How the top stock fund managers of 2024 outwit their peers — and their big bets for 2025

Sharp stock selection in an increasingly positive backdrop marked by lower interest rates has the 66-year-old Fidelity Trend Fund on track for a 40% gain for the third time in five years.

Shilpa Marda Mehra, who has managed this fund since 2018, looks for quality growth stocks with sustainable competitive advantages that other investors underestimate. Her performance reflects her knack for picking stocks, though she also credited other factors for her successful year.

"The anticipation of interest rate cuts by the Fed, and the ongoing investment in companies well-positioned to benefit from the development of gen AI were significant contributors to the fund's performance," Mehra said via email.

This fund is more diversified than some of its peers, as it holds five sectors with at least 8% of its assets. Mehra highlighted her picks in the technology, industrials, and consumer discretionary sectors, plus the commercial aerospace industry.

Still, like other leading managers, Mehra largely rode the success of mega caps. Her seven biggest bets were the so-called Magnificent Seven, led by Nvidia and Apple. Those companies have benefited greatly from the AI boom, which Mehra believes is still in its early innings.

"I'm focused on looking for companies that are the pick-and-shovel companies of AI — meaning the companies that support the creation of AI through digging, cooling systems, paving the roads and semiconductors that support the products," Mehra said. "Going into 2025, I'm also watching out for potential emerging competition."

Ticker: FTRNX

Year-to-date return: 51%

Biggest holdings (as of November 30): Nvidia, Apple, Amazon, Microsoft, Meta Platforms, Tesla, Alphabet, Axon Enterprise, Eli Lilly, Coherent

Mortimer and his team's strategy of trying to recognize the winners ahead of the crowd paid off this year.

Finding a company and waiting for Wall Street to catch up with positive estimate revisions is the goal for the names that make the fund's list. One way of catching a lead is by recognizing transformational change taking place within a company. The approach is built on the belief that positive estimate revisions lead to stock outperformance over time.

The bottom-up stock-picking strategy focuses on relative valuation opportunities through stocks that aren't as expensive as they look if they beat earnings expectations.

Heading into 2025, Mortimer expects the AI play to continue, with one catch: the winners will broaden to include companies using AI to drive profits by delivering solutions to end users and businesses.

"We are seeing that with a number of software companies today that can charge more for products that drive good return on investment for enterprises," Mortimer said. "Consumers will see this as devices become more useful with the adoption of AI and lead to potential upgrade cycles. And we believe the cloud hyperscalers will continue to invest but shift more of that incremental capital toward custom silicon chips that are cheaper for certain use cases."

The Mag 7 could also look more like the Mag 8 or 9 if other companies near the $1 trillion market cap cross the threshold.

Areas outside technology that Mortimer is bullish on include weight-loss drugs, which he said will continue to be a strong investable theme. He expects to see additional opportunities coming from online sports betting, transformation of the advertising industry, and renewed growth in financial services companies with less regulatory pressures.

Ticker: HGOYX

Year-to-date return: 51%

Biggest holdings (as of November 30): Apple, Nvidia, Meta, Amazon, Alphabet, Broadcom, Microsoft, Netflix, Spotify, ServiceNow

This mutual fund lived up to its name this year by posting robust returns, thanks to concentrated bets on the market's biggest growth stocks.

Many market strategists were calling for a broader but more modest return at this time last year. Instead, mega caps like Nvidia, Alphabet, Amazon, and Tesla — the four largest positions in this fund — had another remarkable year as economic growth stayed strong and inflation faded.

In turn, the American Century Focused Dynamic Growth Fund is on pace for a top-3% finish in its category for the first time since 2020, according to Morningstar. Fund managers Keith Lee, Henry He, and John Rabroker haven't hedged their bets much, as their 10 biggest holdings account for about two-thirds of the fund's assets.

Outside those Magnificent Seven or FAANG stalwarts, big positions in software firm Salesforce and fast-casual food giant Chipotle Mexican Grill lifted performance.

Companies in this fund have grown earnings and revenue much faster than their index peers and will need to do so again in 2025 if they're going to justify their elevated valuations.

Ticker: ACFOX

Year-to-date return: 53%

Biggest holdings (as of November 30): Nvidia, Alphabet, Amazon, Tesla, Microsoft, Netflix, Salesforce, Chipotle Mexican Grill, Rocket Lab, Mastercard

In a year driven by the noise of interest-rate movements and Fed policy, bottom-up stock-picking strategies like the one driving this fund thrived. The fund, comprised of small and mid-cap stocks, wrapped the year by beating its benchmark, the Russell 2500 growth index, by a wide margin.

Brandon Nelson, the senior portfolio manager, named the fund after the timpani drum, an instrument he played. Its success results from a research-driven approach focusing on company-specific fundamentals that signal a potential to maintain sustainable and under-estimated growth. The fund has heavy exposure to industrials, healthcare, and technology, which make up about 75% of its weighting.

On the quantitative side, Nelson and his team look for companies that have the potential to go from a 2% or 3% market share to 8% or higher, often driven by offering unique products or services with competitive protection. In a steady economy, where GDP growth is between 2% and 3%, the stock should also have a minimum expected revenue growth of 10% and at least 15% annual earnings-per-share growth.

The second requirement is qualitative, focusing on the management team's ability to set and exceed Wall Street's expectations. This means generating clean earnings reports without situations where management consistently puts up messy quarters and bad guidance and then comes up with excuses for falling short, Nelson said.

"The reason we focus on both of those is if you can find a stock where they've got those characteristics, the market really likes them, and they tend to reward those stocks with enhanced valuations, higher P/E multiples, higher cash flow multiples, and higher revenue multiples. Pick your favorite metric," Nelson said. "If you can consistently show fast and underestimated growth, chances are you're going to hold your valuation, if not, see those valuation metrics rise."

Axon Enterprise (AXON) is a favorite of Nelson's and a poster candidate for a stock that fits the bill of requirements. Once a taser company, it's now a police and military hardware and software provider that uses AI to enhance its offerings, such as body camera footage that can fill incident reports — a feature Nelson believes will continue to be in high demand, including globally.

Ticker: CTOGX

Year-to-date return: 54%

Biggest holdings (as of October 31): Axon Enterprise, Sterling Infrastructure, ADMA Biologics, RadNet, FTAI Aviation, Fair Issac, AppLovin, The Descartes Systems Group, GoDaddy, Natera

2024 was a stock picker's year, according to Bice, DeCicco, and O'Halloran, who oversee the Lord Abbett Focused Growth Fund. The fund managers used a combination of fundamental and technical analysis to seek out pockets of outperformance in the broader market.

Bice, DeCicco, and O'Halloran's outperformance this year is due to their careful curation of companies with quality financials and competitive advantages. The fund invests primarily in US companies of various sizes. It is home to household mega-cap names such as Nvidia, Amazon, Microsoft, Meta, and Alphabet, but it also has a dedicated allocation to mid and small-cap stocks. Especially as recession fears and inflation concerns recede, Bice, DeCicco, and O'Halloran are confident that the economic environment is favorable for small caps to take off.

"We outperformed in 2024 due to stocks in several sectors including technology, communications services, consumer discretionary, and healthcare," the fund managers said in an email.

The fund managers identified several areas of the market poised for accelerating growth going forward, including AI, healthcare, industrials, utilities, and consumer products.

"We are bullish on the market for 2025. We think inflation continues to moderate, the economy continues to be healthy, and that the technology revolution (recently catalyzed by generative AI) continues to favor equities," they said.

Ticker: LFGVX

Year-to-date return: 59%

Biggest holdings (as of September 30): Nvidia, Microsoft, Alphabet, Amazon, Spotify, Meta, Apple, MercadoLibre, Natera, AppLovin

Like many other high-performing funds, Alger Focus Equity played the AI trade well. Crawford and Kelly took a diversified approach to stock picking and sector allocation, investing in high-growth hardware, software, and utilities companies.

"Long-term investments in companies such as TSM and NVDA, which are truly hubs of all things AI, and others like APP, which is embracing AI to accelerate its core mobile ad business and expand into new end markets, helped drive performance for our clients," the fund managers told BI in an email.

In particular, Crawford and Kelly saw potential in utility companies, an area of the market that growth investors have typically overlooked. Crawford and Kelly are confident that demand for utilities, especially nuclear energy, will continue to rise in coming years thanks to increasing data center demand.c

Crawford and Kelly weren't only investing in AI, though. They also saw potential in the healthcare company Natera and the waste management company GFL Environmental.

Crawford and Kelly are doubling down on their AI picks going into the new year.

"As we look to 2025, we continue to have strong conviction in companies such as APP, which we believe has the potential to benefit from implementing AI and broadening its market scope to include e-commerce. We also believe the independent power producers will likely continue to reap the benefits of a tight power market and the ability to price their product (electricity) at a rate that is substantially higher than in the past. Finally, we believe that NVDA has an interesting roadmap ahead with its launch of Blackwell and a quick launch of its next chip, Rubin, the following year," the fund managers said.

Ticker: ALGYX

Year-to-date return: 59%

Biggest holdings (as of September 30): Microsoft, Nvidia, Meta, Amazon, Apple, GFL Environmental, Broadcom, AppLovin, Taiwan Semiconductor Manufacturing, Vertiv Holdings

After a three-year hiatus, Lynch is back on BI's list of fund managers of the year.

Lynch and his co-managers, David Cohen and Sandeep (Sam) G. Chainan, underwent a rough patch a couple of years ago as their Morgan Stanley Insight Fund fell 80% from November 2021 to January 2023 alongside a broader bear-market plunge. Since that trough, however, the fund's performance has turned around significantly, rising 145%. In 2024 alone, it beat 99% of similar funds according to Morningstar data.

High-flying tech stocks have driven outsize returns for the fund. Tesla, The Trade Desk, and DoorDash — three of its top six holdings — are all up more than 70% this year.

According to the fund's fact sheet, Lynch and his team aim to invest in firms with moats around them and in those with leadership teams who deploy capital well.

"We seek to invest primarily in established and emerging companies in the United States that we believe have sustainable competitive advantages with above average business visibility, the ability to deploy capital at high rates of return, strong balance sheets and an attractive risk/reward profile," the fact sheet said.

Ticker: MCRTX

Year-to-date return: 61%

Biggest holdings (as of September 30): DoorDash, Cloudflare, Tesla, The Trade Desk, Affirm, Shopify, Samsara, MicroStrategy, Global E Online, Roblox

Wrona capitalized on two of the biggest trends in the market this year: AI and crypto.

In a year where technology stocks did well across the board, Wrona differentiated his fund by looking carefully for companies with strong fundamentals. His fund has well-known AI beneficiaries such as Nvidia, Meta, Amazon, and Microsoft, but it also has more under-the-radar picks such as semiconductor design company Ambarella.

It also helped that Wrona had been bullish on the bitcoin trade before the cryptocurrency's post-election runup. One of his fund's top holdings is the crypto trading platform Coinbase.

AI and crypto Yep! Twill continue to be big drivers of returns in 2025, Wrona believes. However, he anticipates that picking stock market winners won't be as simple as betting on Big Tech going forward.

He sees the AI trade will broaden out in the coming years. "Nvidia had very little competition until recently in terms of where people were flowing their investment dollars. In 2025 and beyond, there's going to be a plethora of companies with strong and improving fundamentals," Wrona said.

"The new challenge starting next year will be 'how do we narrow down this large group of companies into a portfolio of the best?' I believe that's going to be a greater challenge than in the last few years just because there will be so many to choose from," he added.

Wrona is keeping his eye on the next phase of the AI trade in 2025: " AI beneficiaries have largely been on the hardware side, and I believe it's going to broaden out into software and services AI."

Ticker: ONERX

Year-to-date return: 63%

Biggest holdings (as of September 30): Enphase Energy, Palantir Technologies, Nvidia, The Trade Desk, Ambarella, Amazon, Coinbase, AMD, ASML, Microsoft

Like many of the funds that did exceptionally well in 2024, the Berkshire Focus Fund is growth-oriented. That means it invests in dynamic and innovative firms that have promising long-term potential, instead of stocks that appear to be trading at a discount.

"The Fund invests primarily in growth companies whose revenues and earnings are likely to grow faster than the economy as a whole, offering above-average prospects for capital appreciation and little or no emphasis on dividend income," its prospectus reads.

Its top holdings fit that description to a T: Nvidia, Meta, Tesla, DoorDash, Advanced Micro Devices, Vertiv, Shopify, Broadcom, and the list goes on. And this year, they delivered on their "above-average prospects" for appreciation, as the fund has returned 65% so far.

It's the second consecutive year of impressive returns for Berkshire, but the fund is still clawing back the 76% loss it suffered from late 2021 to early 2023.

In the fund's mid-year report in June, Fobes said he plans to continue keeping many of his eggs in the AI basket.

"We remain particularly excited about the opportunities in artificial intelligence (AI), which has driven our overweight allocation in software, semiconductors, and the cloud," Fobes wrote. "We believe both the prospect for falling interest rates over the coming year and healthy corporate earnings growth will continue to drive Fund performance, albeit we might well expect some consolidation in markets near term given such a strong start to the year."

Ticker: BFOCX

Year-to-date return: 72%

Biggest holdings (as of September 30): Nvidia, Meta, Tesla, DoorDash, AMD, Vertiv, Shopify, Broadcom, Uber, Taiwan Semiconductor

Doyle's Kinetics Paradigm Fund is probably the most unique on this year's list.

While it benefited from the AI trade like the other outperforming funds, Doyle takes a hyper-concentrated approach to setting up his fund.

Texas Pacific Land makes up 65% of it, giving the stock massive influence over how the Kinetics Paradigm Fund performs. With TPL up 104% in 2024, the fund has also enjoyed 87% upside. The company owns 880,000 acres of land in western Texas and earns royalties from tech firms looking to build out data centers on the land, and from oil firms looking to drill. AI enthusiasm has sent the stock soaring recently.

"The amount of capital that's going to be spent to build out data centers and bringing AI and all of the things that are associated with that to fruition needs to be done where there's cheap energy, cheap electricity, and available real estate, and water," Doyle told Business Insider in November. "I think people are coming to the conclusion, although I think we're still early in the game, that a big chunk of that is going to take place in the western part of Texas."

Since late November, however, TPL has dipped more than 36% after its massive run-up, dragging the Paradigm fund down 28% with it.

Ticker: WWNPX

Year-to-date return: 105%

Biggest holdings (as of September 30): Texas Pacific Land, Brookfield Corp., LandBridge, Live Nation Entertainment, CACI International, Howard Hughes, Franco-Nevada, Cboe Global Markets, Associated Capital Group, Brookfield Asset Management