XPO Logistics: Sundheim's Industrial Bet in a Shifting Landscape

Daniel Sundheim, the founder of D1 Capital Partners, is known for his contrarian instincts and focus on undervalued industries. In 2025, his top stock pick—XPO Logistics (NYSE: XPO)—reflects a bold bet on an overlooked sector: global logistics. With a $506 million stake in XPO as of Q3 2024, Sundheim has positioned the company as his second-highest-ranked holding, signaling confidence in its resilience amid economic uncertainty. But what makes XPO stand out in a crowded market?

Why Sundheim Bets on XPO

XPO’s appeal lies in its dual strengths: a global logistics footprint and a laser focus on cost discipline. Sundheim’s team emphasizes XPO’s ability to navigate a “soft freight environment” while delivering consistent growth. In Q3 2024, the company reported $2.05 billion in revenue, a 3.5% year-over-year increase, driven by higher North American LTL (Less-Than-Truckload) yields and expanding European operations. Net income rose to $95 million from $86 million in the prior-year period, underscoring operational efficiency.

XPO’s stock has surged 86% year-to-date, far outpacing broader market indices. This outperformance aligns with Sundheim’s thesis that industrial services, like logistics, benefit from a resilient U.S. economy and declining interest rates.

The XPO Advantage: Global Reach and Tech Integration

XPO operates in over 20 countries, leveraging its 700+ locations to serve sectors from e-commerce to healthcare. Its competitive edge stems from technology-driven supply chain solutions, including AI-powered route optimization and last-mile delivery systems. This integration allows XPO to offer scalable, cost-effective services—a critical differentiator as global trade complexity grows.

Financial Resilience Amid Macroeconomic Headwinds

XPO’s financial performance highlights its ability to thrive in challenging conditions. While freight volumes softened in 2024, XPO prioritized revenue quality over volume, tightening cost controls and renegotiating contracts. The result? Gross margins expanded by 150 basis points year-over-year.

This discipline has not gone unnoticed. ClearBridge Large Cap Value Strategy, in its Q3 2024 letter, praised XPO’s “operational discipline” and called its results “impressive” in a tough freight market.

Sundheim’s Portfolio Shift: From Tech to Industrial

Sundheim’s bold move into XPO reflects a broader portfolio reallocation. In Q2 2024, D1 Capital reduced stakes in tech giants like Alphabet and Meta, reallocating capital to industrial plays such as XPO. This pivot underscores a belief that undervalued industrial stocks, buoyed by strong balance sheets and secular demand, offer better risk-adjusted returns than speculative tech stocks.

Risks and Caveats

While Sundheim’s thesis is compelling, XPO faces macroeconomic risks. Its performance is tied to freight demand and U.S. interest rates—both of which could shift abruptly. Additionally, AI-focused stocks are seen by some as offering faster growth, though Sundheim views XPO as a long-term value play.

Conclusion: A Steady Hand in a Volatile Market

XPO Logistics is no flash-in-the-pan. With a 3.5% revenue growth rate, an 86% stock surge year-to-date, and D1 Capital’s $506 million backing, the company embodies Sundheim’s contrarian strategy: invest in overlooked industries with durable fundamentals.

The data speaks clearly: XPO’s operational improvements, global scale, and alignment with D1’s value-driven approach make it a compelling long-term hold. However, investors must weigh its steady growth against the allure of faster-moving tech sectors. For those with patience, XPO’s stock—up 86% in 2024—suggests Sundheim’s bet may yet prove prescient.

In a world of fleeting opportunities, XPO stands as a reminder: sometimes, the best investments are those that quietly build value, one shipment at a time.