In the article, we will discuss 10 stocks to sell 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.”
5. Analog Devices, Inc. (NASDAQ:ADI)
Number of Hedge Fund Holders: 61
Analog Devices, Inc. (NASDAQ:ADI) is a Washington-based semiconductor company. Bridgewater Associates added the company to its portfolio in Q1 2022 and sold it soon after. In Q1 2022, the firm held stakes worth $21.3 million in Analog Devices, Inc. (NASDAQ:ADI), representing 0.08% of the firm’s portfolio. Bridgewater Associates dumped its Analog Devices, Inc. (NASDAQ:ADI) position entirely in the second quarter of 2022.
In Q2 2022, Analog Devices, Inc. (NASDAQ:ADI) recorded an EPS of $2.52, exceeding the estimates by $0.09, and the revenue of $3.11 billion was up 76.7% on a YoY basis, beating estimates by $50 million. Moreover, the company paid out $1.3 billion to its shareholders during the quarter in the form of share repurchases worth $906 million and $394 million in dividends.
On August 18, Needham analyst Quinn Bolton downgraded Analog Devices, Inc. (NASDAQ:ADI) from Buy to Hold after its earning reports. The analyst added that Analog Devices, Inc. (NASDAQ:ADI) and the semiconductor industry are on their way to a broader slowdown.
Here is what Madison Funds had to say about Analog Devices, Inc. in its Q3 2021 investor letter:
“At its 2017 investor day, Analog Device’s VP of Automotive, Mark Gill, described how the company’s content on well-equipped electric vehicles was $600 per car compared to $250 per car for the traditional 2017 internal combustion engine car. Since then, Analog has highlighted the success of its EV battery management systems (BMS) product nearly every quarter. The BMS product is hardware and software that manages the power into and out of the battery systems. It’s the brains of the operation. Analog says it’s on its fifth generation BMS product, that it has the no. 1 market share in high voltage products, and that it is on 5 of the top 10 selling EVs. While we think that the BMS product is just 1 to 1.5% of Analog’s product mix, we think that it could add nearly a point of revenue growth per year to the company’s top-line given the expected ramp in EV production. This is a material amount of growth atop an already nicely growing company revenue line.”
4. Accenture plc (NYSE:ACN)
Number of Hedge Fund Holders: 61
Accenture plc (NYSE:ACN) is an Irish-American information technology and consulting company. At the end of Q1 2022, the company had a 0.28% concentration in Bridgewater Associates’ portfolio, with 211,086 shares worth $71.18 million. However, the firm sold its stake in the June quarter.
As of August 23, Accenture plc (NYSE:ACN) has a dividend yield of 1.23%, with an annualized dividend payout of $3.88. The most recent quarterly dividend was $0.97 per share, paid to shareholders on August 15.
On August 9, Baird analyst David Koning maintained a Neutral rating on Accenture plc (NYSE:ACN) and raised his price target to $338 from $310. The analyst believes that its recent acquisition of Romp could increase its annualized revenue and views its risk/reward as decent, owing to solid growth, high-quality earnings, and a clean balance sheet.
Here is what Polen Capital had to say about Accenture plc (NYSE:ACN) in its Q1 2022 investor letter:
“Accenture’s business is firing on all cylinders and continue to enjoy an acceleration in their respective fundamentals because of the increase in digitization around the world. Nearly every company today is searching for ways to become more digital, and Accenture is positioned to provide many of the solutions these companies seek. This inflection in fundamentals was not lost on the market, and each business’s stock performed exceptionally well in 2021. In fact, they represented two of the three top absolute performers for the Global Growth Portfolio last year. As a result, its stock is currently more fully priced. As such, we lowered Accenture to an average weight. We maintain high conviction in the business and plan to own it for many years, but recognize the increase in their prices.”
3. JD.com, Inc. (NASDAQ:JD)
Number of Hedge Fund Holders: 62
JD.com, Inc. (NASDAQ:JD) is a Chinese e-commerce company and a member of the Fortune Global 500. The company possesses some of the best drone delivery systems, infrastructure, and capabilities.
According to its second quarter reports, JD.com, Inc. (NASDAQ:JD) reported an EPS of $0.61 against the $0.40 consensus. The revenue of $40 billion represented a 5.4% YoY growth and outperformed the estimates of $38.47 billion. Furthermore, the company reported that its annual active customers increased to 580.8 million, an increase of 9% in 12 months. The company is also focusing on its shareholder returns through its $1.26 annual dividend and the $3 billion share repurchase program which will last till May 2024.
In Q1 2022, Bridgewater Associates had a $123.91 million stake in JD.com, Inc. (NASDAQ:JD), representing 0.49% of the fund’s portfolio. The stock was dumped by the firm during the quarter ending June 30.
On July 25, Morgan Stanley analyst Eddy Wang named JD.com, Inc. (NASDAQ:JD) a “Catalyst Driven Idea” ahead of its Q2 earnings and believes that the company’s Q3 revenue growth will accelerate from June levels. Wang has an Overweight rating on JD.com, Inc. (NASDAQ:JD) with an $80 price target.
Here is what Argosy Investors had to say about JD.com, Inc. (NASDAQ:JD) in its Q3 2021 investor letter:
“We sold JD as a result of the furor over Chinese stocks during the quarter. We had been concerned about China’s lack of respect for investor rights for some time, and Beijing has become significantly more aggressive in asserting itself of late. In addition, the legal structure Chinese companies use to come public in the U.S., a Cayman Islands shell corporation leaves American investors with an unsure path to recovering value should these companies cease to trade on U.S. exchanges. Because of the uncertainty, we exited our position in JD completely. We still love JD’s long-term prospects, but we cannot estimate the legal/regulatory risk associated with these companies anymore. More broadly, we are freeing up cash for some other positions we already own which have declined in this market, and after additional review, remain attractive.”
2. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders: 66
Broadcom Inc. (NASDAQ:AVGO) is an American semiconductor and computer software company. On August, 12 BofA removed the company from its US 1 list, yet maintained a Buy rating on the company shares.
In May 2022, Broadcom Inc. (NASDAQ:AVGO) announced its acquisition of VMware, Inc. (NYSE:VMW) for $61 billion in cash and stock. The acquisition is expected to provide Broadcom Inc. (NASDAQ:AVGO) with an additional $13 billion in annual revenue, $1.6 billion in annual net income, and $4 billion in annual operating cash flow. The deal is expected to close in 2023 as it still needs regulatory approval.
Bridgewater associates owned 19,229 shares of Broadcom Inc. (NASDAQ:AVGO), valued at $12.1 million at the end of Q1 2022, representing 0.04% of the fund’s portfolio. In Q2 2022, the firm dumped the stock entirely.
On July 20, Deutsche Bank analyst Ross Seymore reaffirmed a Buy rating for Broadcom Inc. (NASDAQ:AVGO) shares with a price target of $635, down from $700. The analyst expects a positive fundamental strength across the majority of the sector. However, he believes that investors are waiting for a “widespread deck-clearing” before looking back at semiconductor stocks.
Here is what ClearBridge Investments had to say about Broadcom Inc. (NASDAQ:AVGO) in its Q4 2021 investor letter:
“However, ClearBridge portfolio companies are responding by supporting their workforces and showing resilience in adapting and thriving. Semiconductor companies ClearBridge owns and engages with have been successful in advancing vaccinations in their global supply chains. In Malaysia, for example, Broadcom has taken part in PIKAS, a public-private partnership vaccination program focusing on the workforce in critical manufacturing sectors. By the summer of 2021, Broadcom was able to get over 90% of workers in its Penang factory at least one dose of vaccine, and roughly 73% fully vaccinated. Companies in the program also pay the administration cost for vaccinations including cases where the employee is no longer employed by the company before full immunization of the employee.”
1. Alibaba Group Holding Limited (NYSE:BABA)
Number of Hedge Fund Holders: 106
Alibaba Group Holding Limited (NYSE:BABA) is China’s largest e-commerce corporation. The company provides consumer-to-business, business-to-consumer, and business-to-business sales services.
Alibaba Group Holding Limited (NYSE:BABA) faced a number of headwinds in recent times. Firstly, the presence of China’s military in Chinese waters raised tensions between USA and China. Additionally, the re-emergence of COVID led to a lockdown in major Chinese cities. Resultantly, Alibaba Group Holding Limited (NYSE:BABA) saw a drop of 1% YoY in the e-commerce segment to 141.94 CNY in Q2 2022 from 144.03 billion CNY in the same quarter of 2021. Moreover, the cloud computing business saw a 10% YoY increase compared to 29% in Q2 2021.
In Q1 2022, Bridgewater Associates held 7.48 million shares of Alibaba Group Holding Limited (NYSE:BABA), valued at $813.88 million, representing 3.28% of the fund’s portfolio. Dalio sold the entirety of his position in the company in Q2.
Here is what Artisan Partners had to say about Alibaba Group Holding Limited (NYSE:BABA) in its Q2 2022 investor letter:
“Alibaba rose 4% during the quarter. We would love to say the share price performance was due to strong operational performance. Unfortunately, that was not the case. The most recent earnings results showed its core e-business still had not returned to growth, primarily due to the difficult retail environment caused by the government’s zero-COVID policy. Alibaba also appears to be losing market share due to its product mix tilted toward apparel and cosmetics, categories currently stalled in this environment. The share price performance this quarter was largely a function of exogenous items—specifically, government actions in the form of stimulus to support the economy and less regulations.
Despite the poor recent results, Alibaba remains a powerful economic engine. It is a global leader in e-commerce and cloud computing, both of which should grow nicely over time. Management has started taking actions to improve profitability, which has been burdened by significant investment in loss-making business ventures. The financial results should improve significantly when China’s economy starts to recover from COVID-19 outbreaks. The shares are incredibly cheap and have some of the highest upside potential in the portfolio. Even embedding significant losses from new ventures, we estimate they are trading at 11X-12X unlevered earnings. In our view, the shares could double, and they still would not be expensive.”
You can also take a look at 10 Stocks Analysts Are Downgrading After Weak Earnings Reports and 10 Stocks That the Russia-Ukraine War Will Affect in the Future.
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Disclosure. None. 10 Stocks to Sell Now According to Ray Dalio is originally published on Insider Monkey.
