Altimeter Capital Management, the hedge fund led by Brad Gerstner, has made significant changes to its portfolio in the fourth quarter of 2024. The firm completely exited its position in KraneShares CSI China Internet ETF (NYSEARCA: KWEB), which had been its largest China-related holding. The proceeds were directed towards two new investments in Instacart parent company Maplebear (NASDAQ: CART) and Flutter Entertainment (NYSE: FLUT), a major player in the sports betting industry. The shift suggests a strategic reallocation of capital amid fluctuating market conditions.
Altimeter Capital has historically maintained a concentrated portfolio, typically holding fewer than 30 stocks. The decision to sell KWEB follows a pattern of the firm making targeted bets on high-growth sectors. In previous quarters, the hedge fund had emphasized technology and internet-based companies. However, the underperformance of Chinese internet stocks may have prompted this decision, reflecting broader concerns about the regulatory and economic landscape in China.
Why Did Altimeter Exit KWEB?
The hedge fund sold all 5.67 million shares of KWEB in the fourth quarter, generating approximately $200 million. The ETF had been Altimeter’s seventh-largest holding, representing 2.86% of its portfolio. Given that KWEB declined by 14% during the quarter, the fund may have sought to minimize further losses. The investment in KWEB was relatively short-lived, as Altimeter only acquired it in the third quarter of 2024, possibly as a bet on a recovery in Chinese internet stocks.
While the ETF’s performance did not meet expectations, estimates indicate that Altimeter may have purchased KWEB shares at an average price of $27.28, meaning it could have exited with a modest gain. The hedge fund swiftly redirected its capital into two U.S.-based companies with different growth prospects.
Investing in Flutter Entertainment
Altimeter acquired 380,315 shares of Flutter Entertainment at an average price of $246.09 per share, amounting to an investment of $93.6 million. This purchase made Flutter the 14th-largest position in the hedge fund’s portfolio. Since the acquisition, Flutter’s stock has gained value, providing some early returns on the investment.
One of the factors that may have attracted Altimeter to Flutter is its shareholder return initiatives. The company announced a $350 million stock repurchase program for early 2025, with plans to buy back up to $5 billion of shares in the long term. Additionally, Flutter is expanding through acquisitions, including a $2.6 billion purchase of Playtech’s Italian gaming division and a $350 million investment in a Brazilian gaming company.
Instacart Faces Market Challenges
Alongside Flutter, Altimeter also invested in Maplebear, acquiring 2.54 million shares of the company at an average price of $42.02 per share, for a total investment of approximately $106.7 million. This made Instacart the hedge fund’s 12th-largest position. However, market performance has not been favorable so far, as shares have struggled since the purchase.
Instacart’s recent earnings report showed weaker-than-expected revenue and profit figures, with total revenue reaching $883 million, falling short of analyst estimates. Concerns remain about the company’s ability to sustain growth in gross transaction value, which increased by 10% in the last quarter. Analysts remain divided on the stock’s long-term potential, with only 58% of them issuing a Buy rating.
Altimeter’s decision to allocate funds away from China-based investments and into U.S. growth stocks reflects a shift in strategy. The hedge fund may be responding to concerns over regulatory uncertainty in China while seeking opportunities in the growing sports betting and online delivery industries. Flutter’s stock buyback plans and expansion strategy offer potential for long-term gains, while Instacart’s investment remains uncertain due to market volatility and performance concerns. Investors will have to wait for future filings to see if Altimeter makes further adjustments to its holdings.
