In this article, we discuss billionaire Daniel Sundheim’s top 15 stock picks heading into 2025.
D1 Capital Partners might be one of the youngest hedge funds but it is one with a solid track record in a highly competitive landscape. Founded in 2018, the hedge fund successfully navigated the downturn triggered by the COVID-19 pandemic thanks to an aggressive investment strategy that revolves around fundamental research.
Daniel Sundheim is the brainchild, having started the hedge fund with $5 billion seed capital. As the founder and chief investment officer, he propelled the hedge fund to prominence in 2020 with a 54% gain in one of the most unpredictable years in the investment world. The stellar performance that continued into 2021 came as the value hedge fund focused on private equity and emerging startups that accounted for 50% of the portfolio.
READ ALSO: Billionaire David Tepper’s Top 10 Stock Picks Heading into 2025 and 10 Best Stocks to Buy for the Long-Term According to Charles Akre.
Nevertheless, Sundheim had one of the worst years of his career in 2022 as the overall equity markets came under pressure amid heightened inflation. As the S&P 500 fell 19.4%, D1 Capital ended up underperforming, going down by 30.5%. However, the hedge fund bounced back to winning ways in 2023, gaining more than 19% as it marked down some of its private investments.
Sundheim’s knack for investing started while he was an undergraduate at the Wharton School University of Pennsylvania. While in college, he invested and traded tech stocks. He went on to gain valuable investing experience while working as an analyst at Bear Stearns.
“Certain people are born to do certain things, and Dan was born to deploy capital,” said Dris Upitis, a former portfolio manager at Viking with Sundheim.
D1 Capital Partners’ edge stems from an investment strategy that revolves around fundamental research to uncover undervalued investment opportunities. Additionally, the hedge fund engages in diversification as one of the ways of spreading the risk and shrugging the pitfalls of volatility in specific sectors.
While controlling about $5.2 billion in portfolio value, Sundheim invests close to a third of its capital in private market bets. Industrial services and consumer stocks also account for the most significant share of the hedge fund’s portfolio. It also has substantial exposure to tech stocks from which it is benefiting from the artificial intelligence frenzy.
According to Sundheim, public companies are the best way to tap into the AI frenzy. Likewise, the investment officer expects artificial intelligence, unlike other technological advances, to be felt across all sectors. Companies investing billions of dollars into talent and AI projects are doing so without expecting short-term returns and are focused on long-term returns.
As the chief investment officer, Sundheim leverages long/short equity strategies using equity derivatives, convertibles, and fixed-income instruments to generate value in the markets. D1 Capital Partners is already up by more than 30% for the year, affirming the effectiveness of Sundheim’s investment strategy. The stellar performance has primarily been driven by gains in the industrial and consumer stocks which are benefiting from a resilient US economy.
Billionaire Daniel Sundheim’s top 15 stock picks heading into 2025 consist of stocks poised to benefit from a resilient US economy as interest rates come down.
Daniel Sundheim of D1 Capital Partners
Our Methodology
To compile the list of billionaire Daniel Sundheim’s Top 15 Stock Picks for 2025, we reviewed D1 Capital Partners’ investment portfolio. We identified the hedge fund’s fifteen largest holdings and analyzed their potential for long-term investment. Finally, we ranked these stocks in ascending order based on D1 Capital Partners’ stakes in each one.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Billionaire Daniel Sundheim’s Top 15 Stock Picks Heading Into 2025
15. Starbucks Corporation (NASDAQ:SBUX)
D1 Capital Partners’ Equity Stake: $116. 21 Million
Number of Hedge Fund Holders as of Q3 2024: 76
Starbucks Corporation (NASDAQ:SBUX) is a company that roasts, markets and sells coffee. It has many stores worldwide. Recently, its main business has struggled, with three quarters in a row of falling revenue. This drop happened because fewer people visited their stores, with a 10% decrease in the fourth quarter. China, a key growth area for Starbucks Corporation (NASDAQ:SBUX), saw a 6% drop in in-store visits in the fourth quarter. Despite this, SBUX still has strong advantages. Its brand is very strong, and it offers a variety of high-priced drinks and food.
Similarly, its gross margins over the last decade have averaged 28.2%, showing the company’s ability to generate profits amid the challenges. Starbucks Corporation (NASDAQ:SBUX) remains one of billionaire Daniel Sundheim’s top 15 stock picks heading into 2025 as it has entered into new markets and replicated its US playbook. As of the third quarter, Starbucks had over 40,000 stores spread across the globe, up 29% from five years ago.
While Starbucks Corporation (NASDAQ:SBUX) started as a growth stock, it has evolved into a reliable dividend stock. It has raised its dividend for 14 consecutive years, rewarding income-focused investors with a forward 2.6% dividend yield.
14. HDFC Bank Limited (NYSE:HDB)
D1 Capital Partners’ Equity Stake: $120.37 Million
Number of Hedge Fund Holders as of Q3 2024: 41
HDFC Bank Limited (NYSE:HDB) is a financial services company that provides banking and financial services. It is one of billionaire Daniel Sundheim’s top 15 stock picks heading into 2025 to gain exposure in India’s financial services sector. With more than 1,680 locations throughout India, the business has established a vast network to serve its varied clientele. With a gross loan book of $11.67 billion as of Q3, HDB has grown by almost 21% in just two years.
Its remarkable growth trajectory demonstrates the company’s ability to meet India’s enormous and expanding demand for financial services. HDFC Bank Limited’s (NYSE:HDB) clientele is broad and includes businesses needing working capital and individuals looking for consumer loans.
The non-banking lending division HDB Financial Services has submitted an application for an IPO with a maximum value of $1.49 billion. HDB Financial Services intends to use the IPO proceeds to improve its capital needs, such as regulatory compliance and onward lending, to spur growth. By making this change, the business should take advantage of India’s rising demand for financial services, grow loan books, and gain market share.
13. Warby Parker Inc. (NYSE:WRBY)
D1 Capital Partners’ Equity Stake: $128.38 Million
Number of Hedge Fund Holders as of Q3 2024: 26
Warby Parker Inc. (NYSE:WRBY) is a healthcare company that provides eyewear products. It also offers eyeglasses, sunglasses, light-responsive lenses, and contact lenses. These services are available online and in 269 stores across the U.S. and Canada. The stock is up by about 58.59% for the year on the company showing strong business momentum amid robust revenue growth.
Warby Parker Inc. (NYSE:WRBY) reported a strong performance in the third-quarter. Revenue was up 13.3% to $192.4 million, helped by gains in active customers. E-commerce revenue grew by 1% year-over-year, with a 35% surge in single-vision glasses and contact lens sales. Warby Parker Inc.’s (NYSE:WRBY) foray into providing comprehensive vision care has been a major factor in its growth. The company’s value proposition to customers has improved, and revenue streams have diversified.
Warby Parker Inc.’s (NYSE:WRBY) customer base continues to expand at an impressive rate, having expanded by 5.6% in the third quarter to 2.43 million active customers. The average revenue per customer has also increased to $305, a 7.5% year-over-year improvement. Amid the customer growth, the eyewear company raised its full-year revenue growth guidance to between 14% and 15%. Successful integration of in-network insurance partnerships, strategic expansion into physical stores, and improvements to e-commerce platforms are expected to accelerate growth.
TimesSquare Capital Management U.S. Small Cap Growth Strategy stated the following regarding Warby Parker Inc. (NYSE:WRBY) in its Q2 2024 investor letter:
“Our preferences in the Consumer-oriented sectors lean toward value-oriented or specialty retailers, franchise models, or premium brands. Warby Parker Inc. (NYSE:WRBY), a specialty retailer of eyewear products, rose 18%. Its first quarter results surpassed expectations with strength in single-vision glasses and a return to growth in its digital channel due to recent marketing efforts. Additionally, forward revenue and profits expectations were increased.”
12. Constellation Brands, Inc. (NYSE:STZ)
D1 Capital Partners’ Equity Stake: $137.36 Million
Number of Hedge Fund Holders as of Q3 2024: 36
Constellation Brands, Inc. (NYSE:STZ) produces, imports, markets, and sells beer, wine, and spirits. It provides beer primarily under the Corona Extra, Corona Familiar, Corona Hard Seltzer, Corona Light, and Corona Non-Alcoholic brands. The stock is flat for the year amid a string of mixed financial results.
In its fiscal second quarter of 2025, earnings per share came in at $4.32, above analysts’ estimates. Revenues increased 2.9% to $2.92 billion. A 12% decline in spirit sales to $388.7 million, dragged by a 9.8% decline in shipment volume, is a point of concern. Nevertheless, Constellation Brands, Inc.’s (NYSE:STZ) beer brands, accounting for over 80% of total revenue, have maintained double-digit percentage sales growth for years. Growth is anticipated to continue at a single-digit percentage rate as brands such as Modelo and Corona gain market share.
According to Constellation Brands, Inc.’s (NYSE:STZ) second-quarter results, its beer business saw a 13% increase in operating income and a nearly 6% increase in net sales. The company’s operational efficiency and pricing power in the beer market are evident in the third consecutive quarter of margin improvement. Constellation Brands, Inc. (NYSE:STZ) has made essential changes to its business plan, such as selling its Svedka vodka brand to the international spirits giant Sazerac. The sale is part of a larger plan to concentrate on the high-end market for wines and spirits.
11. Meta Platforms Inc. (NASDAQ:META)
D1 Capital Partners’ Equity Stake: $144.06 Million
Number of Hedge Fund Holders as of Q3 2024: 235
Meta Platforms Inc. (NASDAQ:META) is a communication services company that develops and provides products that enable people to connect and share with friends. It is a leader in the social networking space as it owns four of the biggest apps that draw in billions of daily active users. Consequently, it has grown to become a powerhouse in digital advertising through Facebook, Instagram and Messenger.
Meta Platforms Inc. (NASDAQ:META) is one of billionaire Daniel Sundheim’s top 15 stock picks for 2025. After a tough 2022 with a 1% revenue drop, the company has bounced back, with revenue up 22% in the first nine months of this year. Its 43% operating margin has boosted profitability, and the stock is up by 80% this year. Meta’s recovery is due to its investments in artificial intelligence, which have improved user engagement and experience. The company now has about 3.3 billion daily active users across its social media platforms.
Growing daily active users and improved engagement levels have made Meta Platforms Inc. (NASDAQ:META) a preferred advertising platform for advertisers looking to target their audience. Over a million advertisers used its AI tools in October to make great ads. The company plans to spend $38 billion to $40 billion to improve its network, which looks promising for the future.
Rowan Street Capital stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its Q2 2024 investor letter:
“We are pleased to report that Meta Platforms, Inc. (NASDAQ:META), our largest position in the fund, has delivered a remarkable performance, +450% since our November 2022 note. Our investment in Meta dates back to 2018, with an average cost basis of approximately $172 per share. Today, the stock trades around $535, reflecting a 3x return over the six-year holding period, equating to a 20% annualized return.
We would like to remind you that achieving these types of returns is never a straight path. From time to time, we might experience volatility — that’s simply part of the investment journey. In fact, wealth creation and volatility go hand in hand. There’s no escaping it; it’s the “price of admission” the market demands. If you take a look at the chart below, you’ll notice the drawdowns META stock has faced over the years, with 2022 standing out as a particularly challenging period, where the stock saw a 75% drop….. ” (Click here to read the full text)
10. Warner Music Group Corp. (NASDAQ:WMG)
D1 Capital Partners’ Equity Stake: $164.78 Million
Number of Hedge Fund Holders as of Q3 2024: 25
Warner Music Group Corp. (NASDAQ:WMG) is a global music entertainment company involved in the discovery and development of recording artists. The stock has been under pressure, going down by about 9% for the year. The underperformance comes amid growing concerns about waning growth rates.
While total revenue in the third quarter was up 2.8% year-over-year to $1.63 billion, it slowed down from annualized revenue growth of 4.2%. Operating margins also shrunk from 13.4% a year ago to 8.8%. On the other hand, the recorded music subscription segment is emerging as a bright spot, going by the 11% revenue increase in the quarter. Recorded music revenue was also up by 6%.
Similarly, Warner Music Group Corp. (NASDAQ:WMG) has embarked on a restructuring drive as it seeks to reinvigorate its growth prospects. The company is targeting $260 million in pre-tax expense savings as it streamlines its operations as part of the restructuring plan. It plans to take advantage of the expected growth in subscription streaming next year. Other strategies include a new organizational structure, expanding globally, and making strategic acquisitions like Cloud9 Recordings and Apicore.
Artisan Mid Cap Value Fund stated the following regarding Warner Music Group Corp. (NASDAQ:WMG) in its Q3 2024 investor letter:
“We are always on the lookout for companies that are under pressure in some form or fashion as this can create the conditions for an attractive entry price. Though equity markets have made substantial gains over the past year, we have still found select opportunities to put capital to work. Q3 purchases included Warner Music Group Corp. (NASDAQ:WMG), MGM Resorts International and Polaris.
Warner Music Group (WMG) is one of the three largest record labels in the world. The music industry had a challenging run post-Napster and pre-Spotify, with a broken monetization model punishing artists and labels alike. We believe we are in early stages of industry revenue growth as key distributors shift from subscriber growth to subscriber monetization. Despite high-quality streaming being adopted by the mainstream, music remains under-monetized compared to the pre-Internet era. We also believe this shift should benefit artists and labels such as WMG. Seventy percent of WMG’s streaming revenue comes from three services: Spotify, YouTube and Apple. Streaming penetration isn’t as high as one would expect in the US and globally, providing a nice runway for growth. However, the market’s outlook for industry growth is more downbeat as shares were down ~14% YTD at the date of our initial purchase in early July and were trading at a trough multiple relative to its public company history. WMG is also much cheaper than its closest competitor Universal Music Group. In regard to WMG’s financial condition, it is solid and stable, with debt that is well termed out and low cost.”
9. Bank of America Corporation (NYSE:BAC)
D1 Capital Partners’ Equity Stake: $174.86 Million
Number of Hedge Fund Holders as of Q3 2024: 98
Bank of America Corporation (NYSE:BAC) is one of the largest banks that offer banking and financial products and services. It generates revenues by offering saving accounts, wealth management, certificates of deposit, investment funds, and credit and debit cards. It is one of the financial institutions that has benefited from the high interest rate environment. Its stock is up by more than 34% for the year.
The outperformance comes from the financial juggernaut leveraging its substantial size, influence and diversified product portfolio to generate solid financial results. The growing popularity of digital banking is helping Bank of America Corporation (NYSE:BAC), which has many active users on its digital platforms. Consequently, it has increased its market share and drawn in more clients by investing in technology in this rapidly changing industry.
Additionally, Bank of America Corporation (NYSE:BAC) is one of Billionaire Daniel Sundheim’s top 15 stock picks heading into 2025 owing to the strategic deals it has inked that affirm its long-term prospects. For starters, it has initiated a strategic partnership with FIFA and expanded into new markets through branch network growth.
Bank of America Corporation (NYSE:BAC) excels in attracting and retaining customers through digital innovation, including its AI-powered assistant, Erica, which has surpassed 2 billion interactions. The bank’s focus on technology has led to a 94% increase in AI and ML patents since 2022, with nearly 1,100 patents and applications. Overall, BAC holds nearly 7,000 patents, the most in the financial services industry, thanks to its 7,500 inventors in 14 countries and 42 U.S. states.
8. Live Nation Entertainment, Inc. (NYSE:LYV)
D1 Capital Partners’ Equity Stake: $200.22 Million
Number of Hedge Fund Holders as of Q3 2024: 44
Live Nation Entertainment, Inc. (NYSE:LYV) is an entertainment company that operates through Concerts, Ticketing, and Sponsorship & Advertising segments. The stock is up by more than 48% year to date as investors react to the company expanding its live event and ticketing portfolio.
Live Nation Entertainment, Inc. (NYSE:LYV) had an impressive summer concert season that propelled it to impressive third-quarter results. Its revenue in the quarter came in at $7.7 billion as earnings per share logged in at $1.66 against $1.58 expected. The company achieved the highest-ever concert profitability as adjusted operating income surged 39% to $474 million.
As expected, Live Nation Entertainment, Inc.’s (NYSE:LYV) shift to smaller venue shows has led to higher adjusted operating income but lower revenues. With ticket sales for the stadium performances off to a powerful start next year, Live Nation is well-positioned for a strong fourth quarter. Additionally, Live Nation plans to introduce 14 new or refurbished venues next year as it seeks to attract 8 million additional fans.
Management has already shared an outlook on expanding growth opportunities, driven by an unprecedented summer concert season and a record-breaking show pipeline. Management is also optimistic about Live Nation achieving double-digit growth in 2024 that should continue into 2025.
Baron Discovery Fund stated the following regarding Live Nation Entertainment, Inc. (NYSE:LYV) in its Q3 2024 investor letter:
“We added to our position in Liberty Media Corporation – Liberty Live, a tracking stock whose primary asset is its holdings in Live Nation Entertainment, Inc. (NYSE:LYV). Live Nation, which produces live concerts and owns Ticketmaster, traded down when the Department of Justice (DOJ) sued the company for anticompetitive behavior. We added to our position in Liberty Live as we do not believe the DOJ suit will lead to the breakup of Live Nation and we believe that Live Nation trades at a valuation well below its intrinsic value. Shares of both Live Nation and Liberty Live recovered during the quarter, ending the period near their 52-week highs.”
7. Spotify Technology S.A. (NYSE:SPOT)
D1 Capital Partners’ Equity Stake: $222.69 Million
Number of Hedge Fund Holders as of Q3 2024: 98
Spotify Technology S.A. (NYSE:SPOT) is an internet content and information company that provides audio streaming subscription services worldwide. The stock’s 155% rally year-to-date attests to the resilience of the company’s core business.
In the third quarter of 2024, Spotify Technology S.A. (NYSE:SPOT) had a record 640 million monthly active users. This comprised 252 million premium members who pay a monthly subscription fee and 402 million free users who are supported by advertisements. In Q3, total revenue reached a record $4.2 billion, a 19% increase over the same period last year.
Strong revenue growth, record subscriber counts, and soaring profits have all contributed to Spotify’s explosive run year to date. According to the company’s long-term outlook, there is still a lot of space for expansion. The company’s competitive edge stems from controlling 31% of music streaming market share. While Spotify Technology S.A. (NYSE:SPOT) faces stiff competition in the streaming business, its significant market share allows it to differentiate itself through pricing.
Spotify Technology S.A. (NYSE:SPOT) invests in advanced technologies to deliver diverse content formats. Its AI-driven recommendation engine ensures users see relevant content. Unique features like AI DJ and AI Playlist enhance user experience by creating personalized playlists and song lists based on prompts. Spotify is a major player in podcasting and is expanding in audiobooks, with over 375,000 titles, ranking second to Amazon’s Audible.
6. Amazon.com, Inc. (NASDAQ:AMZN)
D1 Capital Partners’ Equity Stake: $225.69 Million
Number of Hedge Fund Holders as of Q3 2024: 286
Amazon.com, Inc. (NASDAQ:AMZN) is an internet retail giant that sells consumer products, advertising, and subscription services through online and physical stores. The company has generated billions of dollars in revenues from its e-commerce and cloud computing dominance.
The stock is up by about 51% year to date, benefiting from robust financial results and growing optimism about its growth prospects. Despite being a huge company with sales of $575 billion over the last 12 months, Amazon.com, Inc. (NASDAQ:AMZN) is still in a phase of robust growth. The company boasts of several growth engines. Amazon is the main beneficiary as shopping trends shift to online, given its robust logistics and supply networks supporting same-day and next-day deliveries. The company’s e-commerce platform accounts for almost 40% of all online sales in the United States.
In addition to e-commerce, Amazon.com, Inc. (NASDAQ:AMZN) is also a player in cloud computing, with Amazon Web Services affirming its growth prospects. Corporate interest in shifting IT capabilities to the adaptable and affordable off-premises computing environment should benefit AWS. Additionally, many of its clients view AWS as a mission-critical partner due to the necessity of integrating artificial intelligence tools.
Additionally, Amazon.com, Inc. (NASDAQ:AMZN) is already leveraging the technology to enhance its e-commerce operations by improving customers’ shopping experience. It’s also using the technology to enhance its cloud solutions, strengthening its competitive edge. AWS has already reached the $110 billion annualized revenue run rate and is still growing.
Patient Capital Opportunity Equity Strategy stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2024 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) moved higher throughout the second quarter as AI demand helped to reaccelerate growth in their AWS business. It looks as though the cloud business is finally past the customer cost optimization period with customers restarting their cloud migrations as well as expanding spend on AI projects. Despite the top and bottom-line improvement seen in the first quarter, the company is significantly underearning its long-term potential as it continues to reinvest aggressively in the business. With 80% of global retail sales still being done in physical stores and 85% of global IT spending still on-premises, we see a long-run way for the dominant player in the cloud, retail, and increasingly logistics and advertising space.”
5. GE Healthcare Technologies Inc. (NASDAQ:GEHC)
D1 Capital Partners’ Equity Stake: $268.16 Million
Number of Hedge Fund Holders as of Q3 2024: 50
GE Healthcare Technologies Inc. (NASDAQ:GEHC) is a healthcare company that develops and manufactures products and services for diagnosing, treating, and monitoring patients. Its Imaging segment offers molecular imaging, computed tomography (CT) scanning, magnetic resonance (MR) and women’s health products.
GE Healthcare Technologies Inc. (NASDAQ:GEHC) delivered solid third-quarter results on October 30, 2024. Its net profit of $470 million, or $1.14 per share on an adjusted basis, easily topped analysts’ estimates of $1.06 per share. Revenue increased 0.9% year-over-year to $4.86 billion, driven by a 6% increase in Pharmaceutical Diagnostics revenue of $625 million.
The future looks bright as GE Healthcare has obtained FDA clearance for GE Healthcare Technologies Inc.’s (NASDAQ:GEHC) SIGNA MAGNUS. The approval should strengthen the company’s neuroimaging unit as it marks a notable advancement in magnetic resonance imaging technology. The medical devices company is also in the process of launching Flyrcado, a new PET imaging agent expected to generate annual revenues of over $500 million.
Additionally, GE Healthcare Technologies Inc. (NASDAQ:GEHC) has made several investments and alliances in the field of artificial intelligence (AI), including a collaboration with Amazon Web Services to create AI medical tools. The company has also unveiled an AI Innovation Lab to accelerate the development of several of its AI initiatives, such as software for detecting breast cancer and AI agents with specialized knowledge in particular care areas.
4. Royal Caribbean Cruises Ltd. (NYSE:RCL)
D1 Capital Partners’ Equity Stake: $278.50 Million
Number of Hedge Fund Holders as of Q3 2024: 52
Royal Caribbean Cruises Ltd. (NYSE:RCL) is a travel services company that operates cruises worldwide. With 68 ships, it benefits from economies of scale and favorable supplier terms.
Royal Caribbean Cruises Ltd. (NYSE:RCL) has succeeded in bringing in more than $13 billion in revenue in 2024, given that 26% of all cruise passengers travel in one of its ships. In addition, the company is profitable, with its net income for the first nine months of the year having soared 64% to $2.3 billion. Royal Caribbean has maintained pricing power and achieved favorable yield-to-cost spreads thanks to its strong financial position and unique product offerings.
Royal Caribbean Cruises Ltd. (NYSE:RCL) focuses on exclusive destinations and innovative ships. Its large family-oriented ships attract a broad clientele and increase yields. Private destinations like Perfect Day at CoCoCay set it apart from competitors, raise ticket prices, and boost shoreline spending. The company’s strategy of deploying advanced ships and expanding private destinations is expected to enhance profitability.
Ariel Investments, an investment management firm, shared insights in its second-quarter 2024 investor letter, stating:
“Global cruise vacation company, Royal Caribbean Cruises Ltd. (NYSE:RCL), advanced on another quarterly earnings beat and subsequent raise in full-year guidance. Stronger than anticipated consumer demand, healthy onboard spend, robust pricing and solid cost containment lifted recent results. Additionally, RCL is benefitting from several new megaships, more island destinations and re-entry into the China market. The resiliency of the core cruise consumer, in combination with management’s superior operational expertise and revised earnings outlook, lays the foundation for RCL to exceed its three-year strategic imperative, the Trifecta Program, a year earlier than expected.”
3. Philip Morris International Inc. (NYSE:PM)
D1 Capital Partners’ Equity Stake: $399.03 Million
Number of Hedge Fund Holders as of Q3 2024: 75
Philip Morris International Inc. (NYSE:PM) is a tobacco company that delivers a smoke-free future through products outside the tobacco and nicotine sector. Its product portfolio consists of cigarettes and smoke-free products, including heat-not-burn, vapour, and oral nicotine products. Its stock has climbed to an all-time high, affirming why it is one of billionaire Daniel Sundheim’s top 15 stock picks heading into 2025.
The 32% year-to-date gain comes from Philip Morris International Inc. (NYSE:PM) delivering better-than-expected results and raising its full-year outlook amid strong demand for non-cigarette products. The maker of Marlboro cigarettes and Zyn nicotine pouches reported third-quarter adjusted earnings per share (EPS) of $1.91 on October 22, 2024. Revenues grew 6.7% from a year ago to $2.96 billion. Philip Morris expects its full-year adjusted diluted EPS of $6.45 to $6.51, up from its previous outlook of $6.33 to $6.45.
Philip Morris International Inc.’s (NYSE:PM) oral product shipments increased by almost 40% in the first nine months of 2024 compared to the same period the previous year. The increase was due to strong Zyn demand in the United States. Reducing the product’s supply constraints has contributed to some of that growth.
Zyn has emerged as a symbol of the transition towards alternatives away from traditional cigarettes. Consequently, it is expected to generate significant long-term value. Philip Morris International Inc. (NYSE:PM) announced earlier this year that it would invest $600 million to build a new production facility for Zyn in Colorado to take advantage of the soaring demand.
2. XPO, Inc. (NYSE:XPO)
D1 Capital Partners’ Equity Stake: $506.48 Million
Number of Hedge Fund Holders as of Q3 2024: 48
XPO, Inc. (NYSE:XPO) provides freight transportation services. It operates in over 20 countries with more than 700 locations. The company serves various industries, including retail, manufacturing, e-commerce, and healthcare. XPO combines technology, scale, and quality in freight management, supply chain optimization, and last-mile delivery.
Increased focus on revenue quality and cost management has resulted in positive results, even in a soft-demand environment. This might explain why the stock is up by more than 86% for the year, affirming its status as one of billionaire Daniel Sundheim’s top 15 stock picks heading into 2025. XPO, Inc. (NYSE:XPO) delivered impressive third-quarter results on October 30, 2024, as it continued to grow its business in a soft freight environment.
Revenue in the quarter logged in at $2.05 billion compared to $1.98 billion for the same quarter last year. The increase was due to higher North American LTL segment yields and European volume growth. Net income surged to $95 million compared to $86 million a year ago.
ClearBridge Large Cap Value Strategy stated the following regarding XPO, Inc. (NYSE:XPO) in its Q3 2024 investor letter:
“Among transports, we maintained our preference for less than truckload (LTL) provider XPO, Inc. (NYSE:XPO), to which we added during the period. We funded the XPO addition first by trimming and ultimately exiting United Parcel Service. UPS’s undemanding valuation notwithstanding, we think a healthier industry structure and better pricing dynamics make XPO a better longer-term investment.”
1. Maplebear Inc. (NASDAQ:CART)
D1 Capital Partners’ Equity Stake: $918.55 Million
Number of Hedge Fund Holders as of Q3 2024: 55
Maplebear Inc. (NASDAQ:CART) is an internet retail company that provides online grocery shopping services to households. Its competitive edge stems from delivering 25% of its orders in less than 30 minutes, making it a preferred online shopping destination for many people. It also benefits from its strategic partnership with Uber Technologies, which enhances deliveries through the Instacart app.
Maplebear Inc. (NASDAQ:CART) is one of billionaire Daniel Sundheim’s top 15 stock picks heading into 2025, going by its 74% gain, year-to-date. The stock has outperformed the overall retail and wholesale sector, which has returned an average of 34.2%. The outperformance comes from Maplebear delivering better than expected financial results and benefiting from improving consumer spending power.
In its third-quarter report on November 13, 2024, the internet retail giant delivered $0.42 in earnings per share against a loss of $20.86 a share delivered in the same period last year. Revenue in the quarter was up 11.5% to $85 million. Maplebear bouncing back to profitability comes from the grocery market being underpenetrated online. The company expects its fourth-quarter gross transaction value to range between $8.50 billion and $8.65 billion, representing an 8% to 10% year-over-year growth.
While we acknowledge the potential of CART as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than CART but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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