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Ray Dalio’s Recent Stock Picks

BRIDGEWATER ASSOCIATESRay Dalio has a reputation of being a bit of an eccentric but as one of the richest people in the world with a net worth north of $10 billion, he can be however he wants, as far as we’re concerned. Dalio runs the ultra-successful Connecticut-headquartered, Bridgewater Associates, which he founded in 1975, two years after graduating from Harvard Business School. The company began with just Dalio and a fellow rugby player but has since grown into a major fund managing over $122 billion in assets and over 1,000 employees. Prior to founding Bridgewater, Dalio was the Director of Commodities at Dominick & Dominick, a brokerage house, as well as the top dog in the Institutional Futures Department of Shearson Hayden Stone. Bridgewater’s strategy is global macro and has two main funds: optimal alpha strategy Pure Alpha started in 1991 and optimal beta strategy All Weather started in 1996. Macro strategies take positions on global economic events, often betting on bonds, currencies, commodities and equities. As of 2011, Bridgewater’s Pure Alpha fund had made its clients $35.8 billion after fees since its inception.

The eccentricity comes from the mystique surrounding the culture at Bridgewater. Dalio penned a book of 300 or so investment, management, and life tenets, and once the public got a hold of it, people accused him of running a cult. Its intent is to guide people to become successful investors, managers, and overall people. An example of the type of content is as follows, “You have to be assertive and open-minded at the same time. This is true in the markets; this is true in almost everything. You have to learn from your mistakes to keep getting better. And it’s through learning from those mistakes that you learn what reality is and how to deal with it, which is called principles. Knowing what’s true, whether you like it or not, is a tremendous asset. There’s no sense in fighting reality.” New hires are required to read the pamphlet and are given a copy before their first day at the firm. Dalio’s goal has always been to seek “the real truth, without letting our egos be involved.” Those are principles he continues to emphasize to this day and is something he demands from all who work at Bridgewater. Bridgewater’s culture may not be for everyone, but whatever it is that they’re doing up there, is working in a big way.

Here are Bridgewater’s top 10 holdings in its 13F portfolio at the end of March:

Company Ticker Value ($000s) Activity
SPDR S & P 500 E T F TRUST SPY 2,720,252 -8%
VANGUARD INTL EQUITY INDEX FUNDS VWO 1,341,659 3%
ISHARES TRUST EEM 924,344 2%
HEWLETT PACKARD CO HPQ 40,885 97%
ISHARES TRUST LQD 36,097 0%
ORACLE CORP ORCL 34,047 29%
ISHARES TRUST IVV 24,712 0%
MICROSOFT CORP MSFT 22,188 2200%
TESORO CORP TSO 20,448 -25%
ROCKWELL COLLINS INC COL 19,992 230%

This quarter Dalio initiated positions in Verizon (VZ), Qualcomm (NASDAQ: QCOM), Royal Bank of Canada (RY), AT&T (T), and Newmont Mining (NEM), betting on telecom, mining, and financials. We have written previously over our preference of QCOM over its competitors Intel’s (NASDAQ: INTC) and Nvidia (NASDAQ: NVDA). QCOM’s S4 Snapdragon processor, should be able to take market share from INTC. We are also glad that QCOM has chosen to focus on improving its dual-core processors before taking on NVDA in the quad-core arena. QCOM trades at a forward P/E of 14.1x versus 9.8x for INTC, 13.0x for NVDA, and 6.7x for Advanced Micro Devices (NASDAQ:AMD). Though we think the premium is warranted, we would wait on weakness in the stock price to begin building a position. Billionaire Stephen Mandel boosted his stake in QCOM by 21% to $523 million during the first quarter (see Stephen Mandel’s new picks).

Ray Dalio also increased positions sizably in the Vanguard MSCI Emerging Markets ETF (VWO), Microsoft (NASDAQ:MSFT), and Hewlett-Packard (HPQ), Rockwell Collins (COL), and Norfolk Southern (NSC), the latter two being industrial goods companies. MSFT has now made Office 2010 is available through its online store. There is now the added functionality of being able to download both free and paid Metro apps directly from the store. Its stock price has been up upon the product launch but at 9.6x forward earnings we still find it attractive. Microsoft is also the third most popular stock among hedge funds at the end of March (see the 10 most popular stocks). Overall, Dalio’s equity portfolio has heaviest weightings in Technology, Consumer Services, and Industrials.

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