Billionaire Daniel Sundheim founded D1 Capital Partners in July 2018 and runs it as chief investment officer. He spent 15 years at Viking Global Investors under billionaire Andreas Halvorsen.
D1’s Q2 filings show that the fund bought over 340,000 shares of Linde plc (NASDAQ:LIN), a stake worth about $177.2 million and 0.51% of the portfolio.
Linde is the largest industrial gas company in the world and sells oxygen, nitrogen, hydrogen and argon to refiners, steelmakers, chemical plants and hospitals.
D1 also bought 1.6 million shares of Builders FirstSource, Inc. (NYSE:BLDR), worth about $146.7 million and 0.42% of the portfolio. BLDR is down about 38% so far this year. Let’s analyze the stock in detail to see whether it’s a decent buy-the-dip opportunity.
Builders FirstSource is a building materials company. Bulls say the housing downturn may be close to a bottom. Construction activity has fallen sharply as high mortgage rates hurt affordability. When the housing and construction market recovers, BLDR will be among the first to benefit.
Daniel Sundheim of D1 Capital
Bear Case and Risks
The biggest risk is that the housing downturn lasts much longer than expected. Builders FirstSource depends heavily on residential construction, and weak housing activity is already putting pressure on sales, margins and earnings.
High mortgage rates remain the central problem. If borrowing costs stay elevated, home affordability could remain weak and builders may continue limiting new construction. The company also carries elevated debt following acquisitions, which gives it less flexibility during a prolonged downturn.
Valuation
The stock trades at about 20 times forward non-GAAP earnings, roughly in line with the sector median of 19.9 times. On an enterprise-value basis, Builders FirstSource trades at about 11 times forward EBITDA, modestly below the sector median of 12 times. Builders FirstSource trades at about 0.83 times forward EV/sales, compared with the sector median of 2.21 times.
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