Last year was a difficult one for stock pickers, but some funds managed to outperform the market. This is how they invest in 2025.
• Actively managed funds had a difficult time in 2024
• They will continue to focus on the topic of artificial intelligence in 2025
• Other ideas include energy and commodity stocks, banks and travel companies
As Barron’s reports, only a quarter of large-cap managers managed to beat the market in 2024. While the S&P 500 rose 25 percent including dividends, actively managed large-cap funds returned an average of just 21 percent. Those investment funds that relied on the “Magnificent Seven” were successful.
Difficult year 2025 ahead
It will also be difficult to beat the market in 2025, because valuations in the large-cap segment as well as the concentration in the technology and communications sectors – they make up 41 percent of the S&P 500 – are high. “Stocks have been rising all year long. If something isn’t really cheap, you should wait for a pullback,” warned Michael Cuggino, manager of the Permanent Portfolio Aggressive Growth Fund, according to Barron’s.
There are also other factors of uncertainty: It is unclear how the stock market will cope with Donald Trump’s presidency and economic policy. Furthermore, hopes of interest rate cuts in 2025 are fading, which has an impact on stocks.
But according to Barron’s, the top stock pickers still have some ideas about how they want to be successful in 2025.
NVIDIA stock, copper and financials
The Permanent Portfolio Aggressive Growth fund managed by Michael Cuggino continues to rely on the tech stocks with which it was successful in 2024: NVIDIA, Broadcom and Palantir Technologies. “We still like the companies,” he said.
One of Cuggino’s more contrarian ideas for 2025 is copper, via shares of mining company Freeport-McMoRan. The fund manager believes macroeconomic tailwinds are favoring the commodity. The copper price is closely linked to economic growth in China, which could be boosted by the latest economic stimulus programs, he says. Additionally, copper is “involved in so many manufacturing processes, from real estate to green energy and other newer industries, the demand is there,” Cuggino argues.
He also gives a thumbs up to financial stocks. For example, he invests in Morgan Stanley, Charles Schwab and State Street.
Expedia shares & Royal Caribbean shares: travel companies on the verge of an upswing?
The Bridgeway Aggressive Investors 1 fund was successful in 2024, particularly thanks to NVIDIA, Microsoft and Apple. While the technology sector continues to make up a large portion of the fund, co-manager John Montgomery also sees value in other areas, including travel stocks like Expedia and Royal Caribbean. “These companies were under attack during the pandemic. Now we’re through the pandemic and people want to travel again,” he is quoted by Barron’s. “Wall Street has not yet fully priced in its potential.”
Montgomery also sees bargains at regional banks such as East West Bancorp, First Horizon and Webster Financial. In his opinion, they are likely to receive a boost from deregulation and consolidation in the industry.
Utilities in view: Vistra and Constellation Energy shares
The Spirit of America Large Cap Value fund also owed its success last year to NVIDIA, Apple and Microsoft. Like other large-cap winners, this fund remains invested in the technology sector.
In addition, co-manager Douglas Revello also relies on utilities such as Constellation Energy and Vistra, which could benefit indirectly from the technology sector. Because these utilities operate nuclear power plants, which are likely to benefit from the enormous demand for energy through artificial intelligence.
Editorial team finanzen.net
This text is for informational purposes only and does not constitute an investment recommendation. finanzen.net GmbH excludes any claims for recourse.
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