5. Booking Holdings Inc. (NASDAQ:BKNG)
Value of D.E. Shaw’s 13F Position: $814 million
Number of Hedge Fund Shareholders: 84
As of the end of the third quarter, D.E. Shaw owned a massive $814 billion stake in Booking Holdings Inc. (NASDAQ:BKNG). His firm has benefited from its stake because the company’s stock has risen 82% in the last year. Booking Holdings increased revenue by 21% to $7.3 billion in the third quarter, while adjusted EBITDA increased by 24% to $3.28 billion.
In the third quarter investor letter, L1 Capital, an investment management firm, explained why Booking Holdings is worth considering. Here is what the firm stated:
“Following significant under-performance, some high-quality businesses in these sectors are now becoming more attractive from a valuation perspective – in our language they are now getting warmer on our Bench of potential investments.
Our ‘all-weather’ portfolio centred around our unique definition of ‘quality’ delivered strong performance in the September quarter. Three companies positively contributed over 0.5% (in Australian dollars) to the Fund’s returns for the quarter (Booking Holdings Inc. (NASDAQ:BKNG), Intuit and Natural Resource Partners, in alphabetical order), and another three companies almost reached this level of positive contribution. No companies detracted from the Portfolio’s returns by 0.5% or more.
As part of our travels during the quarter (see page 6) we had the opportunity to meet with management of both Booking Holdings and Intuit. We continue to view both companies as exceptionally well managed.
Booking Holdings, the world’s leading online travel agency, continues to benefit from a strong global travel environment with particular strength in Europe, Booking Holdings’ core market. Fears of peak ‘revenge travel’ following COVID-19 lockdowns have been misplaced in our view. We assess current travel volumes to be only slightly elevated compared to pre-COVID-19 trends, with some regions, particularly outbound travel from China, still relatively depressed. Anyone who has travelled anywhere recently will be nodding when we say hotel rates have increased meaningfully in recent times. Accommodation providers are generally doing quite well, but the increased hotel rates have been necessary to offset inflation in costs such as employee salaries and additional cleaning services. As Booking Holdings ‘clips the ticket’ of accommodation spend, the company has benefitted from increased average daily hotel rates. Importantly, Booking Holdings continues to invest in its business, improving the reach, quality and range of services it provides, resulting in gains in market share and an extension of its industry leadership position. Booking Holdings is now more fairly valued by the market, but still provides attractive base case risk-adjusted returns and remains one of the larger investments in the Fund.”
