Ray Dalio founded Bridgewater Associates out of his apartment in 1973 and after 28 years, gave up the CEO title last year. Dalio now serves as “mentor” and co-CIO. Bridgewater manages institutional money only, around $120 billion, with the true uniqueness of the firm being its culture – driven by utter transparency. After reviewing Bridgewater’s recent 13F filing – which reports publicly traded equity positions from the end of 3Q – we have taken notice of five stocks that the fund is invested in for the long-term (check out Ray Dalio's top bets).
The first stock on Dalio’s long-term investment list is Bed Bath & Beyond Inc. (NASDAQ:BBBY). Dalio increased his stake in the retailer by 200% last quarter. After two huge drops of 15% or more in the weeks following, the retailer is still down 10% over the past twelve months, despite the Dow Jones Industrial Average's 10% gain over the same time period. Bed Bath & Beyond expects revenues for FY2013 to be up 16% following 9% growth in FY2012, driven by the acquisitions of Cost Plus and Linen Holdings.
The weakness seen in recent quarterly results will likely continue in the interim as the retailer struggles due to weak sales in its home goods segment. We believe Bed Bath & Beyond’s niche market will improve over the long-term as it expands in the midst of a housing market rebound. The retailer is currently offering investors a chance to get into the stock at a good value, trading below its historical 5-year average P/E (16x) at 12x trailing earnings. Fellow billionaire Steven Cohen of SAC Capital is also one of Bed Bath & Beyond's top investors (check out Steven Cohen's top bets).
Electronic Arts Inc. (NASDAQ:EA) is down 20% year to date on continued pressure from social and mobile gaming. Revenues are expected to be down 7% in FY2013 after a 9% in FY2012. Over the long haul, revenues are expected to be driven by digital sales, including online and mobile games. The declining sale of video game consoles and games via the retail segment are part of the fundamental shift in consumer buying and gaming preferences. We believe the interim pressure will present a buying opportunity as EA does have a robust long-term growth rate of 15% and a relatively low-debt load, with a debt-to-equity ratio of 25%. Paul Tudor Jones joined Dalio during the third quarter by taking a new position in the gaming company (see PTJ's biggest bets here).
Continue reading to see Dalio’s biggest high-growth bet…