In this article, we reviewed Brad Gerstner’s biography and investment track record. You can skip our detailed discussion about Brad Gerstner’s biography and investment track record and jump directly to the Top 5 Stock Picks of Brad Gerstner.
Brad Gerstner, the founder of internet, software, and travel-focused Altimeter Capital has been among the standout performers over the last decade amid his successful investments in startups and early-stage technology companies. He is also dubbed the “online travel king” due to his multiple successful internet-related travel investments. His $20 billion investment firm Altimeter, which he founded in 2008 with a seed capital of $3 million from friends and family, is famous for its concentrated investments, long-term strategy, and market-beating returns across its private growth equity funds. Altimeter helped several companies grow and go public, resulting in billions of dollars in profits for the firm. Since 2011, the firm’s public equity fund has averaged annual returns of 29%. Before moving on to Brad’s investment philosophy and top 10 stock picks, let’s briefly review his biography.
Who is Brad Gerstner?
Brad Gerstner was born on May 4, 1971, in Goshen, Elkhart County, Indiana. Thomas Gerstner and Martha Burt are Brad Gerstner’s parents. Brad Gerstner grew up with his siblings Douglas, William, and Lynne Vandy.
The marriage of Brad Gerstner and Michelle Boyers took place on September 29, 2007. At Harvard, they had known each other while pursuing Master’s degrees. Boyers is the CEO of the Give Forward Foundation, an organization focused on improving education in low-income schools and providing legal services for undocumented immigrants. Lincoln and Jack, the couple’s two children, live happily in Woodside, California.
Brad Gerstner was a top student throughout his education. Between 1989 and 1993, he attended Wabash College and earned an undergraduate degree. The Lilly Scholarship, one of the best scholarships available in higher education, was awarded to Gerstner because he ranked among the top 10% of his graduating class. As a result of this scholarship, Gerstner earned a BA in Economics and Political Science from Oxford.
In 1993 and 1996, Brad Gerstner studied law at Indiana University School of Law. As a result of his high academic ability, he qualified as a Jump scholar. The scholarship was created to help law students succeed in their legal careers. Gerstner attended Harvard Business School and received his MBA in 2000.
Brad Gerstner’s Entrepreneurial Story
Brad Gerstner grew up in a small town in Indiana. At the time, his father worked for an auto parts manufacturing company. A layoff occurred in 1977, and Gerstner’s father was one of the outgoing employees. After that, his father borrowed money from the bank and mortgaged a house and a car to build an auto parts company himself.
According to Brad Gerstner, his father’s decision to start his own business at a time when inflation was so high was a mistake. Since business results did not meet expectations, his father lost his house, car, and everything he owned. His entire life was spent paying off debt.
After the incident, Brad Gerstner’s grandfather forbade his grandsons from becoming entrepreneurs. Instead, he advised them to become doctors, engineers, or lawyers.
Brad Gerstner, however, has had an interest in becoming an entrepreneur and business owner since he was young. He established Wawasee Boat Care in 1986 before starting college. Despite the failure of his first business, he learned a lot about business and venture capital from the experience.
Between college and law school, he worked at a local firm in Indianapolis as an associate lawyer. For some time, he was also Indiana’s deputy secretary of state. Following his graduation from Harvard, Gerstner launched three internet search companies. General Catalyst, an online travel investment platform, was founded by him, and he sold it in 2001 to Interactive Corp. As co-founder and CEO of the National Leisure Group, an early online travel start-up, Gerstner worked there from 2001 to 2003. The following year, Gerstner co-founded and was chief executive officer of Openlist.com, which he sold to Marchex. This demonstrates Gerstner’s ability to build thriving businesses.
Gerstner also worked as an investment portfolio manager at PAR Capital in Boston from 2005 to 2008. During his tenure in PAR, he guided the company into financing venture capital deals with Zillow Group, Inc. (NASDAQ:Z), ITA Software, and Farecast. In 2008 at a time of economic downturn, Gerstner founded Altimeter Capital with less than $3 million in seed capital. Many in the business world questioned Gerstner’s vision, but he has now become the world’s leading technology investor.
Brad Gerstner has been dubbed the “online travel king” by Bloomberg in recognition of his many successful internet-related travel investments, including Booking Holdings Inc. (NASDAQ:BKNG), Uber Technologies, Inc. (NYSE:UBER) and Expedia Group, Inc. (NASDAQ:EXPE). Bloomberg also described Brad Gerstner of Altimeter Capital as an adventurer.
Brad Served on the Boards of Multiple Companies
Brad Gerstner served on the board of directors of the online travel company Orbitz Worldwide from 2010 to 2015. In February 2015, Expedia Group, Inc. (NASDAQ:EXPE) announced that it would acquire Orbitz for $1.2 billion in cash. Brad Gerstner was also among the early and long-running investors of Expedia Group, Inc. (NASDAQ:EXPE). His firm sold a stake in Expedia Group, Inc. (NASDAQ:EXPE) in the September quarter of 2021. On 1 May 2019, he was appointed to the board of directors of iHeartMedia, Inc. (NASDAQ:IHRT), a mass media corporation headquartered in San Antonio, Texas. Gerstner also served on the boards of directors of a travel technology company SilverRail Technologies, which was also acquired by Expedia Group, Inc. (NASDAQ:EXPE) in 2017. He was also a board member of the last-minute hotel booking application, HotelTonight, which was acquired by Airbnb, Inc. (NASDAQ:ABNB) in 2019 for $400 million.
A family foundation named Give Forward was founded by Brad Gerstner and his family in 2018. In order to improve education in East Palo Alto, the Foundation supports low-income schools. In the Bay Area, California, they also provide legal services for undocumented immigrants.
The Board Challenge was also founded by Gerstner in partnership with Guy Primus, CEO of Valence Community, and Sukhinder Singh Cassidy, Founder, and Chair of the TheBoardlist. Increasing diversity in corporate board rooms is their goal. In a statement issued in 2020, the Board Challenge pledged to add at least one black director to U.S. corporate boards.
In the early 90s, he worked for the US senator from Indiana, Dick Lugar, who was chairman of the Foreign Relations Committee at the time. He also worked with a senior statesman, Rhodes Scholar. After graduating from law school, he got a call from Senator Lugar asking him to accept an appointment as Deputy Secretary of State in Indiana. After becoming Deputy Secretary of State, he had two paths: either going to run for Secretary of State or going to make some money. He decided to make money instead of going deeper into politics.
Brad Gerstner was one of the most prominent venture capitalists and the founder of many travel-related internet startups. He is also among the earliest investors that identified the potential of internet companies. Success stories of his venture capitals suggest that he has pretty much achieved his goal.
Besides VC juggernaut, Altimeter Capital’s public investments have also seen strong price appreciation, proving himself to be a world-class stock picker. Since 2011, holding an equal-weight portfolio of the fund’s top 20 13F positions, and rebalancing stocks quarterly would have garnered nearly 2.2x annual return of the S&P 500. Let’s briefly review his investment philosophy before moving to his top stock picks.
Running a simplified, concentrated portfolio around his best ideas is something that Brad Gerstner believes in strongly. He likes focused investing and essentialism for him is being focused on doing a few things and doing them well. His stock portfolio also suggests focused and selected investments.
2. Multi-year compounders
He believes in finding companies in the internet-travel, tech, and consumer & e-commerce areas with the potential to sustain growth for many years. Moreover, he likes to create a significant stake to move the needle and help companies make the right decisions.
Once he identifies and invests in those opportunities, he avoids selling them on short-term market movements. He holds those stakes and waits for companies to compound over years. For instance, his strategy of holding a stake in Snowflake Inc. (NASDAQ:SNOW) garnered billions of dollars in returns for his investment firm. He invested in Snowflake Inc. (NASDAQ:SNOW) well before its IPO on NASDAQ. The Altimeter was the lead investor for the software company’s $79 million Series C funding round in June 2015, according to CrunchBase.
3. Special insight and core competence
Unlike other investors who give importance to valuations and growth metrics, he never invests in any company without having a special insight. Additionally, he invests in startups and companies within his area of expertise and where he believes he has an advantage. His favorable investment areas include consumer applications and the internet, the life-sciences industry, the cloud & digital transformation, and consumer & e-commerce.
As of December 2021, Altimeter Capital, which primarily manages a long or short public equity fund and private growth equity funds, held $10.51 billion in the 13F portfolio while assets under management were well above $20 billion.
Let’s start taking a look at Altimeter’s top 10 stock picks. We used the fund’s fourth quarter portfolio for this analysis.
Top 10 Stock Picks of Brad Gerstner
Unity Software Inc (NYSE:U)
Altimeter Capital has a $300 million stake in Unity Software Inc (NYSE:U) as of the end of the fourth quarter. The stock is down 10% over the past 12 months. However, analysts believe Unity Software Inc (NYSE:U) has long-term growth prospects. Morgan Stanley analyst Matthew Cost believes the company’s non-gaming solutions alone can bring about $25 billion for Unity Software Inc (NYSE:U) within just five years. Cathie Wood‘s hedge fund has a $1.1 billion stake in Unity Software Inc (NYSE:U) as of the end of 2021. Even though growth stocks like Unity Software Inc (NYSE:U), Booking Holdings Inc. (NASDAQ:BKNG), Uber Technologies, Inc. (NYSE:UBER) and Expedia Group, Inc. (NASDAQ:EXPE) took a beating recently, investors are bullish on their long-term growth prospects.
Roblox Corp (NYSE:RBLX)
Another notable technology and gaming stock in Altimeter’s portfolio is Roblox Corp (NYSE:RBLX), which is making headlines due to its metaverse solutions. Citi analyst Jason Bazinet recently started covering Roblox Corp (NYSE:RBLX) with a price target of $59, saying Roblox Corp (NYSE:RBLX)’s valuation is “justified” by its “strategic position, rapid growth and healthy pipeline of product enhancements.”
Hedge funds were quick to detect the potential of Roblox Corp (NYSE:RBLX) as 61 hedge funds tracked by Insider Monkey reported owning stakes in Roblox Corp (NYSE:RBLX) at the end of the fourth quarter as compared to just 50 funds in the previous quarter.
Sea Ltd (NYSE:SE)
Altimeter has a $279.64 million stake in Sea Ltd (NYSE:SE), which recently announced that its ecommerce business was exiting India. Sea Ltd (NYSE:SE) has been a huge loser lately, declining 70% in the past six months. A total of 108 funds in Insider Monkey’s database had stakes in Sea Ltd (NYSE:SE), compared to 117 in the previous quarter.
Shopify Inc (NYSE:SHOP)
Online store development platform Shopify Inc (NYSE:SHOP) is among the top 10 stock picks of Altimeter. The hedge fund has a $275.5 million stake in the Canada-based company. Of the 924 hedge funds tracked by Insider Monkey, 86 hedge funds reported owning shares of Shopify Inc (NYSE:SHOP), compared to 73 funds a quarter earlier. Cathie Wood’s hedge fund is the leading stakeholder in Shopify Inc (NYSE:SHOP) as of the end of March with 903,063 shares. Like Booking Holdings Inc. (NASDAQ:BKNG), Uber Technologies, Inc. (NYSE:UBER) and Expedia Group, Inc. (NASDAQ:EXPE), Shopify Inc (NYSE:SHOP) is popular among elite hedge funds.
Confluent Inc (NASDAQ:CFLT)
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Disclosure: The article Who is Brad Gerstner? is originally published on Insider Monkey.