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Microsoft Corporation (MSFT) Among Billionaire Ray Dalio’s Long-Term Stock Picks

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Several weeks after the end of each quarter, hedge funds and other notable investors file 13Fs with the SEC to disclose many of their long equity positions as of the end of that quarter. There are a few different ways for investors to use this information. For one, we have found that the most popular small cap stocks among hedge funds outperform the S&P 500 by an average of 18 percentage points per year, and we think that more strategies are possible as well. We can also track individual funds, such as billionaire Ray Dalio’s Bridgewater Associates, over time. Here are the five largest holdings by market value in Bridgewater’s portfolio as of the beginning of this year which the fund had also owned about $15 million or more of at the end of 2010 (or see the full list of stocks Bridgewater reported owning):

Dalio and his team reported a position of 1.6 million shares in Microsoft Corporation (NASDAQ:MSFT), making the software company their largest single-stock holding. Following a steep rally in late April, Microsoft Corporation (NASDAQ:MSFT) is up 18% year to date and currently trades at 11 times forward earnings estimates. We would note that EPS for the fiscal year ending in June 2014 will likely include a temporary boost to earnings from new versions of Windows and Office. In the fourth quarter of 2012, Microsoft Corporation (NASDAQ:MSFT) had just missed our list of the five most popular stocks among hedge funds (find hedge funds’ favorite stocks).

BRIDGEWATER ASSOCIATESBridgewater cut its stake in Dell Inc. (NASDAQ:DELL) by 62% between October and December, though it still owned 1.4 million shares. Dell has had trouble handling a shift from hardware to software and services, and in its most recent quarter revenue and net income were down at double-digit rates compared to the same period in the previous year. However, the company is currently an acquisition target with a consortium of private equity funds offering $13.65 per share for Dell; billionaire Carl Icahn, who has been having a busy year, has also expressed interest in a transaction (see what Icahn owned at the beginning of January).

Oracle Corporation (NASDAQ:ORCL) is another of Dalio’s long term stock picks. Oracle’s business has been steady, with not much change on either top or bottom lines compared to a year ago. The trailing and forward P/Es are 16 and 12, respectively, which isn’t really value territory- this suggests that the market is pricing in some earnings growth going forward, and we’d recommend avoiding the stock until that actually does show up. Seth Klarman’s Baupost Group was selling Oracle but still had over 10 million shares in its portfolio according to that fund’s own 13F (research more stocks Baupost owns).
Who else does he like?
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