In this article, we will be discussing the 5 best stocks to buy according to billionaire Daniel Sundheim. If you want to read our detailed analysis of Sundheim’s history, and hedge fund performance, go directly to the 10 Bests Stocks to Buy According to Billionaire Daniel Sundheim.
5. Carvana Co. (NYSE: CVNA)
Sundheim’s Stake Value: $524,623,000
Percentage of Daniel Sundheim’s 13F Portfolio: 3.88%
Number of Hedge Fund Holders: 64
Carvana Co. (NYSE: CVNA) is an online used car retailer. The company was founded in 2012 and is ranked fifth on the list of 10 best stocks to buy according to billionaire Daniel Sundheim. Carvana shares have returned 90.89% to investors over the past 12 months.
On August 5, Carvana Co. (NYSE: CVNA) declared earnings for the second quarter of 2021. It reported earnings per share of $0.27, beating the estimates by $0.63. The revenue for the first three months of 2021 was $3.34 billion, up 198.2% YoY, beating the estimates by $860 million. The company also declared a gross profit of $552 million, up 268%. On August 5, Cowen analyst John Blackledge raised the price target on Carvana to $366 from $336 and maintained an “Outperform” rating on the shares.
On June 30, the company announced that it is expanding its presence in Kansas and will now offer as-soon-as-next-day touchless home delivery to residents of the Wichita area. Customers may search over 30,000 used cars for sale, apply for auto financing, use the car loan calculator, buy, trade-in, and arrange next-day delivery. D1 Capital Partners owns 2 million shares in Carvana Co. (NYSE: CVNA) worth over $524 million, representing 3.88% of their portfolio. Hedge fund sentiment increased for Carvana in the first quarter of 2021. Insider Monkey’s data shows that 64 elite hedge funds held stakes in the company at the end of the first quarter, up from 63 funds a quarter earlier.
Steel City Capital LP, in its first-quarter 2021 investor letter, mentioned Carvana Co. (NYSE: CVNA). Here is what the fund said:
“Carvana’s (CVNA) 4Q’20 results weren’t particularly great. EBITDA was negative ($70) million, a stark turnaround on a sequential basis from a first-ever EBITDA profit of $21 million in 3Q’20. The culprit was a steep drop off in retail unit GPU ($1,265 vs. $1,857) and wholesale unit GPU ($358 vs. $1,113) as some of the COVID-driven aberrations in the used car market began to abate.
The company’s presentation of EBITDA (calculated “bottom up”) is dubious, as it commingles non-operating items including mark-to-market changes in its retained securitization portfolio. With the exception of 1Q’20, when ABS markets were going haywire, this line item provided a tailwind throughout 2020, including a gain of $5 million in 4Q’20. Also on the non-operating self-help front, management released a reserve for vehicle service contract cancellations in 4Q’20, adding another $7 million to EBITDA, and boosting “Other” GPU by $96.
Putting it all together, I put operating EBITDA closer to negative ($82) million vs. the $70 million printed by the company. This is a larger loss than 4Q’19 (calculated on a similar operating basis) despite the company selling 43% more retail units y/y!…” (Click here to see the full text)
4. Hilton Worldwide Holdings Inc. (NYSE: HLT)
Sundheim’s Stake Value: $574,381,000
Percentage of Daniel Sundheim’s 13F Portfolio: 4.25%
Number of Hedge Fund Holders: 47
Hilton Worldwide Holdings Inc. (NYSE: HLT) owns, rents, manages, develops, and franchises hotels and resorts. The company was founded in 1919 and is placed fourth on the list of 10 best stocks to buy according to billionaire Daniel Sundheim. The company shares have offered investors more than 52% in returns over the course of the past 12 months.
On August 2, Argus analyst John Staszak initiated a coverage on Hilton Worldwide Holdings Inc. (NYSE: HLT) with a “Buy” rating and raised the price target to $154 from $145. On July 29, Hilton posted earnings results for the second quarter of 2021. The earnings per share was $0.56, beating market predictions by $0.17. However, the revenue over the period was $1.33 billion, missing the estimates by $20 million.
The hedge fund managed by Daniel Sundheim owns more than 4.75 million shares in Hilton Worldwide Holdings Inc. (NYSE: HLT), worth over $574 million, representing 4.25% of their portfolio. D1 Capital Partners has trimmed its stake in the firm by 29% in the last three months.
LRT Capital Management, in its first-quarter 2021 investor letter, mentioned Hilton Worldwide Holdings Inc. (NYSE: HLT). Here is what LRT Capital Management has to say about Hilton in its letter:
“Hilton is the second largest hotel company in the world after Marriott International (MAR). The company owns a portfolio of brands from the low end (Hampton Inn, Hilton Garden Inn), through the mid-tier (DoubleTree, Hilton, Curio, Embassy Suites, Homewood Suites), to the luxury high end (Waldorf Astoria, Conrad, LXR). Hilton’s portfolio is almost perfectly balanced between the three categories, while the majority (73%) of the company’s EBITDA geographic exposure is in the United States with Asia Pacific and Europe each contributing another 10%. Hilton today is almost exclusively a manager and franchisor of hotels, not a hotel owner. The company owns 61 hotels, manages 715 and franchises 5,702 – in total 6,478 properties with over 1 million combined rooms.8 Like all franchise based businesses Hilton requires very little capital to grow as it utilizes the investment capital of its hotel-owners/partners to expand. Hilton currently faces a difficult operating environment due to the covid-19 pandemic and uncertainty about the future of business travel. However, the company is an excellent operator with a somewhat leveraged capital structure – if pent-up demand for travel materializes post-Covid, as we expect it will, the company will quickly go from losing money to raking in profits.
Hilton last reported earnings on February 17, with both top and bottom line disappointing investment analysts’ expectations. However, these poor results are not indicative of the company’s long-term outlook. In normal times, Hilton generates prodigious free cash flow which we expect will resume once travel demand returns. Over the longer term we expect Hilton to grow its topline at least twice as fast as GDP due to rising revenues per room and the growing number of rooms. Most importantly, the industry continues to consolidate with chain branded hotels taking market share from independent operations. With the superior marketing and loyalty programs offered by hotel chains (Hilton Honors has 112 million members) driving demand, independent hotel owners see the benefits of signing up with one of the dominant hotel chains (Hilton, IHG and Marriott). Furthermore, the company’s main growth opportunities remain abroad, as hotel chain penetration remains much lower outside the United States. Shares are up 9.34% year-to-date. We believe the shares are undervalued at 31.72x forward earnings.”
3. T-Mobile US, Inc. (NASDAQ: TMUS)
Sundheim’s Stake Value: $594,000,000
Percentage of Daniel Sundheim’s 13F Portfolio: 4.39%
Number of Hedge Fund Holders: 98
T-Mobile US, Inc. (NASDAQ: TMUS) and its subsidiaries offer mobile communication services in the United States, Puerto Rico, and the US Virgin Islands. The company was founded in 1994 and ranks third in the list of 10 best stocks to buy according to billionaire Daniel Sundheim. In addition, shares of the company rallied 28% in the last 12 months, resulting in a $134.7 billion market capitalization.
On August 2, Deutsche Bank analyst Bryan Kraft raised the price target on T-Mobile to $195 from $188 and kept a “Buy” rating on the shares after “powerful” second quarter results. On July 29, T-Mobile US, Inc. (NASDAQ: TMUS) posted earnings for the second quarter of 2021. It announced earnings per share of $0.78, beating market predictions by $0.29. In addition, the revenue for the first three months of 2021 was over $20 billion, beating the estimates by $610 million.
The stock is a new arrival on Daniel Sundheim’s portfolio, as his hedge fund bought about 4.74 million shares worth over $594 million, representing 4.39% of their portfolio.
ClearBridge Investments, in its fourth-quarter 2020 investor letter, mentioned T-Mobile US, Inc. (NASDAQ: TMUS). Here is what the fund said:
“The portfolio’s quality bias and valuation discipline have generated compelling returns over time with typically strong relative results in more challenging environments as it did through the first three quarters of 2020. However, that same quality bias tends to create a more challenging relative performance environment for the Strategy during periods of sharp economic acceleration, which tend to benefit stocks that are more commodity linked or of lower quality. This has been the case during the vaccine- and stimulus-driven rally experienced late last year and during the most recent quarter. Sectors that lagged in the quarter included communication services, where T-Mobile trailed after generating robust returns earlier in the recovery.”
2. Danaher Corporation (NYSE: DHR)
Sundheim’s Stake Value: $597,634,000
Percentage of Daniel Sundheim’s 13F Portfolio: 4.42%
Number of Hedge Fund Holders: 81
Danaher Corporation (NYSE: DHR) develops, manufactures, and markets professional, medical, industrial, and commercial products and services. It was founded in 1969 and is placed second on the list of 10 best stocks to buy according to billionaire Daniel Sundheim. Shares of Danaher are up 48.81% in the past 12 months.
On August 4, Credit Suisse analyst Katie Tryhane initiated a coverage on the stock and rated it as “Outperform,” giving it a price target of $306. On July 27, Danaher Corporation (NYSE: DHR) declared that its two subsidiaries Pall Corporation and Cytiva, have devised a strategic growth strategy to invest more than $1.5 billion in expanding manufacturing capacity and services for global life sciences customers. The two companies would invest approximately $600 million and $400 million, respectively, to increase the production of essential goods required to develop biological medicines, such as chromatography resins and cell culture media. On July 22, Danaher declared earnings for the first quarter of 2021. It reported earnings per share of $2.46, beating market predictions by $0.41. The revenue for the first three months of 2021 was $7.22 billion, up 36.2% YoY, beating the estimates by $510 million.
D1 Capital Partners holds 2.66 million shares in Danaher Corporation (NYSE: DHR) worth over $597 million, representing 4.42% of their portfolio. In addition, there were 81 hedge funds in our database that held stakes in Danaher at the end of the first quarter of 2021, the same as the quarter earlier.
1. Expedia Group, Inc. (NASDAQ: EXPE)
Sundheim’s Stake Value: $891,862,000
Percentage of Daniel Sundheim’s 13F Portfolio: 6.6%
Number of Hedge Fund Holders: 86
Expedia Group, Inc. (NASDAQ: EXPE) operates as an online travel company globally. It was founded in 1996 and ranks first on the list of 10 best stocks to buy according to billionaire Daniel Sundheim. Expedia shares have returned 91.95% to investors during the course of the past 12 months.
On August 5, Expedia Group, Inc. (NASDAQ: EXPE) posted earnings results for the second quarter of 2021. The earnings per share was -$1.13, missing market predictions by $0.53. However, the revenue was $2.11 billion over the period, beating the estimates by $130 million. On July 14, ASG, an Alpine Investors portfolio firm, purchased hotel operations management platform ALICE from Expedia Group, Inc. (NASDAQ: EXPE). According to the business, ALICE is an all-in-one hotel operations platform utilized by over 25K hoteliers worldwide. On May 26, RBC Capital analyst Brad Erickson initiated a coverage on Expedia, rating the stock as “Sector Perform,” with a price target of $175.
At the end of the first quarter of 2021, D1 Capital Partners owned more than 5.18 million shares in Expedia Group, Inc. (NASDAQ: EXPE), worth $891.86 million. This represented 6.6% of the investment portfolio of D1 Capital Partners. The company is also getting the attention of the smart money, as 86 hedge funds tracked by Insider Monkey reported owning stakes in the company at the end of the first quarter of 2021, up from 76 funds a quarter earlier.
ClearBridge Investments, in its first-quarter 2021 investor letter, mentioned Expedia Group, Inc. (NASDAQ: EXPE). Here is what the fund said:
“Several of our better performers in the first quarter were purchased while their business models were under stress from COVID restrictions or the macro environment the pandemic created. What gave us confidence in purchasing Expedia were the actions the company took to extend out their balance sheets until travel resumed. It should benefit as a broader vaccination rollout prompts cruise lines to resume operations and consumers to start traveling again and are positioned to deliver better margins and gain pricing power as the economy normalizes due to the cost controls implemented during the downturn.”
You can also take a peek at Best Stocks to Buy According to Billionaire Barry Rosenstein’s Jana Partners and 10 Best Stocks to Buy According to Brazilian Billionaire Jorge Paulo Lemann
