10 Best Stocks to Buy According to Eminence Capital’s Ricky Sandler

7. LPL Financial Holdings Inc. (NASDAQ:LPLA)

Number of Hedge Fund Holders: 47 

Eminence Capital’s Stake: $194,415,797

LPL Financial Holdings Inc. (NASDAQ:LPLA) provides an integrated platform of brokerage and investment advisory services to independent financial advisors and financial advisors at enterprises. The stock holds immense value for investors, indicated by revenue and earnings growth over the past few months, recent strategic acquisitions and partnerships, an impressive dividend profile, and the advisory and brokerage assets it holds. For example, the firm has recently entered into agreements to acquire Atria Wealth Solutions and is preparing to onboard the wealth management businesses of Prudential Financial and Wintrust Financial. These acquisitions are expected to enhance the market position of the company and provide substantial growth opportunities.

LPL Financial Holdings Inc. (NASDAQ:LPLA) has grown assets under management in the past few months primarily driven by organic growth and the successful onboarding of new clients and advisors. These would in turn strengthen the financial position of the firm by contributing to higher fee-based revenue. At the end of the first quarter of 2024, total advisory and brokerage assets of the firm grew to $1.22 trillion, up from $1.10 trillion at the end of Q1 2023, representing an 11% increase.

In its Q4 2023 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and LPL Financial Holdings Inc. (NASDAQ:LPLA) was one of them. Here is what the fund said:

“LPL Financial Holdings Inc. (NASDAQ:LPLA) is the largest independent broker-dealer in the U.S. Shares declined 4.1% in the quarter as expectations for the number of interest rate cuts in 2024 increased (shares still finished the year up 12.7%). LPL invests idle client cash in both floating as well as fixed rate contracts. Rate cuts could reduce LPL’s cash revenues and earnings from its floating rate contracts. LPL’s interest rate exposure has also made it a favored stock for short-term traders to gain exposure to higher interest rates. We believe some of the stock weakness was a result of these investors reducing their stake as rates look set to fall. On a long-term basis, we believe that even under conservative assumptions for rates, the stock offers a positively skewed risk/reward profile. Moreover, LPL’s execution continues to be strong as it gains share among advisors and wins large enterprise deals. We therefore remain shareholders and have been adding to our position.”