In this article we look at why This Billionaire Hedge Fund Manager Just Sold Off Shopify Inc (SHOP) and 9 Other Stocks. Click to skip ahead and see why This Billionaire Hedge Fund Manager Just Sold Off Shopify Inc (SHOP) and 4 Other Stocks.
Daniel Sundheim’s D1 Capital Partners is a New York-based hedge fund and venture capital firm that was founded by Sundheim in 2018. The Tiger Cub, who previously served as the chief investment officer at $59 billion hedge fund Viking Global, has amassed a personal fortune of $3.2 billion according to Forbes.
A graduate of the University of Pennsylvania, where he received a Bachelor’s degree in Finance, Sundheim has quickly elevated his fund’s status as one of the hottest on Wall Street thanks to his investing acumen, growing it from $5 billion in assets at inception to more than $40 billion just four years later.
Daniel Sundheim of D1 Capital Partners
D1 Capital was one of the top performing funds in 2020, returning 60%, which raised its annualized returns close to 30% as of the end of that year. It got off to a rough start in 2021, losing billions in the GameStop Corp. (NYSE:GME) short squeeze in January, but had recovered most of those losses by April. 2022 has been a rough one for the fund however, as it was down by 22.5% year-to-date as of the end of May, including 4% losses during that month.
Sundheim was massively trimming the size of his fund’s 13F portfolio in Q1, selling off 21 former holdings while adding just one new position. The value of his fund’s portfolio declined markedly as a result, being cut nearly in half to $8.49 billion, its lowest amount in the last two years.
Despite all the selling, Sundheim largely maintained the same levels of exposure to the sectors he’s most bullish on. Consumer discretionary stocks still accounted for more than half of the portfolio’s assets on March 31, while tech stocks had grown to account for more than a quarter of them. Sundheim cut his exposure to communications stocks by nearly 5 percentage points to 2.79%.
In this article, we’ll take a look at ten stocks the billionaire investor sold off in Q1 as he repositions himself for the investing challenges that lie ahead in 2022.
The following data is gathered from D1 Capital Partners‘ latest 13F filing with the SEC. We follow hedge funds like D1 Capital Partners because Insider Monkey’s research has uncovered that their consensus stock picks can deliver outstanding returns.
All hedge fund data is based on the exclusive group of 900+ funds tracked by Insider Monkey that filed 13Fs for the Q1 2022 reporting period.
This Billionaire Hedge Fund Manager Just Sold Off Shopify Inc (SHOP) and 9 Other Stocks
10. Masimo Corporation (NASDAQ:MASI)
Former Value of D1 Capital Partners‘ 13F Position: $149 million
Number of Hedge Fund Shareholders: 38
JD.com, Inc. (NYSE:JD), Shopify Inc. (NYSE:SHOP), and Carvana Co. (NYSE:CVNA) aren't the only stocks Sundheim has lost conviction in. His hedge fund took a large stake in medical technology maker Masimo Corporation (NASDAQ:MASI) during the third quarter of last year. The billionaire’s fund bailed on the position during Q1 however, unloading all 507,397 shares that it held on December 31. Those shares have tanked by 55% so far in 2022.
The bulk of those 2022 share declines occurred after Masimo Corporation (NASDAQ:MASI) announced the acquisition of Viper Holdings for $1 billion, a move that baffled pretty much everyone. The medical company believes that by buying the commercial audio and theater sound system maker, it can leverage its commercial channels in regards to its own devices, including a forthcoming, health-focused smart watch.
Masimo Corporation (NASDAQ:MASI) clarified some of its future plans during its Q1 earnings report in May, when the company revealed that it earned $0.93 in adjusted EPS and $304.2 million in revenue, slightly topping estimates on both fronts. However, the updates left many unanswered questions and featured margins that were below assumptions, which prompted Piper Sandler analyst Jason Bednar to lower his price target on the company to $130 from $160, with a ‘Neutral’ rating on the shares.
9. Block, Inc. (NYSE:SQ)
Former Value of D1 Capital Partners‘ 13F Position: $178 million
Number of Hedge Fund Shareholders: 84
Block, Inc. (NYSE:SQ) is another stock that has been battered in 2022, losing 60% of its value year-to-date. It’s also another stock that Daniel Sundheim jettisoned from his 13F portfolio shortly after taking a long position in the company. D1 Capital bought just 1.1 million SQ shares during Q4, but unloaded all of them during the following quarter. Hedge fund ownership of Block Inc. has fallen by 16% over the past two quarters after reaching an all-time high in Q3 of 2021.
Shares of Block, Inc. (NYSE:SQ), which is the parent company of Square, Cash App, Spiral, and TIDAL, have sank by 72% over the last year. Square’s gross profit grew by 41% year-over-year in Q1 to $661 million, while Cash App’s gross profit was up 26% to $624 million. Those are solid growth rates for a company that’s trading at just 2x sales.
And as Square and Cash App introduce more features and become more integrated, that should boost the revenue generation and stickiness of both of Block, Inc. (NYSE:SQ)’s primary fintech offerings. Truist analyst Andrew Jeffrey recently lowered his price target on Block to $105 from $145, noting that legacy processors have a less attractive risk/reward profile given the margin risk they face. He nonetheless maintained a ‘Buy’ rating on SQ shares and considers the company his favorite large-cap fintech.
8. Toast Inc. (NYSE:TOST)
Former Value of D1 Capital Partners‘ 13F Position: $222 million
Number of Hedge Fund Shareholders: 40
Toast Inc. (NYSE:TOST), which launched its IPO in the third quarter of 2021, is another stock that Daniel Sundheim took a stake in during Q4 before unloading entirely the following quarter. Shares of the company, which provides cloud-based software for the restaurant industry, have lost 61% of their value in 2022 and 77% of their value since the company’s IPO.
Toast Inc. (NYSE:TOST) is confident in the forthcoming digitization of the restaurant industry, believing it has a $55 billion market opportunity in the space and noting that restaurants which have utilized digital platforms like its own ultimately perform far better. The company grew revenue by 90% in Q1 to $535 million, while its Annual Recurring Revenue grew by 66% to $637 million, which still represents just 1% of the company’s perceived market opportunity.
Toast Inc. (NYSE:TOST) ended the first quarter with 62,000 live locations, having added a net total of more than 5,000 new locations for the first time ever during a quarter in Q1. Its strong Q1 also allowed it to raise its full-year guidance by 6% at the midpoint of its range. Mizuho has an $18 price target and ‘Neutral’ rating on TOST shares, but believes the second half of the year could be a good one for the payments sector and its beaten-down stocks.
7. Coupa Software Incorporated (NASDAQ:COUP)
Former Value of D1 Capital Partners‘ 13F Position: $237 million
Number of Hedge Fund Shareholders: 46
Coupa is another business software provider that Sundheim has abandoned in favor of other investments. There was a 22% drop in hedge fund ownership of Coupa Software Incorporated (NASDAQ:COUP) during the first quarter, with Sundheim’s D1 Capital among the former shareholders of the company that sold off their positions during the quarter. COUP shares are down by 65% this year.
Coupa Software Incorporated (NASDAQ:COUP), which provides cloud-based business management and spending software solutions, beat estimates in its fiscal Q1 as business travel began bouncing back. The company pulled in $196 million in revenue, up by 18% year-over-year, while its adjusted earnings per share of $0.08, up a penny from the year-ago period. Coupa has been a spending spree in recent years, making several acquisitions to bolster its offerings, including its $1.5 billion purchase of LLamasoft in November 2020.
The Aristotle Large Cap Growth Fund also unloaded its position in Coupa Software Incorporated (NASDAQ:COUP) during Q1, explaining some of the reasons behind its decision in the fund’s Q1 2022 investor letter:
“We sold our position in Coupa Software following the company’s fourth quarter 2021 earnings results. The company reported earnings that were disappointing relative to the growth trajectory of both pre-COVID and prior quarters over the past fiscal year. We are concerned that the company is seeing slowing traction in the enterprise sector and felt that the weak topline and billings guidance along with margin compression from increased sales and marketing costs creates too many headwinds for us to be comfortable with. The weak fiscal year 2023 billings guidance when combined with management’s qualitative comments about a strong pipeline is concerning to us, and we believe management has done a disappointing job in providing more transparency around the growth drivers for the business.”
6. Bath & Body Works Inc. (NYSE:BBWI)
Former Value of D1 Capital Partners‘ 13F Position: $238 million
Number of Hedge Fund Shareholders: 57
Sundheim’s fund took a new stake in Bath & Body Works Inc. (NYSE:BBWI) during Q3 but unloaded more than half of it a quarter later. D1 Capital finished the job in Q1, selling off the remainder of its position in the specialty retailer. Alexander Mitchell’s Scopus Asset Management also sold off its BBWI position during the first quarter.
Sundheim’s fund perfectly capitalized on its Bath & Body Works Inc. (NYSE:BBWI) position, holding the stock while it was hot throughout 2021 and selling it off early in 2022 as it started to go sour. BBWI shares gained 88% last year but have given back all of those gains and more in 2022.
Analysts are generally bullish on the long-term trajectory of Bath & Body Works Inc. (NYSE:BBWI), but are concerned about how rising freight and other costs will impact the company in the short-term at the same time that recession fears are driving down consumer confidence. B. Riley analyst Susan Anderson has a ‘Buy’ rating on BBWI shares, but lowered her price target on them to $67 from $76 in May, citing uncertain macro conditions.
JD.com, Inc. (NYSE:JD), Shopify Inc. (NYSE:SHOP), and Carvana Co. (NYSE:CVNA) rank as some of the other top stock picks that Sundheim’s firm unloaded in Q1. Check them out at the link below.
Click to continue reading and see the This Billionaire Hedge Fund Manager Just Sold Off Shopify Inc (SHOP) and 4 Other Stocks.
Disclosure: None. This Billionaire Hedge Fund Manager Just Sold Off Shopify Inc (SHOP) and 9 Other Stocks is originally published at Insider Monkey.