A select group of high-conviction stocks picked by hedge funds and high-profile investors could beat the market in the new year. Since the election of former President Trump, the financial industry has enjoyed a renewed favor in the hedge fund world. Goldman Sachs analyzed the holdings of 697 hedge funds, with total stock positions reaching $3 trillion, and professional traders increased their holdings of financial stocks to the largest increase in at least 15 years. Data from Goldman Sachs shows that financial services company LPL Financial has become the company with the most concentrated long positions of hedge funds in the industry, with hedge funds owning a 16% equity limit as of the end of the third quarter. Stephen Mandel’s Lone Pine Capital increased its bet on LPL Financial last quarter, increasing its stake to more than $500 million. Dan Loeb’s Third Point also recently added a new stake in the stock, worth $112 million. Financial stocks have surged since Election Day, in part on hopes that the new administration will roll back a raft of government regulations. LPL Financial shares soared 41% in the fourth quarter. Goldman Sachs said large JD.com investors have also become increasingly interested in Chinese stocks recently, with a quarter of hedge funds now owning at least one Chinese ADR, the most since 2021. The Chinese government has ignited enthusiasm as it signals a broad stimulus package to revive growth and avoid continued stagnation. In November, China launched a five-year stimulus plan totaling 10 trillion yuan to address local government debt problems and said it would provide more economic support next year. JD.com YTD Shan JD.com Chinese e-commerce giant JD.com has become a popular stock among high-profile investors. Appaloosa Management’s David Tepper told CNBC he’s buying “everything” related to China because of the latest government support, and the company is his top holding one. Philippe Laffont’s Coatue Management and Michael Burry, known for triggering the subprime mortgage crisis before the 2008 global financial crisis, both significantly increased their stakes in JD.com last quarter. Domino’s Warren Buffett’s Berkshire Hathaway bought Domino’s Pizza, a national pizza chain that’s trading near its lowest level this year price. The stakes, worth about $500 million, are relatively small in Berkshire’s vast portfolio (cash holdings alone exceed $300 billion), so Buffett’s investing deputy Ted Weschler and Todd Combs may be the man behind the investment. The pizza chain aligns with the Omaha, Neb.-based giant’s other long-term processed food investments and fits Berkshire’s value investing philosophy. DPZ YTD mountain Domino’s Pizza Laffont’s Coatue also owns a significant stake in the pizza chain. Domino’s has struggled to grow sales in the United States as competition from cost-sensitive customers intensifies. The stock is up less than 3% this year. Nike Bill Ackman’s Pershing Square doubled down on Nike last quarter, valuing its concentrated portfolio bet at $1.4 billion. As of the end of June, the bet was worth only about $220 million. Nike is undergoing a broader restructuring after shifting its strategy to selling directly to consumers. Earlier this month, its new chief executive, Elliott Hill, outlined his strategy to return its online business to a full-price model and aggressively liquidate older sales through “less profitable channels.” in stock. NKE YTD Shannage’s stock price has significantly lagged behind the market this year, falling by more than 30%. Constellation Energy power producer is another popular stock among stock-picking hedge funds anticipating Trump’s return to the White House. According to InsiderScore, Constellation Energy saw the largest increase in hedge fund high-conviction ownership, including purchases of shares from Coatue Management and Lone Pine Capital. Energy companies could benefit from the president-elect’s pledge to roll back environmental regulations and his encouragement of the crypto industry and its massive energy needs. Constellation Energy shares are up 94% this year.
