In the article, we will discuss 10 stocks to sell according to Ray Dalio. To skip the detailed analysis of Ray Dalio’s Bridgewater Associates, go directly to 5 Stocks to Sell Now According to Ray Dalio.
Raymond Thomas Dalio is an American billionaire investor, hedge fund manager, and philanthropist. He is also the author of Principles: Life & Work, a book on corporate management and investment philosophy, which was featured on the New York Times best-seller list and called the “gospel of radical transparency”.
Investment Strategy
Ray Dalio doesn’t believe in the buy-and-hold strategy and likes to make profits off of expensive stocks and reinvesting. He calls his philosophy “rotating the portfolio”. According to his book, Ray Dalio has developed a principle of “Risk Parity” which he explains as, “It’s about balancing risk, not dollar amounts.”
Dalio’s basic investment philosophy is divided into two parts. The first one revolves around alpha investments, where he looks to actively generate better returns than the benchmarks and is not in any way related to the general market. Secondly, the beta investments produce returns through passive management and normal market risk.
Bridgewater Associates
In 1975, Ray Dalio formed a company from his home where he began managing capital for clients. However, in 1980, Dalio went bankrupt and laid off all his employees. He then asked his father for $4000 and founded Bridgewater Associates in 1983. It is one of the world’s largest investment portfolios, with $235.5 billion in assets under management.
According to Bridgewater Associates’ 13F portfolio, the firm had $23.598 billion in managed 13F securities as of Q2 2022. During the quarter, the firm made 116 new stock purchases and increased holdings in 612. Furthermore, Bridgewater slashed its positions in 256 stocks and sold out of 99. Alibaba Group Holding Limited (NYSE:BABA), Broadcom Inc. (NASDAQ:AVGO), and JD.com, Inc. (NASDAQ:JD) are some major stocks that Ray Dalio sold in the June quarter.
Our Methodology
After assessing the Q2 2022 13F portfolio of Ray Dalio’s Bridgewater Associates, we picked the 10 famous stocks that the firm sold out of. For further understanding of the readers, the recent financial reports, dividend history, and analyst ratings around each stock have also been provided.
The hedge fund sentiment has been taken from Insider Monkey’s database of 895 elite hedge funds as of Q2 2022.
Stocks to Sell Now According to Ray Dalio
10. Marsh & McLennan Companies, Inc. (NYSE:MMC)
Number of Hedge Fund Holders: 40
Marsh & McLennan Companies, Inc. (NYSE:MMC) is an American insurance brokerage, risk management, reinsurance services, talent management, investment advisory, and management consulting company. In Q1 2022, Bridgewater Associates owned 195,565 shares of the company, valued at $33.328 million. The firm sold off the stock in Q2 2022.
According to Marsh & McLennan Companies, Inc. (NYSE:MMC)’s Q2 reports, the company posted an EPS of $1.89, compared to the $1.85 consensus. The revenue of the company recorded a 7.4% growth to $5.38 billion, outperforming the estimates by $50 million. On top of that, the company repurchased common stock worth $600 million, which brings its 6-month share buyback value to $1.1 billion.
On July 29, JPMorgan analyst Stephen Tusa maintained an Overweight rating on Marsh & McLennan Companies, Inc. (NYSE:MMC)’s shares and raised his price target to $190 from $180.
Alibaba Group Holding Limited (NYSE:BABA), Broadcom Inc. (NASDAQ:AVGO), and JD.com, Inc. (NASDAQ:JD) are some of the notable stocks Ray Dalio sold, along with Marsh & McLennan Companies, Inc. (NYSE:MMC).
9. Tractor Supply Company (NASDAQ:TSCO)
Number of Hedge Fund Holders: 41
Tractor Supply Company (NASDAQ:TSCO) is a Tennessee-based retail company that supplies materials for home improvement, agriculture, lawn and garden maintenance, livestock, and pet care. Bridgewater Associates increased its position in the company in Q1 by 238%, but sold the stock entirely in Q2. The firm owned 12,466 shares of Tractor Supply Company (NASDAQ:TSCO), valued at $2.9 million in Q1 2022. However, Bridgewater Associates dumped the entirety of its stake in the second quarter of 2022.
On August 4, Tractor Supply Company (NASDAQ:TSCO) declared a $0.92 quarterly dividend, in line with the previous one. The quarterly dividend is payable on September 7 to the shareholders of record on August 22. As of August 23, the company has a dividend yield of 1.83%.
According to the Insider Monkey database, 61 hedge funds had stakes in Tractor Supply Company (NASDAQ:TSCO), with a combined value of $4.2 billion at the end of Q2 2022. The most significant stakeholder was Select Equity Group, with 2.26 million shares worth $438.63 million.
On August 19, Oppenheimer analyst Brian Nagel said that he sees a long-term buying opportunity in Tractor Supply Company (NASDAQ:TSCO) due to current weakness. The analyst has an Outperform rating on the company shares with a price target of $270.
Here is what LRT Capital Management had to say about Tractor Supply Company (NASDAQ:TSCO) in its Q3 2021 investor letter:
“We currently have a small (approximately 3%) position in Tractor Supply (TSCO), and we wanted to give you more insight into why we own shares in this business…
In our search for truly great businesses, we look for specific qualitative and quantitative factors. What defines a great business to us is one with high returns on capital relative to its peers, growth opportunities, and a durable competitive advantage. What’s more, management’s decisions must be intelligent, and their interests must be aligned with shareholders, because management, ultimately, is the link between business value and shareholder value. We strive to buy shares only in high quality companies which we believe can compound in value for many years to come.
The COVID-19 pandemic has been a disruptive event for the retail sector. Businesses changed the way they make sales to stay alive during devastating lockdowns for commerce. Formerly novel modes of shopping, such as curb-side pickup, and delivery services have now reached the status of a new normal. Businesses that adapted quickly have benefited massively. Another consequence of the pandemic has been the migration from cities to the suburbs due to “work from home” policies which in practice mean “work from anywhere”.
City life is very expensive for most Americans. With the wider acceptance of the work-at-home culture, and in-office hybrid models, more Americans are opting to move away from the cities, while potentially keeping their big city salaries. This move allows employees to buy a larger space, likely for less money, and re-allocate their budgets with more disposable income…” (Click here to see the full text)
8. Honeywell International Inc. (NASDAQ:HON)
Number of Hedge Fund Holders: 42
Honeywell International Inc. (NASDAQ:HON) is an American multinational conglomerate. Its primary segments include aerospace, building technologies, performance materials and technologies, and safety and productivity solutions.
On July 28, Honeywell International Inc. (NASDAQ:HON) reported an EPS of $2.10, beating the estimates by $0.08. The company also generated a revenue of $8.95 billion, outperforming the street consensus by $280 million. Honeywell International Inc. (NASDAQ:HON) slightly lowered its prior revenue guidance of $35.5 billion-$36.4 billion to $35.5 billion-$36.1 billion and reaffirmed its EPS guidance of $8.55-$8.80 for FY22.
As of Q2 2022, 42 hedge funds held bullish positions in Honeywell International Inc. (NASDAQ:HON). 8 hedge funds pulled out of the company in Q2, including Bridgewater Associates, which held 262,200 shares worth $51.616 million at the end of Q1 2022.
Here is what Distillate Capital had to say about Honeywell International Inc. in its Q3 2021 investor letter:
“The largest exited positions were Oracle, which outperformed significantly, and Texas Instruments and Honeywell, which were roughly flat versus the market in the quarter but were edged out for inclusion by other stocks that became even more attractively valued.”
7. American Tower Corporation (NYSE:AMT)
Number of Hedge Fund Holders: 52
American Tower Corporation (NYSE:AMT) is a real estate investment trust, primarily focusing on wireless and broadcast communications infrastructure. In Q1 2022, Bridgewater Associates held a position worth $44.58 million in the company, covering 0.17% of the fund’s portfolio. However, the fund completely discarded its position in the quarter ending June 30.
According to the company’s Q2 reports, American Tower Corporation (NYSE:AMT)’s FFO of $2.51 outperformed the estimates by $0.05. In addition, the revenue of $2.67 billion was $30 million above the street consensus. For FY22, the company made a cut in its total property revenue to $10.28 billion -$10.46 billion, from the previous outlook of $10.295 billion-$10.475 billion.
On July 29, Deutsche Bank analyst Matthew Niknam reiterated a Hold rating on American Tower Corporation (NYSE:AMT)’s shares. However, the analyst raised his price target on the firm to $285 from $270.
Here is what Richie Capital Group has to say about American Tower Corporation (NYSE:AMT) in its Q2 2022 investor letter:
“The portfolio positions that increased during the quarter likely did so because of the sectors in which they are categorized as opposed to any company specific news. American Tower (NYSE:AMT) is one of the largest global REITs. The company owns and operates multi-tenant cell towers globally. Our long tenured investment is based on their impenetrable business model and the long tail of the current 5G investment cycle that will extend over the next decade. Carriers are in the early stages of upgrading their cell sites with new equipment to provide contiguous 5G coverage globally. Additionally, since 5G technology requires increased cell site density, cellular carriers will need to invest extensively to ensure strong performance across their networks.”
6. Shopify Inc. (NYSE:SHOP)
Number of Hedge Fund Holders: 60
Shopify Inc. (NYSE:SHOP) is a Canadian e-commerce company operating in 175 countries across the globe. According to the Insider Monkey database, 60 hedge funds had positions collectively worth $3.26 billion in the company at the end of Q2 2022. ARK Investment Management held the most prominent stake in the company, consisting of 1.2 million shares worth $455.2 million.
In Q2 2022, Shopify Inc. (NYSE:SHOP) reported a net loss of $1.2 billion, or $0.95 per diluted share, compared to a net income of $0.9 billion, or $0.695 per diluted share in Q2 2021. The company announced a revenue of $1.3 billion, representing a 16% YoY growth and bringing the 3-year CAGR to 53%. Shopify Inc. (NYSE:SHOP) exited the quarter with $6.95 billion in cash, cash equivalents, and marketable securities.
According to the fund’s 13F filings, Bridgewater Associates held shares worth $4.1 million in Shopify Inc. (NYSE:SHOP) at the end of Q1 2022, making up 0.01% of the fund’s portfolio. The firm sold all of its stake in the company in Q2 2022.
Shopify Inc. (NYSE:SHOP) is one of the notable stocks that Ray Dalio sold, along with Alibaba Group Holding Limited (NYSE:BABA), Broadcom Inc. (NASDAQ:AVGO), and JD.com, Inc. (NASDAQ:JD).
Here is what Rowan Street had to say about Shopify Inc. (NYSE:SHOP) in its Q2 2022 investor letter:
“Tobias Lutke, Shopify (NYSE:SHOP) Founder and CEO
When Tobias Lütke opened an online snowboarding store in 2004, he realized how painfully cumbersome e-commerce software was. So he decided to create Shopify – a platform that made it easy for anyone to open up an online store.
Tobi has built Shopify into one of the most popular e-commerce platforms in the world, with $175 billion in GMV (Gross Merchandise Value) and $4.6 billion in revenues in 2021. SHOP went public in 2015, when revenues were just lightly above $200 million, and the stock is up 1,233% since its IPO. Shopify stock peaked in November 2021 (traded at astronomical 47x sales), which coincided with peak enthusiasm for the tech-driven, “stay-home” stocks. Since then, the stock is down almost 80% and is currently trading at just 6x 2023E sales. We believe that Mr. Market is offering us an exceptional value, at current price levels, for an exceptional company led by a very talented, visionary founder/CEO.”
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Disclosure. None. 10 Stocks to Sell Now According to Ray Dalio is originally published on Insider Monkey.
