Ray Dalio founded Bridgewater Associates out of his apartment in 1973 and after 28 years, he gave up the title of CEO last year. Dalio is now “mentor” and continues to serve as co-CIO. Bridgewater manages institutional money only, around $120 billion, with the true uniqueness of the firm being its culture – driven by utter transparency. We have researched Bridgewater’s recent 13F filing – which reports publicly traded equity positions from the end of September – and noticed five stocks that Dalio and his firm sold its complete stake in. The reasons behind these selloffs range from industry-related to company-specific (check out Ray Dalio’s other key moves).
Best Buy Co., Inc. (NYSE:BBY) was Bridgewater’s 11th largest 13F holding at the end of 2Q following a 350% increase over that period. Dalio quickly fell out of love with the big box retailer and dumped all of its shares last quarter. Best Buy was down 15% during 3Q, and continues to see earnings pressure from online retailers amid a less-than-stellar economic backdrop. With a forward P/E of just over 5x, we are cautious that investors could fall into a value trap. Best Buy also has an attractive dividend, yielding 5.6%, but the retailer has seen its cash position drained by 85% over the past year, and free cash flow generation is slowing.
From a broader perspective, consumer electronics purchases are seeing a fundamental shift that is moving to the online landscape. This shift has already pushed one retailer completely out of business – Circuit City – and has many investors not too optimistic on what the future will bring. Founder Richard Schulze’s interest in the company appears to have little bearing on reassuring investors that there is sustainable value in Best Buy’s business model (see Are Hedge Funds Hoping For a Best Buy Takeover?)
The retailer saw Schulze show potential interest in exploring a buyout between $24-$26 a share, which held up the stock for a short time. After weak 3Q results, shares fell as low as $12, and Schulze lowered his potential offer price to $20. Billionaire David Einhorn – founder of Greenlight Capital – was another top fund manager selling off his entire stake in Best Buy last quarter (check out David Einhorn’s newest stock picks).
Symantec Corporation (NASDAQ:SYMC) was another one of Dalio’s selloffs in 3Q. Symantec is a software security company with projected FY2013 revenue growth of only 1%. Its long-term growth also remains near the low end of the industry at an 8% compounded annual growth rate, far below notable competitor CommValut Systems (23%). While Symantec appears cheap at 11x earnings, its growth outlook places it at the bottom of the industry and justifies its subpar metrics. Symantec is also heavily reliant on large-sized contracts, which are becoming harder to find in an increasingly tight fiscal environment.
Applied Materials, Inc. (NASDAQ:AMAT) is the world’s largest manufacturer of water fabrication equipment for the semiconductor industry. Dalio found little reason to stay invested in the company and sold off all his shares on the back of expectations that Applied would see FY2013 sales down 10%, following a 17% decline in 2012. Applied posted 3Q earnings results of $0.06, down from $0.21 year over year. This drop comes on a sharp decline in chip equipment revenues, and weakness in many of Applied’s other segments as well. We believe there are better investments in the semiconductor industry, mainly due to a continued expected decline in flat panel displays, and uncertainty in the solar industry. Applied’s long-term EPS growth rate (9%) is well below other investment opportunities in the space - the industry’s average is 15%.