During the third quarter, hedge funds strategically invested large sums in financial stocks, shares of Tesla, and a prison operator in anticipation of a market rally, catalyzed by Trump’s successful bid for the presidency in the US elections. These strategic picks are often referred to as ‘Trump trades,’ specific market sectors that occasionally fluctuated depending on the performance of Trump’s campaign and experienced substantial gains following his victory.
Well-known hedge funds such as Bridgewater Associates, Coatue Management, and D1 Capital constructed formidable portfolios consisting of shares from banks and other financial assets. This anticipatory move derived from the expectation that a victorious Trump would introduce more relaxed regulations in the financial sector, thus propelling these companies towards remarkable growth.
Tesla, the pioneering electric vehicle company, also attracted significant attention from hedge funds. Noteworthy was the fact that Tesla’s founder, Elon Musk, had a familiar and comfortable relationship with Trump, a factor that was perceived to potentially benefit the car manufacturer in the future.
As of the end of September, Bridgewater held substantial positions in leading investment banks such as Goldman Sachs, Morgan Stanley, Wells Fargo, Bank of New York Mellon, and Citigroup. Additionally, a significant new position was taken up in Bank of America.
Their most significant financial commitment was the investing in Wells Fargo shares worth $79.6 million. This comes on top of a surge in the KBW Bank Index, which has increased by approximately 17% since the end of September and had a near 12% uptick following the November 5th election.
The portfolios’ continuity beyond the cutoff date of September 30th cannot be accurately determined with available information. This date signifies the limitation for the 13-F filings, providing a look into the secretive and often undisclosed investment habits of prominent market players, such as hedge funds and sovereign wealth funds.
D1 Capital Partners, another significant player, demonstrated their confidence in the financial sector with a newly minted investment stake worth $174.9 million in Bank of America, highlighting again the broadly held positivity for potential Trump-driven growth.
Coatue Management, meanwhile, reduced its interests in Meta Platforms and Nvidia, two tech giants. However, they pivoted to invest in two prominent investment firms, hinting towards a shift towards more stable and potentially lucrative sectors.
The hedge fund acquired 2.7 million shares in KKR, valued at $355 million dollars and bought approximately $30 million worth of shares in Blackstone. Both Blackstone and KKR, as managers of private equity funds, are predicted to reap the rewards in an environment ripe for dealmaking.
Tesla continued to benefit from the ‘Trump effect’, pulling in more investments due to Elon Musk’s association with the then-Republican candidate. Tesla’s shares exhibited an impressive increase of over 28% since the November 5th elections, adding credence to the positive economic impact of a Trump administration.
Benefiting from this trend, Third Point acquired a new sharehold of 400,000 in the EV manufacturer. Likewise, Viking Global purchased a sizeable 436,272 shares in Tesla, further enabling the company’s remarkable ascent.
Coatue Management demonstrated their continued faith in Tesla by amplifying their stake by an impressive 36.4%, bringing their total holdings to 2.2 million shares. A gamble that proved successful, as by the end of September their investment was valued at $584.5 million.
Another unexpected winner post-Trump’s election victory was the private prison Geo Group. Macro hedge fund Discovery Capital Management, in a surprising move, secured a brand-new position in Geo Group, holding 387.1 million shares.
Following the election, there was a rocket-firing surge in the company’s stocks of over 84%. A large catalyst driving this was Trump’s anticipated stringent stance against illegal immigration, intensifying interest in detention centers. A shrewd ‘Trump trade’ which reaped considerable financial benefits.
It should be noted that the increase in financial stocks and other ‘Trump trades’ significantly correspond with the bold economic strategies of Trump’s administration. The propelled growth in these sectors is an undeniable testament to the Trump effect and thus, a reflection of his capable leadership.
In hindsight, the third quarter presented an illuminating snapshot into the strategic bets taken by prominent hedge funds. Chasing the ‘Trump trades’, these funds demonstrate the confidence that big players had, and continue to have, in a Trumpian economy that was seen as conducive to impressive growth and prosperity.