Cheeky Pint: Dan Sundheim of D1 Capital on the Art of Public Market Investing

Podcast: Cheeky Pint
Host: Stripe (John Collison)
Guest: Dan Sundheim, Founder of D1 Capital
Date: October 22, 2025

Episode Overview

In this insightful episode, Stripe cofounder John Collison, along with Ben Thompson (Stratechery) and Daniel Gross, sits down with Dan Sundheim, founder of D1 Capital Partners—a hedge fund managing both public and private investments. Over a pint (or several), they explore the nuances of long-term public market investing, the integration of private and public equity, portfolio construction, the post-GameStop hedge fund landscape, and Sundheim’s perspective on tech trends, sectoral bubbles, and leadership in investing.

Major Themes

• Philosophies and process behind public market investing
• How to evaluate and construct long/short portfolios
• Lessons from portfolio mistakes (e.g., Netflix)
• GameStop, short squeezes, and modern retail investing
• The future of public vs. private markets
• AI-driven investment cycles, bubbles, and secular shifts
• Stock selection, sizing, and pattern recognition in investing
• Market inefficiencies, global comparisons, and lessons from Europe/Asia
• Advice for aspiring investors

Key Discussion Points & Insights

1. Dan Sundheim’s Approach to Public Markets

• Public Markets Are 'Problematic' Today:
  Sundheim expresses skepticism about taking companies public in the current environment, citing volatility and misaligned incentives for employees.

  "If I ran a private company like Stripe, I wouldn't go public. I think the public markets are kind of problematic at this point."
  — Dan Sundheim [00:20]

• Fundamental, Bottom-Up Focus (No Quant/Technical Strategies):
  D1 Capital employs deep, fundamental analysis, investing with 3-5 year horizons, equally applying due diligence to public and private names.

  "We do fundamental analysis and so deep research... Whether it’s public or private, we’re investing with a horizon of three to five years... Public is a two-way door, private is a one-way door."
  — Dan Sundheim [03:30]

2. Investment Process & Decision-Making

• Idea Vetting and Memo Culture:
  Investment ideas are stress-tested well before memos are written; positions are often bought before the written memo is finished.

  "We start buying it before the memo is done and then the memo is kind of the final compilation of the due diligence."
  — Dan Sundheim [02:12]

• Portfolio Construction as ‘Art, Not Science’:
  Sizing is highly qualitative, based on a blend of potential upside, risks, fundamentals, and momentum—constantly rebalanced as ideas mature.

  "It is entirely an art that we’re always trying to get better at. We look at tons of data... but it is really just a feel."
  — Dan Sundheim [19:34]

• Mock Portfolios for Analyst Development:
  D1’s analysts run simulated portfolios (“mock portfolios”) to sharpen their skills, which factor into performance reviews and compensation.

  "Every week they have to take the positions they cover and say, ‘if I was managing capital, here’s how I would allocate it.’"
  — Dan Sundheim [17:47]

3. Pattern Recognition & Recruiting

• Pattern Recognition is Key:
  Intuition and commercial instinct are as important as analytical chops—something that takes years to develop.

  "It’s pattern recognition… part of it is just understanding business models... probably just you’re either born with it or not."
  — Dan Sundheim [13:05]

• Recruitment Philosophy:
  D1 avoids lateral portfolio manager hires, preferring to train people (often from private equity) from the ground up, even if it takes several years for them to contribute meaningfully.

  "We pretty much only hire people who’ve never done public equity before... it takes about three years for them to really be contributing to D1."
  — Dan Sundheim [13:58]

4. Managing Mistakes and Long-Term Holds

• Biggest Mistake: Selling Great Businesses Too Early
  Sundheim looks back at selling Netflix as an example of a painful mistake—selling when business still deserved a far higher multiple.

  "The biggest mistakes are selling the Costcos too early because the IRR is totally dependent upon what you assume the exit multiple is."
  — Dan Sundheim [06:28]

  • Netflix Case Study:
    D1's original thesis on Netflix proved correct, but turnover of the analyst team and a momentary distraction led to an untimely sale—despite the position’s long-term compounding.

    "The thesis was correct and I didn’t hold it long enough... It was not excusable."
    — Dan Sundheim [10:02]

5. The GameStop Era: Short Squeezes & Pain Tolerance

• January 2021 and GameStop:
  D1 suffered through unprecedented, sentiment-driven short squeezes, a traumatic experience that forced a re-examination of risk management.

  "Nothing happens fundamentally and a stock goes up 400% in two weeks. That's what happened... That was the toughest period I've ever had."
  — Dan Sundheim [25:20] & [27:58]

• Short Book Diversification Post-GameStop:
  The fund moved from concentrated short positions to a more diversified short book to avoid being crushed by erratic, crowd-driven spikes.

  "After GameStop we took about a year off short selling and then I re-engaged... you can have 40 [shorts] instead of 8... and our short alpha has been as good or better."
  — Dan Sundheim [33:57], [35:07]

6. Anatomy of Shorts & Lessons in Risk

• Types of Shorts:
  D1’s short positions now broadly fall into four buckets: unsustainable story stocks, secularly doomed businesses, competitively disadvantaged names, and cyclically overearning companies.

  "There's retail stocks which are just like story stocks... terminal value stocks... business is just really disadvantaged... and cyclically overearning."
  — Dan Sundheim [35:26–37:53]

• Why Not Use Derivatives:
  Sundheim prefers to short stocks directly; he avoids derivatives due to timeframes and complexities.

  "There’s typically a time frame… I don’t like having something that making a bet that something’s going to happen in a certain period of time."
  — Dan Sundheim [39:29]

7. Understanding Market Inefficiencies (Europe, China, US)

• Slow Price Discovery in Europe:
  European stocks, especially in turnarounds (e.g., Rolls Royce), tend to take much longer to reflect fundamental change compared to US counterparts.

  "The US is pretty quick at seeing change... In Europe... once a company like Rolls had underperformed for so long... [investors] just kind of got in their head that Roles is something we just don't want to touch."
  — Dan Sundheim [43:01–43:59]

• China’s Value Trap:
  Sundheim stopped investing in China due to government unpredictability, capital allocation inefficiencies, and investor uncertainty.

  "I think the government has way too much influence... What markets don't like is uncertainty."
  — Dan Sundheim [69:36–70:12]

8. The Art of Stock Selection: Multiple Expansion and Compounding

• Most Money is Made on Multiple Expansion:
  The biggest gains come when the market shifts its perception of a company’s durability and growth prospects, leading to a re-rating of multiples.

  "You’re always going to make the most money for multiple expansion... when I sell companies too early, it’s almost always because we use too low of a multiple at exit."
  — Dan Sundheim [57:49], [58:54]

• Examples of Market Underappreciation:
  Booking.com (Priceline) once traded at 9x earnings while growing at 40%; today, slower growth but far higher multiple. Meta (Facebook) also eventually saw multiple expansion as its business-model skepticism faded.

  "Sometimes the market is just so skeptical... even as the business slows, the multiple goes up."
  — Dan Sundheim [55:49–56:32]

9. Structural Shifts: Private vs. Public Markets

• Shift Toward Privates:
  D1 is now roughly two-thirds private by AUM—mostly due to natural evolution, not a pre-planned shift.
  The volatile, sentiment-driven nature of public markets deters some companies from going public.

  "If I ran a private company like Stripe, I wouldn't go public... The public markets are kind of problematic at this point."
  — Dan Sundheim [88:38]

10. Stock Picks and Sectoral Bets

• 10-Year Hold Picks:
  For a hypothetical nonprofit that must hold for 10 years, Sundheim mentions Clean Harbors (hazardous waste, incinerators) and Siemens Energy (gas turbines and grid modernization) due to their moats and long secular tailwinds.

  "I like Siemens Energy quite a bit... I like Clean Harbors... very, very good business. And the starting multiple is pretty reasonable."
  — Dan Sundheim [60:03–61:13]

• Bet on the AI Energy Demand Supercycle:
  He predicts a major secular tailwind for gas turbine and grid companies as electricity demand compounds globally, driven by AI and data centers.

  "Electricity demand in the U.S. grew at 0% for the last 20 years... over the next 20 years, I think electricity demand will grow at 4%... The bottleneck is going to be electricity."
  — Dan Sundheim [62:30–66:32]

• SpaceX Enthusiasm:
  Sundheim’s bull case rests on dramatic cost reductions from reusability, first-mover advantage, and Starlink, with significant upside from unquantifiable “optionality” in defense, global telecom, and beyond.

  "He is ruthless about bringing down cost to a point where his business becomes a natural monopoly because it is a low cost provider... There is a lot of option value."
  — Dan Sundheim [80:10–83:41]

Notable Quotes & Memorable Moments

• On Sizing Positions:

  "For every stock, there is a target price, but then there’s also what kind of risk... You don’t want all names where you could make 100% but lose 40."
  — Dan Sundheim [19:34]

• On Human Tendency to Seek New Ideas:

  "It’s like a human tendency—oh, this is a new company. I love investing. Let’s learn about this new company. But at the end of the day... trying to sell and move into something else is almost always a bad decision."
  — Dan Sundheim [10:40]

• On Developing Talent in Investing:

  "It takes even five years to really get a sense. Because some people start out analytically solid, but the actual intuition of stock picking hasn’t come to them yet."
  — Dan Sundheim [15:22]

• On Emotional Asymmetry:

  "There’s an asymmetry of emotion. When you're making a lot of money... I feel like, yes, I'm happy that we're succeeding but I'm not euphoric. When you go through something like that [GameStop], I mean, it is so painful and stressful."
  — Dan Sundheim [29:05]

• On Pattern Recognition:

  "It's an art, not a science."
  — Ben Thompson [13:42]
  "You have to always be on and there are people who love it. If you love it and you have that commercial instinct, and you have to be analytically sharp."
  — Dan Sundheim [17:15]

Timestamps for Important Segments

• D1’s Investment Philosophy: [03:30]
• Memo Process and Decision Making: [02:12]
• Handling Portfolio Mistakes, Netflix Case: [07:20]–[10:27]
• GameStop / Short Squeeze Crisis: [24:00]–[33:57]
• Shorting Philosophy, Post-GameStop: [35:07]–[37:53]
• Pattern Recognition and Talent: [13:05]–[17:13]
• European vs. US Market Inefficiency: [43:01]–[46:41]
• Why Avoid China: [69:34]–[73:26]
• Multiple Expansion in Public Markets: [55:25]–[58:54]
• Best Stock for 10-Year Lockup: [60:03]–[62:32]
• AI, Energy Demand, Siemens Energy: [61:13]–[68:32]
• SpaceX Optionality: [80:04]–[83:41]
• Talent Development Advice: [95:37]

Advice to Aspiring Investors

• Read—a Lot:
  Read incessantly: company write-ups, Buffett letters, and stock pitches. Let the market be your mentor; watch and learn from how ideas play out.

  "Pretty much with anything you want to do in life, I just believe that reading incessantly is the way to get ahead... the more you read, the better you are."
  — Dan Sundheim [95:37]

Closing Thoughts

This episode offers a masterclass in applied investing, filtered through two decades of experience and a willingness to admit mistakes and adapt. Sundheim articulates the balance required between analysis, intuition, emotional fortitude, and relentless reading in seeking out winning investments. With an engaging, candid tone and plenty of war stories (and a pint in hand), he gives listeners a rare, inside look at how today’s elite hedge fund managers operate in increasingly complex global markets.