguro Digital Ltd. (NYSE:PAGS) at the end of March 2022, compared to 26 funds in the prior quarter. Daniel Patrick Gibson’s Sylebra Capital Management was the largest shareholder of the company as of Q1 2022, with a stake worth $198.30 million.
Here is what Artisan Mid Cap Fund has to say about PagSeguro Digital Ltd. (NYSE:PAGS) in its Q1 2021 investor letter:
“We also reduced our position in PagSeguro. PagSeguro is making good progress establishing a fast-growing digital bank and expanding its Brazilian payments business despite the pandemic. However, the company’s growth initiatives will require another year of heavy investment spending in 2021. This comes as Brazil’s progress combatting COVID-19 trails many major economies’, casting a cloud over the broader economic outlook. Given these potential headwinds, we trimmed our position to fund higher conviction holdings.”
3. Align Technology, Inc. (NASDAQ:ALGN)
YTD Share Price Decline as of May 25: 57.84%
Number of Hedge Fund Holders: 45
Align Technology, Inc. (NASDAQ:ALGN) is an Arizona-based medical device company that manufactures and sells products for restorative and aesthetic dentistry. Align Technology, Inc. (NASDAQ:ALGN) stock has plunged about 58% year-to-date as of May 25. Gabriel Plotkin’s Melvin Capital has dumped 75% of the shares it previously held in Q1 2022. The hedge fund now owns 161,112 Align Technology, Inc. (NASDAQ:ALGN) shares worth $70.2 million.
On April 27, Align Technology, Inc. (NASDAQ:ALGN) posted its Q1 financial results, announcing earnings per share of $2.13, missing estimates by $0.10. The $973.22 million revenue also fell short of analysts’ predictions by $26.37 million.
Credit Suisse analyst Matt Miksic on May 4 trimmed the price target on Align Technology, Inc. (NASDAQ:ALGN) to $418 from $722 and kept an Outperform rating on the shares. The analyst noted that Align Technology, Inc. (NASDAQ:ALGN) experienced a decline in cases late in the March quarter, driven by economically sensitive behavior among patients. Due to the uncertainty around the magnitude and duration of this consumer behavior, management retracted guidance and the analyst lowered his expectations for Clear Aligner sales by $345 million. However, he continues to see Align Technology, Inc. (NASDAQ:ALGN) as a solid disruptive growth play.
Among the hedge funds tracked by Insider Monkey, 45 funds were long Align Technology, Inc. (NASDAQ:ALGN) at the end of March 2022, down from 51 funds in the earlier quarter. Fisher Asset Management is the biggest shareholder of the company, with 571,043 shares worth about $249 million.
Here is what Harding Loevner Global Equity Fund has to say about Align Technology, Inc. (NASDAQ:ALGN) in its Q4 2021 investor letter:
“Align Technology, which we wrote about a year ago, employs computer-aided design and manufacturing to make custom invisible orthodontics—an application of established technology to a new market. In an imaginative exploitation of the work from home phenomenon driven by COVID-19, Align dramatically expanded its digital marketing efforts last year, establishing a direct relationship with potential end-users who were seeing their smiles up close every day on video calls. The results of this very effective campaign to win new patients has endeared the company to its key customers, the family orthodontist or dentist.”
2. Atlassian Corporation Plc (NASDAQ:TEAM)
YTD Share Price Decline as of May 25: 51.34%
Number of Hedge Fund Holders: 65
Atlassian Corporation Plc (NASDAQ:TEAM) is an Australian company that offers software solutions like Jira, Confluence, Bamboo, Crucible, Trello, and Atlassian Marketplace for software developers and project managers. Melvin Capital dumped 47% of Atlassian Corporation Plc (NASDAQ:TEAM) shares previously held in the first quarter of 2022. The hedge fund owned a $234.5 million stake in the company. With a year-to-date decline of over 51% as of May 25, Atlassian Corporation Plc (NASDAQ:TEAM) is one of the biggest losers in Gabriel Plotkin’s portfolio.
On May 23, Jefferies analyst Brent Thill lowered the price target on Atlassian Corporation Plc (NASDAQ:TEAM) to $180 from $275 and maintained a Hold rating on the shares. The analyst trimmed his projections across 28 software companies due to stiffening economic conditions and the daunting risk of recession. He warned investors that his new price targets are 25% lower, though weak fundamentals could result in multiples shrinking further.
According to Insider Monkey’s Q1 data, Atlassian Corporation Plc (NASDAQ:TEAM) was found in 65 public hedge fund portfolios, down from 69 funds in the last quarter. Jim Simons’ Renaissance Technologies owned the largest stake in the company, with 2.6 million shares worth $776.8 million.
Here is what ClearBridge Investments International Growth ADR Strategy has to say about Atlassian Corporation Plc (NASDAQ:TEAM) in its Q1 2022 investor letter:
“The structural bucket has the shortest investment horizon across the spectrum of growth companies we target in the Strategy. We closely monitor the macro impacts and turnaround progress of these companies and will be disciplined sellers when the thesis for a holding plays out. We also trimmed back workflow software maker Atlassian (NASDAQ:TEAM) after a strong runup in its shares in 2021. Most of our reductions in emerging growth have involved IT or related companies where innovation is a key to their business model. That said, we remain positive on the IT sector and have largely maintained holdings in our highest-conviction ideas.”
1. Coty Inc. (NYSE:COTY)
YTD Share Price Decline as of May 25: 41.65%
Number of Hedge Fund Holders: 30
Coty Inc. (NYSE:COTY) is an American company that markets and sells beauty products worldwide under Alexander McQueen, Burberry, Calvin Klein, Cavalli, Chloe, Davidoff, Gucci, Hugo Boss, Kylie Jenner, Lacoste, Marc Jacobs, Miu Miu, Nikos, Kim Kardashian West, and Tiffany & Co. brands.
Securities filings for Q1 2022 disclose that Gabriel Plotkin’s Melvin Capital slashed its Coty Inc. (NYSE:COTY) stake by 30%, holding 29.40 million shares of the company worth $264.3 million. Coty Inc. (NYSE:COTY) shares have declined about 42% year-to-date as of May 25, making it one of the top losers in the Melvin Capital portfolio.
On May 11, Barclays analyst Lauren Lieberman lowered the price target on Coty Inc. (NYSE:COTY) to $8 from $10 and reiterated an Equal Weight rating on the shares. The analyst noted that in an increasingly volatile macro environment, Coty Inc. (NYSE:COTY) surpassed Street estimates on the top and bottom line this quarter and reaffirmed its fiscal 2022 guidance, which “speaks to the growing resiliency the company has built since CEO Sue Nabi’s arrival”.
The Q1 database of Insider Monkey suggests that 30 hedge funds were bullish on Coty Inc. (NYSE:COTY), down from 36 funds in the earlier quarter. Steve Cohen’s Point72 Asset Management held a prominent position in the company, with more than 8 million shares worth $73.1 million.
Here is what ClearBridge Investments Value Equity Strategy has to say about Coty Inc. (NYSE:COTY) in its Q3 2021 investor letter:
“Coty is a global beauty company primarily made up of its market leading prestige fragrance business and a mass cosmetic business acquired from P&G that includes brands such as Covergirl. It is a turnaround story catalyzed by the new CEO, Sue Nabi, an experienced beauty expert who previously worked at L’Oreal and successfully executed turnarounds and the relaunch of its Lancome and L’Oreal Paris brands. Early signs are supportive of improving performance in Coty’s cosmetics business. The company should also benefit from an accelerating growth trend in its prestige fragrance business driven by purchases shifting online and the category’s emerging popularity.”
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Disclosure: None. 10 Biggest Losers in Gabriel Plotkin’s Melvin Capital Portfolio is originally published on Insider Monkey.
