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10 Best Stocks to Buy According to Billionaire Daniel Sundheim

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·15 min read
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In this article, we will be discussing the 10 best stocks to buy according to billionaire Daniel Sundheim. If you want to skip our detailed analysis of Sundheim’s hedge fund returns, investment philosophy, and history, go directly to the 5 Best Stocks to Buy According to Billionaire Daniel Sundheim.

Daniel Sundheim founded D1 Capital Partners with a seed funding of $5 billion in July 2018 after leaving Viking Global Investors, where he was the chief investment officer.

D1 Capital Partners invests in both public and private markets. It invests on behalf of endowments and foundations, family offices, sovereign wealth funds, outsourced CIOs, hospitals, and pension funds worldwide. D1's investment approach is based on fundamentals and research, emphasizing medium to long-term returns.

D1 Capital Partners manages more than $13 billion in assets at the end of the first quarter of 2021. In January 2021, the firm lost $4 billion (20% of its capital) due to the short squeeze of GameStop Corp. (NYSE: GME). Nevertheless, D1 was one of the best-performing funds in 2020, with a 60% gain.

As of the end of the first quarter, D1 Capital Partners holds significant stakes in companies including Microsoft Corporation (NASDAQ: MSFT), Amazon (NASDAQ: AMZN), and Facebook, Inc. (NASDAQ: FB).

Microsoft Corporation (NASDAQ: MSFT), a Washington-based technology firm that provides computer software and services, received a significant investment from D1 Capital Partners. On July 28, JPMorgan analyst Mark Murphy raised the price target on Microsoft Corporation (NASDAQ: MSFT) to $310 from $300 and kept an “Overweight” rating on the shares. In a research note, Murphy informed investors that Microsoft Corporation (NASDAQ: MSFT) posted revenue growth that was five points higher than expected, as well as a healthy gain in commercial bookings.

Based on the latest 13F holdings for the first quarter of 2021, Daniel Sundheim owns 164,600 shares in Amazon.com, Inc. (NASDAQ: AMZN) after increasing his holding in the company by 47% from the fourth quarter of 2020. On July 30, JPMorgan analyst Doug Anmuth lowered the price target on Amazon.com to $4,100 from $4,600 and maintained an “Overweight” rating on the shares.

In Facebook, Inc. (NASDAQ: FB), Daniel Sundheim owns 2.80 million shares. The considerable investment covers an impressive 6.11% of the fund's portfolio. On July 29, Truist analyst Youssef Squali raised the price target on Facebook to $425 from $400 and kept a “Buy” rating on the shares. Based on our calculations, Facebook, Inc. (NASDAQ: FB) ranks 1st in our list of the 30 Most Popular Stocks Among Hedge Funds.

10 Best Stocks to Buy According to Billionaire Daniel Sundheim
10 Best Stocks to Buy According to Billionaire Daniel Sundheim

Daniel Sundheim of D1 Capital Partners

Average investors have to tread the financial markets with extreme caution. Even experts are having a hard time making sense of the rapidly changing world. The hedge fund industry's reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey's research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26, 2021, our monthly newsletter's stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify a select group of hedge fund holdings that significantly underperformed the market in advance. We have been tracking and sharing the list of these stocks since February 2017, and they lost 13% through November 16. That's why we believe hedge fund sentiment is a handy indicator that investors should consider. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

With this context in mind, here is our list of 10 best stocks to buy according to billionaire Daniel Sundheim. We used Sundheim’s 13F portfolio for the first quarter for this analysis.

Best Stocks to Buy According to Billionaire Daniel Sundheim

10. Booking Holdings Inc. (NASDAQ: BKNG)

Sundheim’s Stake Value: $420,096,000 Percentage of Daniel Sundheim’s 13F Portfolio: 3.1% Number of Hedge Fund Holders: 103

Booking Holdings Inc. (NASDAQ: BKNG) is a global provider of online travel and restaurant reservations and related services. The company was incorporated in 1997 and is placed tenth on the list of 10 best stocks to buy according to billionaire Daniel Sundheim. Booking shares have offered investors more than 25.96% in returns over the past year.

On August 5, Stifel analyst Scott Devitt raised the price target on Booking Holdings Inc. (NASDAQ: BKNG) to $2,450 from $2,400 and kept a “Hold” rating on the shares after the company published "excellent" second-quarter results, with gross bookings nearly 41% higher than the consensus forecast. On August 4, the company declared earnings for the second quarter of 2021. The company posted earnings per share of -$2.55, missing the estimates by $0.37. The revenue over the period was $2.16 billion, up 242.9% YoY, beating the estimates by $270 million.

The hedge fund chaired by Daniel Sundheim holds 180,311 shares in Booking Holdings Inc. (NASDAQ: BKNG) worth over $420 million. D1 Capital Partners' stake in Booking decreased by 29% in the past few months.

Just like Microsoft Corporation (NASDAQ: MSFT), Amazon.com, Inc. (NASDAQ: AMZN), and Facebook, Inc. (NASDAQ: FB), Booking Holdings Inc. (NASDAQ: BKNG) is one of the best stocks to buy according to billionaire Daniel Sundheim.

Ensemble Capital, in its second-quarter 2021 investor letter, mentioned Booking Holdings Inc. (NASDAQ: BKNG). Here is what Ensemble Capital has to say about Booking Holdings in its letter:

"Booking Holdings: This dominant online travel company saw its stock plummet during the early stages of the pandemic, but then came roaring back as it became clear that highly effective vaccines would be developed in record time. After performing about in line with the market until late April, the stock price weakened, finishing the quarter down 6%, as it became clear that a full reopening of European travel this summer is in jeopardy due to the continent’s difficulties with their vaccine rollout. But while this means that summer 2021 results may not rebound as much as we hoped, it is now clear from travel patterns in the US and China that people will return to travel with a vengeance as soon as it is feasible. Long-term demand for Booking’s services is not in doubt.”

9. Datadog, Inc. (NASDAQ: DDOG)

Sundheim’s Stake Value: $446,475,000 Percentage of Daniel Sundheim’s 13F Portfolio: 3.3% Number of Hedge Fund Holders: 44

Datadog, Inc. (NASDAQ: DDOG) delivers a cloud-based monitoring and analytics platform for developers, IT operations teams, and business users. The company was incorporated in 2010 and is placed ninth on the list of 10 best stocks to buy according to billionaire Daniel Sundheim. Datadog, Inc. (NASDAQ: DDOG) shares have returned 43.24% to investors over the course of the past 12 months.

On August 5, Datadog, Inc. (NASDAQ: DDOG) declared earnings for the second quarter of 2021. The earnings per share was $0.09, beating the market predictions by $0.06. The revenue over the period was $233.5 million, up 66.8% YoY, beating the estimates by $21.06 million. On August 4, Datadog Cloud Security Platform was launched by Datadog, Inc. (NASDAQ: DDOG) . The Cloud Security Platform from Datadog, Inc. (NASDAQ: DDOG) gives DevOps and Security teams the access to a shared source of truth, backed by a uniform data schema. On August 2, RBC Capital analyst Matthew Hedberg raised the firm's price target on Datadog to $110 from $90 and kept a “Sector Perform” rating on the shares.

Daniel Sundheim holds more than 5 million shares in Datadog, Inc. (NASDAQ: DDOG), worth over $446 million, representing 3.3% of their portfolio. D1 Capital Partners has increased stakes in the firm by 37% in the past few months. Just like Microsoft Corporation (NASDAQ: MSFT), Amazon.com, Inc. (NASDAQ: AMZN), and Facebook, Inc. (NASDAQ: FB), Datadog, Inc. (NASDAQ: DDOG) is one of the best stocks to buy according to billionaire Daniel Sundheim.

Artisan Partners, in its first quarter 2021 investor letter, mentioned Datadog, Inc. (NASDAQ: DDOG). Here is what the fund has to say about Datadog, Inc. in its investor letter:

“We also added to Datadog. Shares of Datadog retreated in Q1 in sympathy with the broader information technology sector. However, the company remains on solid fundamental footing, recently setting a quarterly record for net new customer additions. Datadog’s cloud solutions fill a void left by legacy tools built for on-premise IT infrastructures, enabling it to take share in an underpenetrated, large addressable market. We believe the company’s low-touch land-and-expand customer acquisition model, combined with a steady expanding product portfolio, position it well for strong profit and cash flow growth in the coming years.”

8. RH (NYSE: RH)

Sundheim’s Stake Value: $451,298,000 Percentage of Daniel Sundheim’s 13F Portfolio: 3.34% Number of Hedge Fund Holders: 50

RH (NYSE: RH), along with its subsidiaries, operates as a home furnishings retailer. It was incorporated in 2011 and is ranked eighth on the list of 10 best stocks to buy according to billionaire Daniel Sundheim. RH shares have gained about 125.26% over the last 12 months.

On June 10, Gordon Haskett analyst Chuck Grom upgraded RH (NYSE: RH) to “Accumulate” from “Hold,” raising the price target to $750 from $550. On June 9, RH posted earnings for the first quarter of 2021. It reported earnings per share of $4.89, beating market predictions by $0.77. In addition, the revenue for the first three months of 2021 was over $860 million, beating the estimates by $103.05 million.

D1 Capital Partners holds 756,450 shares in RH (NYSE: RH) worth over $451 million, representing 3.34% of their portfolio. RH (NYSE: RH) is getting the attention of the smart money, as 50 hedge funds tracked by Insider Monkey reported owning stakes in the company at the end of the first quarter of 2021, up from 42 funds a quarter earlier.

Just like Microsoft Corporation (NASDAQ: MSFT), Amazon.com, Inc. (NASDAQ: AMZN), and Facebook, Inc. (NASDAQ: FB), RH (NYSE: RH) is one of the best stocks to buy according to billionaire Daniel Sundheim.

Polen Capital, in its first-quarter 2021 investor letter, mentioned RH (NYSE: RH). Here is what the fund said:

RH was also a top contributor during the quarter. RH is a leading luxury retailer in home furnishings, including high-end luxury furniture, home décor, lighting, textiles, etc. The company has experienced high demand for its products over the past year, despite many of its galleries and integrated restaurants being closed, at least temporarily, in 2020. We think the management team has continued to make thoughtful investments in the core business as well as other adjacencies to further meet customer needs. We believe RH has a long runway to further expand into other home furnishings categories, expand its footprint both domestically and internationally, and launch other luxury adjacent categories.”

7. Snowflake Inc. (NYSE: SNOW)

Sundheim’s Stake Value: $476,787,000 Percentage of Daniel Sundheim’s 13F Portfolio: 3.52% Number of Hedge Fund Holders: 71

Snowflake Inc. (NYSE: SNOW) delivers a cloud-based data platform globally. The company was founded in 2012 and stands seventh on the list of 10 best stocks to buy according to billionaire Daniel Sundheim. Snowflake shares have offered investors returns exceeding 38% over the course of the past 3 months.

On June 16, Envestnet, Inc. (NYSE: ENV) announced a partnership with Snowflake Inc. (NYSE: SNOW) to make its industry-leading data analytics available on the Snowflake Data Marketplace, making it easier to search, acquire, and integrate into financial solutions. On June 14, Deutsche Bank analyst Patrick Colville raised Snowflake Inc. (NYSE: SNOW) price target to $265 from $248 and maintained a “Buy” rating.

D1 Capital Partners owns 2.08 million shares in Snowflake Inc. (NYSE: SNOW) worth over $476 million, representing 3.52% of their investment portfolio. The hedge fund has increased its stake by 110% in the previous quarter. The company is also getting the attention of the smart money, as 71 hedge funds tracked by Insider Monkey reported owning stakes in the company at the end of the first quarter of 2021, up from 54 funds a quarter earlier.

Just like Microsoft Corporation (NASDAQ: MSFT), Amazon.com, Inc. (NASDAQ: AMZN), and Facebook, Inc. (NASDAQ: FB), Snowflake Inc. (NYSE: SNOW) is one of the best stocks to buy according to billionaire Daniel Sundheim.

RiverPark Funds, in its first-quarter 2021 investor letter, mentioned Snowflake Inc. (NYSE: SNOW). Here is what the fund said:

"We also established a position in Snowflake during the quarter. Snowflake offers cloud-based data storage and analytics, generally termed "data warehouse-as-a-service." The data warehousing market—created by the massive, growing amount of user, customer, and account data and the need to search and analyze it—has historically stored its data on physical servers located on-premises. However, the cloud data platform market—storing data off-premises on cloud servers—is a relatively new $70 billion+ market. Significantly, incremental warehouse data capacity and renewals are expected to be driven by and to the cloud, with more than 75% of databases in the cloud by 2022.

Snowflake requires absolutely no infrastructure management from its users, is fully scalable for each customer, runs on Amazon, Microsoft, or Google cloud platforms, and most critically, Snowflake helps companies analyze their data. The company also has a unique, customer-aligned billing model based on usage. All of which has led to Snowflake being among the leaders of this highly fragmented market, posting 124% revenue growth last year. SNOW’s growth comes from the combination of more customers—which grew 73% last year—and customers buying more services—the company boasts an amazing 150%+ net customer retention. The company’s growing scale has also led to increasing gross margin and operating leverage, up 1,100 basis points and 8,200 basis points, respectively, over the past two years. The company has guided to FCF break-even this year, and with the company’s capital expenditure-light model—Snowflake uses the public cloud for hosting—we expect FCF to grow much faster than revenue growth, which we forecast to grow comfortably more than 50% per year for the next several years. Additionally, we have great confidence in the SNOW management team, which previously had an enormously successful run guiding one of our other core Cloud software holdings ServiceNow.”

6. Netflix, Inc. (NASDAQ: NFLX)

Sundheim’s Stake Value: $491,404,000 Percentage of Daniel Sundheim’s 13F Portfolio: 3.63% Number of Hedge Fund Holders: 110

Netflix, Inc. (NASDAQ: NFLX) provides entertainment services. It was founded in 1997 and is ranked sixth on the list of 10 best stocks to buy according to billionaire Daniel Sundheim. Netflix currently has a $228.98 billion market capitalization.

On July 21, Credit Suisse analyst Douglas Mitchelson raised the price target on Netflix to $643 from $586 and maintained an “Outperform” rating on the shares following quarterly results. On July 20, Netflix, Inc. (NASDAQ: NFLX) posted earnings for the second quarter of 2021. The earnings per share was $2.97, missing market predictions by $0.19. However, the revenue over the period was $7.34 billion, beating the estimates by $20 million. The company’s addition of paid subscribers was 1.54 million vs. 1.19 million expected. Netflix is expecting third-quarter revenues of $7.48 billion vs. $7.48 billion consensus and earnings per share of $2.55 vs. $2.17 consensus.

The hedge fund chaired by Daniel Sundheim holds 942,000 shares in Netflix, Inc. (NASDAQ: NFLX) worth over $491 million. There were 110 hedge funds in our database that held stakes in Netflix at the end of the first quarter of 2021, compared to 116 funds in the quarter earlier.

Just like Microsoft Corporation (NASDAQ: MSFT), Amazon.com, Inc. (NASDAQ: AMZN), and Facebook, Inc. (NASDAQ: FB), Netflix, Inc. (NASDAQ: NFLX) is one of the best stocks to buy according to billionaire Daniel Sundheim.

Polen Capital, in its first-quarter 2021 investor letter, mentioned Netflix, Inc. (NASDAQ: NFLX). Here is what the fund has to say about Netflix, Inc. in its investor letter:

"We purchased Netflix in March, initiating a 3% position in the portfolio. We believe Netflix is a highly competitively advantaged company. It has recently met all our investment guardrails, and we anticipate it will remain sustainably above our guardrails over the next five years and beyond. We know Netflix for its ubiquitous streaming service and deep library of owned content. The company has made investments in this content (currently running at nearly $20 billion/year), generally keeping subscribers highly engaged and loyal to their service. The company has number one market share in 99% of markets globally, but it is our view that video streaming on-demand is still an underpenetrated space with many years of attractive growth likely ahead. The service is also relatively affordable at roughly $11/month on average globally.

We believe Netflix’s growth in content spend is beginning to moderate, which could allow margin expansion to continue for many years when paired with ongoing subscriber growth and price increases. While there is competition from the likes of Apple (Apple TV+), Amazon (Prime Video), Disney (Disney+ and Hulu), and others, we believe there can be a handful of winners in this industry. Already, we see many people subscribe to multiple streaming video services, with Netflix being their “anchor” service. That said, the barriers to entry are high, and we believe they are getting higher given the substantial amount of capital and size of the subscriber base required to maintain a competitive service for both viewers and content producers. Over the next five years, we expect Netflix’s earnings growth to be approximately 30% annualized and free cash flow to grow at an even higher rate.”

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Disclosure: None. 10 Best Stocks to Buy According to Billionaire Daniel Sundheim is originally published on Insider Monkey.