Hedge funds piled into bets on financial stocks, Tesla shares and a prison operator in the third quarter, filings showed, ahead of a rally that followed Donald Trump’s victory in the US presidential election.
Many of the bets have become known as so-called Trump trades, corners of the market that at times were swayed by the Republican candidate’s fortunes before the election and notched gains after his win.
Bridgewater Associates, Coatue Management and D1 Capital were among those that added shares of banks and other financial stocks, which have soared since election day on hopes that a Trump win would bring looser regulations to the financial industry, according to filings released Thursday.
Bridgewater, founded by Ray Dalio, ended September with bigger positions in Goldman Sachs, Morgan Stanley, Wells Fargo, Bank of New York Mellon and Citigroup. It also built a new position in Bank of America.
The fund’s biggest position in dollar terms was Wells Fargo, a stake worth $79.6 million at the end of September.
The KBW Bank Index is up roughly 17% since the end of September and has surged by nearly 12% since the Nov. 5 vote.
It is not possible to say whether Bridgewater and the other funds held their positions past Sept. 30, which is the cutoff date for the 13-F filings. Though they are backward-looking, the filings are one of the few ways to see the portfolios of often-secretive market players such as hedge funds and sovereign wealth funds.
Other hedge funds making bets on the banking sector included Dan Sundheim’s D1 Capital Partners, which had a new $174.9 million stake in Bank of America on Sept. 30, a filing showed.
Coatue Management reduced its sizable stakes in Meta Platforms and Nvidia, but built new stakes in two investment firms. It bought 2.7 million shares in KKR, worth $355 million, and 195,969 shares in Blackstone, or roughly $30 million.
Both Blackstone and KKR, which manage private equity funds, could benefit from a rebound in dealmaking.
Some hedge funds also took positions in Tesla, which is seen benefiting from founder Elon Musk’s close association with Trump.
Shares in Tesla have jumped over 28% since Nov. 5 as Trump was a candidate supported by Elon Musk. The founder of Tesla will lead the government efficiency initiatives.
Third Point added a new 400,000 share-position in the EV-maker, while Viking Global bought 436,272 shares. Coatue increased its stake in Tesla by 36.4%, to 2.2 million shares, a position worth $584.5 million at the end of September.
Daniel Loeb, founder of Third Point, said in a letter to investors last month that he believed the Republican candidate was more likely to win the election and was making adjustments to his portfolio to capture a potential boom in corporate activity.
Meanwhile, macro hedge fund Discovery Capital Management took a new position in private prison Geo Group, with 387.1 million shares.
Stocks in the company skyrocketed over 84% since the election as Trump’s promised crackdown on illegal immigration could boost demand for detention centers.
