Conviction Investing in 2025: Lessons from Outperforming Portfolios

In 2025, the markets tested the mettle of investors like never before. Volatility, regulatory shifts, and macroeconomic uncertainty created a landscape where emotional discipline and thesis-driven decision-making became the linchpins of outperformance. A portfolio that returned 31.87% in 2025-significantly outpacing the S&P 500's 16.39%- offers a compelling case study in how conviction investing can thrive even in turbulent conditions. This analysis explores the strategies behind this success, focusing on two key holdings: Meta Platforms (META) and Hims & Hers Health (HIMS).

Emotional Discipline: The META Case Study

Meta's journey in 2025 epitomized the power of staying the course. The stock faced a dramatic drawdown in 2022, plummeting from $300 to $123. For many, this would have been a signal to exit. However, one investor viewed the decline as an opportunity, adding to their position during the downturn. By April 2025, when the stock rebounded to $485–$515 amid tariff-related market lows, the investor's patience paid off: the META position delivered a 146.4% total gain, becoming a cornerstone of the portfolio's outperformance.

This outcome underscores a critical lesson: conviction investing requires the emotional discipline to act counter to market panic. As the investor noted, "The thesis for META-its dominance in AI-driven advertising and metaverse infrastructure-remained intact, even as the price fluctuated." By doubling down during the 2022 selloff and holding through short-term volatility, the investor capitalized on a long-term narrative that outperformed the broader market.

Managing Drawdowns: The HIMS Challenge

While META was a triumph, HIMS presented a steeper test of conviction. The stock reached an all-time high of $62.76 in October 2025 but faced a 47% drawdown by year-end, driven by concerns over compounding legislation and slowing growth post-commercial GLP-1. For investors, this decline was a psychological hurdle. Yet, the same portfolio held firm, recognizing that HIMS's fundamentals-such as its 49% year-over-year revenue growth to $600 million in Q3 2025-still aligned with its long-term vision.

The company's strategic moves further justified the conviction. HIMS expanded into international markets, launched new products (e.g., low testosterone and menopause treatments), and secured partnerships with industry leaders. Despite missing EPS expectations in Q3, the stock rebounded 3.45% in the aftermarket, demonstrating resilience. The investor's rationale? "The drawdown was a test of patience, not a signal to abandon the thesis. HIMS's 2030 targets-$6.5 billion in revenue and $1.3 billion in adjusted EBITDA-remain compelling." As the earnings call noted.

Portfolio Performance vs. the S&P 500

The contrast between this conviction-driven portfolio and the S&P 500 is stark. While the index returned 16.39% in 2025, the portfolio's 31.87% return highlights the rewards of concentrated, thesis-based investing. Even when HIMS underperformed, its risk-adjusted metrics outperformed META's, with a Sharpe ratio of 0.29 and a Sortino ratio of 1.15 compared to META's 0.25 and 0.64, respectively. This suggests that while volatility is inevitable, disciplined investors can navigate it effectively.

Moreover, HIMS's year-to-date return of 6.90%-compared to META's -0.20%-and its 25% outperformance against the S&P 500's 17% growth illustrate how diversified conviction can mitigate risks. The portfolio's success wasn't a one-trick pony; it balanced high-conviction bets with strategic risk management.

Conclusion: The Conviction Investing Framework

The 2025 experience reaffirms that conviction investing thrives on two pillars: emotional discipline and thesis-driven analysis. By staying invested in META during its 2022 nadir and weathering HIMS's volatility, the investor demonstrated how patience and a deep understanding of fundamentals can outperform market averages.

As markets evolve, the lessons from 2025 remain relevant. Conviction investing isn't about blind faith-it's about rigorous analysis, the courage to act against the crowd, and the resilience to hold through turbulence. For investors seeking to replicate this success, the message is clear: align your portfolio with companies whose theses withstand the test of time, and let discipline guide your decisions.