D1 Capital Partners is not your typical hedge fund but a crossover fund that invests in stocks and venture capital. Founded in 2018 by Daniel Sundheim with a seed capital of $5 billion, it is one of the youngest hedge funds making waves with its solid track record in this highly competitive industry.
The hedge fund rose to fame in 2020 at the height of the COVID-19 pandemic as it posted a 54% gain in arguably one of the most unpredictable years. The hedge fund outperformed the broader market index, which gained 14% and the Nasdaq index, which gained 43%. The gains in 2020 through 2021 came from D1 Capital remaining heavily invested in startups, accounting for about 50% of the portfolio. The startup investments contributed 70% of the fund's gains in 2021.
However, 2022 was one of the tumultuous years for the young hedge fund as tech socks and private valuations plunged. As the S&P 500 fell 19.4%, D1 Capital also came under pressure due to its significant exposure in the tech sector and private equities. The hedge fund lost 30.5%.
Nevertheless, Sundheim's hedge fund returned to winning ways early in the year, gaining 25% between mid-2022 and March 2023 and beating the S&P 500. The gains came after the hedge fund marked down some of its private investments, which account for the most significant share of the portfolio, by 2.5%.
The crossover fund lets investors choose from share classes in various exposures to privates. Investors can choose privates of between 35% and 50% exposure as it remains invested in about 167 private companies.
The hedge fund's most significant private wagers include Space Exploration Technologies Corp, Lineage Logistics, and Collectors Universe. The largest sector exposures for nonpublic companies are real estate and industrials. The hedge fund purchased a $300 million stake in Hilton and $153 million in apartment real estate investment trust Avalon Bay, affirming Sundheim's bullishness toward the real estate sector.
While the stock market had been bullish for most of the year, it came under pressure in the third quarter. The S&P 500 pulled back 3%, with the tech-heavy Nasdaq dropping 3.7%. The pullback resulted in exciting investment opportunities, which Sundheim took advantage of. The hedge fund manager made significant changes to D1 Capital Partners as valuation levels dropped.
Regulatory filings indicate that the hedge fund increased its stake in Microsoft by 78%during the third quarter. Thanks to the artificial intelligence boom, Microsoft Corporation (NASDAQ:MSFT) stock has rallied more than 50% for the year. The hedge fund also doubled its holdings in Meta Platforms. While the two stocks account for about $500 million of the portfolio, they are not the biggest.
Instacart (Maplebear Inc.) (NASDAQ:CART) remains the hedge fund's biggest holding, having transitioned from a private entity to going public through an IPO in September. While the hedge fund sold more than a third of its shares in Alphabet Inc. (NASDAQ:GOOG), it affirmed its exposure on high growth tech stocks by adding a new stake in Amazon worth about $115 million.
Billionaire Daniel Sundheim's D1 Capital Portfolio: Top 12 Stock Picks
Daniel Sundheim of D1 Capital
Our Methodology
We picked top 10 stocks from D1 Capital Partners' 13F portfolio for the third quarter of 2023.
Billionaire Daniel Sundheim's D1 Capital Portfolio: Top Stock Picks
D1 Capital Partners Equity Stake: $249. 24 Million
Year-to-date gain: –12%
HDFC Bank Limited (NYSE:HDB) is one of D1 Capital's top stock picks, offering exposure in the financial services sector. The company offers banking and finance to people and businesses in India and some other places. It operates through Wholesale Banking, Retail Banking, and Treasury Services.
Invitation Homes Inc. (NYSE:INVH) is a premier single-home leasing company that strives to meet changing lifestyle demands. The real estate company offers access to high-quality, updated homes with valued features. It is the latest addition and one of D1 Capital Partners’ top stock picks in the real estate sector. D1 Capital Partners acquired 8.69 million shares in Invitation Homes Inc. (NYSE:INVH) in Q3 2023, valued at $275.26 million and accounting for 3.96% of the portfolio. The stock is up by about 13% for the year.
Stamford, Connecticut, Philip Morris International Inc. (NYSE:PM) is a consumer defensive play that operates as a tobacco company. The company delivers a smoke-free future through products outside of the tobacco and nicotine sectors. Philip Morris International Inc. (NYSE:PM)’s product line includes cigarettes and smoke-free products, including heat-not-burn, vapour, and oral nicotine products.
While Philip Morris International Inc. (NYSE:PM) is down by about 8% for the year, D1 Capital Partners’ holdings are down by about 4%. The hedge fund held stakes worth $282.9 million in the company as of the end of the third quarter.
Nu Holdings Ltd. (NYSE:NU) is a new addition to the D1 Capital portfolio as a financial services company offering a digital banking platform and financial services. The company offers Nu Credit and debit cards. It also provides savings solutions and digital account solution that supports all personal finance activities.
Nu Holdings Ltd. (NYSE:NU) is up about 100% year to date. As of Q3 2023, D1 Capital Partners held stakes worth $287.52 million, accounting for 4.14% of the portfolio.
Sundheim further affirmed his confidence about opportunities in the healthcare sector by increasing his stakes in Insulet Corporation (NASDAQ:PODD) by 152% in Q3 2023. The company makes and sells insulin delivery systems for people with diabetes who need insulin. It offers the Omnipod System, a self-adhesive disposable tubeless device worn on the body for up to three days.
Nevertheless, Insulet Corporation (NASDAQ:PODD) has underperformed and is down by about 39% for the year. D1 Capital Partners increased its stakes in the company to 1.8 million shares in the third quarter.
General Electric Company (NYSE:GE) is D1 Capital Partners' top investment play in the industrial sector, operating as a high-tech industrial company. The company offers gas and steam turbines and data-leveraging software for power generation, industrial government, and other customers.
General Electric Company (NYSE:GE) is up by about 81% for the year, affirming its status as one of D1 Capital's top stock picks in the industrial sector. While D1 Capital Partners started investing in General Electric Company (NYSE:GE) in the first quarter, its investments have gained 44% and currently accounts for 4.21% of the portfolio.
Irvine, California-based Rivian Automotive, Inc. (NASDAQ:RIVN) is an automaker that designs, develops, manufactures, and sells electric vehicles and other accessories. The company benefits from the auto industry's electrification drive as the transition from fossil fuels heats up.
Sundheim has been buying and selling shares in Rivian Automotive, Inc. (NASDAQ:RIVN) since Q4 2021, affirming his confidence about the company's long-term prospects amid the electric vehicles boom. Nevertheless, he cut his stake in Rivian Automotive, Inc. (NASDAQ:RIVN) by 4% in Q3 2023 to 13.5 million shares valued at $327.39 million. The stock is also down by 11% year to date.
