Finding the right stocks in today’s market isn’t easy. With so many options, it’s tough to know which ones are worth your attention. But when you get it right, the payoff can be huge. That’s why we do the heavy lifting for you, sorting through the noise to bring you stocks that are set to move.
Each week, we dig into the data, look at market trends, and identify stocks with real potential. Our focus is on opportunities that aren’t just good for a quick win but have the strength to deliver ongoing growth.
This week, we’ve highlighted three stocks that stand out from the pack. Backed by solid analysis, these picks are positioned for a strong run.
LPL Financial (LPLA) – Hedge Funds’ Favorite in Financials
LPL Financial has emerged as a standout in the financial sector, capturing the attention of some of the most prominent hedge funds. As of the third quarter, 16% of the company’s equity cap was owned by hedge funds, making it the most concentrated long position in the sector, according to data from Goldman Sachs. High-profile investors Stephen Mandel and Dan Loeb have taken substantial stakes, with Mandel’s Lone Pine Capital investing over $500 million and Loeb’s Third Point adding $112 million last quarter.
So, why all the excitement around LPL Financial? The company has benefited significantly from the post-election rally in financial stocks, driven by optimism around deregulation under the new administration. Shares surged an impressive 41% in the fourth quarter, outpacing many of its peers in the sector.
LPL Financial’s appeal lies in its strong positioning as a leading provider of financial services to independent advisors. Its platform has consistently shown growth, benefiting from the ongoing shift of advisors and clients away from traditional wirehouses. The company also stands to gain further if proposed regulatory rollbacks materialize, potentially unlocking additional growth opportunities.
For investors seeking exposure to financials with strong momentum and significant institutional backing, LPL Financial is a name to keep on the radar. The combination of hedge fund conviction, sector tailwinds, and a proven growth strategy makes it a compelling buy candidate heading into 2025.
Spotify Technology (SPOT): Growth Story with Strong Momentum
Spotify Technology (SPOT) delivered outstanding returns in 2024, with its stock surging 138%. The company has benefited from a growing user base, strong demand for premium subscriptions, and strategic price increases, positioning itself as the global leader in audio streaming. While the stock’s high valuation reflects elevated expectations, Spotify’s recent performance and outlook suggest there’s still room for growth.
Spotify now boasts 640 million monthly active users (MAUs), of which 252 million are paying subscribers, marking a 12% increase in premium users year-over-year as of Q3 2024. What’s especially notable is the platform’s strong growth in international markets like Latin America and other regions outside North America, which are key drivers of future expansion.
Another major factor supporting Spotify’s success is its ability to raise prices across multiple markets. Thanks to added features and the platform’s expansion into podcasts and audiobooks, average revenue per user (ARPU) increased 11% year-over-year on a constant currency basis. Combined with ongoing user growth, these higher prices create a powerful revenue model that has helped Spotify achieve its first full year of positive net income in 2024, with earnings per share (EPS) reaching $5.90.
Looking ahead, analysts expect Spotify’s revenue to grow another 15% in 2025, with EPS accelerating 58% to $9.32. These projections underscore the company’s ability to sustain momentum, particularly as it continues to leverage its low churn rate and pricing power.
While Spotify’s forward price-to-earnings (P/E) ratio of 51 reflects its premium valuation, this can be justified by its market leadership and strong financial trajectory. However, investors should keep an eye on potential risks, including rising royalty demands from content creators, which could increase costs. Monitoring metrics like MAUs, ARPU, and gross margins will be crucial in assessing whether Spotify meets or exceeds expectations.
For investors looking to tap into the ongoing shift toward digital entertainment and subscription-based content, Spotify remains an attractive option. Although the stock may not repeat its exceptional performance from 2024, it is well-positioned to continue delivering strong returns in 2025. If the company maintains its growth trajectory and executes on its pricing strategy, Spotify could be trading at a higher share price a year from now, making it a compelling addition to a diversified portfolio.
Arista Networks (ANET): A Networking Powerhouse Ready for AI Growth
The announcement of The Stargate Project, a $500 billion AI infrastructure initiative backed by OpenAI, Oracle, and SoftBank, highlights the massive opportunities emerging in artificial intelligence. While much attention has been focused on the leading AI players, Arista Networks (ANET) stands out as a key beneficiary of this groundbreaking project.
Why Arista Networks Is Positioned to Win
Arista Networks specializes in high-performance networking solutions, with a significant market share in high-end data center switching. As the AI revolution demands enormous computing power and connectivity, Arista’s ethernet switching portfolio is uniquely positioned to meet these needs.
With OpenAI, Oracle, and Microsoft at the forefront of Stargate, Arista’s exposure to these tech giants is a major advantage. Analysts at Piper Sandler estimate that switching represents more than 50% of networking spend, and Arista controls over 30% of the high-end data center switching market. This creates a $6 billion serviceable addressable market for Arista over the next five years.
Key Catalysts for Growth
Stargate’s plan to build 10 massive AI data centers—with more in the pipeline—will require robust networking infrastructure. Oracle and Microsoft, both key players in Stargate, rely heavily on Arista’s solutions for their data centers. As the demand for AI workloads grows, Arista’s position as a trusted networking provider gives it a clear path to capture a significant share of this market.
Additionally, the increased deployment of graphics processing units (GPUs) for AI inference and training will drive greater demand for high-performance networking equipment, further bolstering Arista’s growth prospects.
Why Arista Is a Buy
Arista Networks is set to benefit from the confluence of major AI infrastructure projects like Stargate and the growing demand for advanced networking solutions. With its established relationships with Oracle, Microsoft, and OpenAI, and a proven ability to deliver in high-growth markets, Arista is well-positioned for long-term success.
For investors looking to capitalize on the AI infrastructure boom, Arista Networks offers a compelling growth story backed by solid fundamentals and strong market potential.