A hand of high-conviction stock picks from hedge funds and notable investors could be primed to trounce the market in the new year. The financial sector has gained newfound love in the hedge fund community since the election of former President Donald Trump. Professional traders raised their exposure to financial stocks to the largest overweight in at least 15 years, according to Goldman Sachs, which analyzed the holdings of 697 hedge funds with $3 trillion in gross equity positions. LPL Financial Financial service firm LPL Financial stood out as the most concentrated hedge fund long position in the sector with 16% of equity cap owned by hedge funds at the end of the third quarter, Goldman’s data showed. Stephen Mandel’s Lone Pine Capital hiked its bet on LPL Financial last quarter, taking the stake to over $500 million. Dan Loeb’s Third Point also recently added a new stake in the stock, worth $112 million. Financial stocks have rallied dramatically since Election Day, partly on hopes that the new administration will roll back a series of government regulations. Shares of LPL Financial have surged 41% in the fourth quarter. JD.com Big investors also grew interested in Chinese stocks as of late with a quarter of hedge funds now owning at least one China ADR, the most since 2021, according to Goldman. The enthusiasm was ignited by the Chinese government’s signal of wide-ranging stimulus measures in a bid to revive growth and avoid continued stagnation. In November, China unveiled a five-year stimulus package totaling 10 trillion yuan to tackle local government debt problems, while indicating more economic support would follow next year. JD YTD mountain JD.com Chinese e-commerce giant JD.com became a popular stock among high-profile investors. David Tepper of Appaloosa Management, who told CNBC he was buying “everything” related to China because of the latest government support, owned the name as one of his top holdings. Philippe Laffont’s Coatue Management as well as Michael Burry, best known for calling the subprime mortgage crisis before the global financial crisis in 2008, both significantly hiked their stakes in JD.com last quarter. Domino’s Warren Buffett ‘s Berkshire Hathaway piled into a national pizza chain whose shares were trading near their cheapest level of the year — Domino’s Pizza . The stake, worth about $500 million, was relatively small in Berkshire’s massive portfolio — cash holdings alone top $300 billion — so Buffett’s investing lieutenants Ted Weschler and Todd Combs may be behind the investment. The pizza chain is in keeping with other, long-standing processed food investments by the sprawling Omaha, Nebraska-based conglomerate, and also fits into Berkshire’s value investment philosophy. DPZ YTD mountain Domino’s Pizza Laffont’s Coatue also owned a sizable stake in the pizza chain. Domino’s has struggled with comparable sales growth in the U.S. as competition for cost-conscious customers mounts. The stock is up by less than 3% this year. Nike Bill Ackman’s Pershing Square doubled down on Nike last quarter, making the bet worth $1.4 billion in his concentrated portfolio. The bet was only worth about $220 million at the end of June. Nike is in the midst of a broader restructuring after it shifted its strategy to sell directly to consumers. Earlier this month, its new CEO Elliott Hill outlined his strategy to return its online business to a full-price model and aggressively liquidate old inventory through “less profitable channels.” NKE YTD mountain Nike Shares of Nike have significantly lagged the market, down more than 30% this year. Constellation Energy Power producers were another group of stocks that gained popularity among stock-picking hedge funds anticipating Trump’s return to the White House. Constellation Energy saw the biggest increase in hedge fund high-conviction ownership, including buying from Coatue Management and Lone Pine Capital, according to InsiderScore. The energy names may benefit from the president-elect’s promised rollback of environmental regulations and his encouragement of the crypto industry and its enormous energy demands. Shares of Constellation Energy are up 94% this year.
5 stocks that hedge funds and big investors are long heading into 2025