The Ledger
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Sundheim: D1 Capital does not use derivatives due to timeframe risk
“I don't use, I really don't use derivatives at all. The problem with derivatives is like, look, At the end of the day, when you break down, what is a derivative? It's just leverage and implied volatility. Like, if I want leverage, I can go, you know, get lever…”
Sundheim: Hiring lateral portfolio managers from other funds almost never succeeds
“If I hire somebody laterally, who's a portfolio manager in another fund, that's rarely been successful, almost, almost never.”
Sundheim: The biggest investing mistakes come from selling great compounders too early
“The biggest mistakes are selling the Costco's too early, because you know, the IRR is totally dependent upon what you assume the exit multiple is, like, and that is difficult to be precise about, you know, what the right exit multiple is for a business.”
Sundheim: D1 Capital stopped investing in China around 2022
“Yeah, we stopped investing in China about three years ago.”
Sundheim: D1 analysts must submit weekly mock portfolios allocating capital
“We, yeah, we, everyone has like a, what we call a mock portfolio. So every week they have to take the positions they cover and they have to say, if I was managing capital, here's how I would allocate capital.”
Sundheim: D1 usually buys public stocks before finishing investment memos
“We're having to get to the memo stage, and usually we start buying it before, because in the public markets, you know, if you have a good idea, you could take a month and a half to, like, write a memo, but by that time, the price may have moved. So usually we …”
D1 Capital covered all short positions at peak prices during GameStop rally
“We covered everything at the worst time, and I knew it was the worst time. But, if it kept going on for two weeks, yeah, all of a sudden there's a real problem, and I wasn't going to put the firm at risk, and I told my investors that this is the worst time.”
Sundheim: D1's 2020 short portfolio ultimately underperformed massively
“Now, if I had held that short portfolio, forget like from the top, if I just held from the end of 2020, I mean, they underperformed massively.”
D1 Capital never received margin calls during the January 2021 GameStop squeeze
“We never came close to going into business, never had margin calls, never.”
Sundheim: D1 Capital avoids hiring portfolio managers or public equity veterans
“One, we don't hire portfolio managers. I pretty much only hire people who've never done public equity before which has pros and cons.”
Sundheim: Private secondaries only offer easy liquidity for companies you shouldn't sell
“You can sell, like, the best companies you can sell easily, but those aren't the companies you want to sell. You know, it, it's, ah, we rarely transact in the secondary market because, you know, we don't want to sell the best companies, and it's hard, like peo…”
Sundheim: Monthly and quarterly returns are arbitrary outputs of past decisions
“If you have a portfolio of things that you've built over time, our monthly returns and quarterly returns are purely an output. Like there's nothing, it's, it is arbitrary in some respects.”
Sundheim: D1 analysts must be awake during coverage earnings calls
“If the company reports earnings, I expect the analyst to be awake. And I'm awake too.”
Sundheim: Private equity hires take three years to contribute at D1
“Now, like, if I hire somebody from private equity, it takes about three years for them to really be, like, contributing to the one.”
Sundheim: D1 paused short selling for a year after GameStop
“After GameStop, we took about a year off of short selling, and then I reengaged in short selling.”
Sundheim: Companies facing secular decline almost never get acquired
“I find that, like generally, companies that have secularists almost never get bought. Like, I rarely has, do I ever see a CEO say, I want to go buy something that grows slower than I do, right? Like, this doesn't happen, right? Nobody wants, like, Take the tim…”
Sundheim: D1's diversified short alpha matches its concentrated era
“Our short alpha since that time, and since we implemented the more diverse portfolio you referenced, our short alpha has been as good or better”