In this article, we discuss 10 consumer staples stocks to buy according to billionaire Ray Dalio.
Ray Dalio is one of the most prominent hedge fund managers in the finance world, who founded Bridgewater Associates in 1975, which is a Connecticut-based hedge fund that accommodates multiple clients including pension funds, endowments, foundations, foreign governments, and central banks.
Bridgewater Associates uses global macro trends to offer investment advisory and wealth management services, and relies on quantitative models rather than historic methods of investments. The fund uses both active and passively managed strategies to generate returns for investors.
According to securities filings for the fourth quarter of 2021, Ray Dalio’s portfolio is worth $17.20 billion, with investments focused in the consumer discretionary, consumer staples, finance, and healthcare sectors. With a top ten holdings concentration of 35.59%, Bridgewater Associates purchased 137 new stocks in Q4, bought additional shares of 299 companies, slashed stakes in 292 securities, and sold out of 89.
The most notable stocks held in the fourth quarter portfolio of Ray Dalio’s Bridgewater Associates included JD.com, Inc. (NASDAQ:JD), The Procter & Gamble Company (NYSE:PG), and Alibaba Group Holding Limited (NYSE:BABA), among others discussed at length below.
Ray Dalio of Bridgewater Associates
Our Methodology
Using the Q4 2021 portfolio of Ray Dalio for this analysis, we selected the top consumer staples stocks owned by the billionaire. We have ranked the securities according to the fund’s stake value in each holding.
Consumer Staples Stocks To Buy According To Billionaire Ray Dalio
10. Colgate-Palmolive Company (NYSE:CL)
Bridgewater Associates’ Stake Value: $162,055,000
Percentage of Bridgewater Associates’ 13F Portfolio: 0.94%
Number of Hedge Fund Holders: 48
Colgate-Palmolive Company (NYSE:CL) is a New York-based multinational company that manufactures and markets consumer staples including oral, personal hygiene, home care, and pet nutrition products.
Ray Dalio initially purchased shares of Colgate-Palmolive Company back in Q1 2011, but the billionaire has been inconsistent with his stake over the years. He added the stock to his portfolio again in Q3 2020, and has held the position consistently since then. In the fourth quarter of 2021, Bridgewater Associates increased its stake in Colgate-Palmolive Company by 14%, holding 1.8 million shares worth over $162 million.
On March 10, Colgate-Palmolive Company declared a $0.47 per share quarterly dividend, a 4.4% increase from its prior dividend of $0.45. The dividend is payable on May 13, to shareholders of record on April 21. The company also announced a new share repurchase program of up to $5 billion, replacing its earlier share repurchase authorization scheme of 2018.
Credit Suisse analyst Kaumil Gajrawala on January 31 lowered the price target on Colgate-Palmolive Company to $90 from $95 and kept an Outperform rating on the shares. According to the analyst, the slashed price target was due to weaker-than-expected Q4 results, with the topline indicative of reduced sales volume and pricing falling short of commodity inflation.
In Q4 2021, 48 hedge funds were bullish on Colgate-Palmolive Company, compared to 54 funds in the prior quarter. First Eagle Investment Management owns the leading position in the company, with 11.5 million shares worth $988.4 million.
In addition to JD.com, Inc., The Procter & Gamble Company, and Alibaba Group Holding Limited, elite funds are pouring into Colgate-Palmolive Company.
9. The Estée Lauder Companies Inc. (NYSE:EL)
Bridgewater Associates’ Stake Value: $189,749,000
Percentage of Bridgewater Associates’ 13F Portfolio: 1.10%
Number of Hedge Fund Holders: 44
The Estée Lauder Companies Inc. (NYSE:EL) was founded in 1946 and is headquartered in New York, operating as a manufacturer and distributor of skin care, makeup, fragrance, and hair care products worldwide.
Initially opening a position in The Estée Lauder Companies Inc. back in Q3 2012, Bridgewater Associates has been inconsistent with its stake in the company over the years. The hedge fund invested in The Estée Lauder Companies Inc. once again in Q3 2020, buying 175,579 shares worth $38.3 million. In the fourth quarter of 2021, Dalio slashed his stake in The Estée Lauder Companies Inc. by 28%, owning 512,559 shares, valued at approximately $190 million.
On February 3, The Estée Lauder Companies Inc. reported that fourth quarter sales increased by 14%, with demand for makeup improving notably in Q4, but due to mask mandates, it is the only category that has not caught up to pre-pandemic sales. The Estée Lauder Companies Inc. noted that skin care, fragrance, and hair care categories have all grown in volume as compared to pre-pandemic levels.
Oppenheimer analyst Rupesh Parikh lowered the price target on The Estée Lauder Companies Inc. on March 17 to $300 from $350 and kept an Outperform rating on the shares. The analyst observed that shares of The Estée Lauder Companies Inc. have fallen 15% since late February, versus a decrease of 4% in the S&P 500. He noted that the decline in The Estée Lauder Companies Inc. was due to geopolitical tensions and recent China COVID-19 headwinds. While it seems like an attractive entry point into the stock, he cannot call a bottom as there are significant modeling risks and valuation is quite high, the analyst told investors in a research note.
Of the hedge funds tracked by Insider Monkey in Q4 2021, Fundsmith LLP is the biggest shareholder of the company, with more than 7 million shares worth $2.65 billion. Overall, 44 funds were bullish on the stock at the end of December.
Here is what Harding Loevner Global Equity Fund has to say about The Estée Lauder Companies Inc. in its Q3 2021 investor letter:
“We sold cosmetic producer Estée Lauder, which we bought last March. At the time, the market reflected a dire outlook for retail demand, especially tourist-related; however, we found its Chinese business attractive and admired its agility across social media and other digital channels. As the stock has appreciated, the resulting valuation now leaves no room for error, such as a potential shift of Chinese consumers’ tastes away from US brands.”
8. Target Corporation (NYSE:TGT)
Bridgewater Associates’ Stake Value: $242,736,000
Percentage of Bridgewater Associates’ 13F Portfolio: 1.41%
Number of Hedge Fund Holders: 49
Target Corporation (NYSE:TGT) was incorporated in 1902 and is headquartered in Minneapolis, Minnesota, operating as a wholesale retailer in the United States. Target Corporation is a seller of grocery, apparel, home products, electronics, food, and household essentials.
Ray Dalio’s fund owns more than 1 million shares of Target Corporation, worth $242.73 million, representing 1.41% of the total investments for the fourth quarter. The billionaire added 10% to his Target Corporation stake in Q4 2021.
Raymond James analyst Bobby Griffin on March 2 lowered the price target on Target Corporation to $275 from $290 and kept a Strong Buy rating on the shares. The lowered target is indicative of the compressed valuation multiples for the consumer staples sector amid inflationary pressure and other macro-driven challenges, according to the analyst, although he sees Target Corporation as a long-term winner in today’s retail landscape.
According to the fourth quarter database of Insider Monkey, 49 hedge funds were long Target Corporation, with collective stakes equalling $3.9 billion. GQG Partners is the leading shareholder of Target Corporation, with 4.90 million shares worth $1.13 billion.
Here is what Nelson Capital Management has to say about Target Corporation in its Q2 2021 investor letter:
“We added Target (tkr: TGT) to our consumer staples sector. Target Corporation offers a broad array of products in owned and known brand items at affordable prices. Its omni-channel fulfillment centers allow customers to receive their items via in-store pickup, curbside pickup, same-day shipping and regular shipping while simultaneously reducing operating costs. With a significantly lower valuation than peers and a unique operating strategy, Target is an attractive holding.”
7. Starbucks Corporation (NASDAQ:SBUX)
Bridgewater Associates’ Stake Value: $299,519,000
Percentage of Bridgewater Associates’ 13F Portfolio: 1.74%
Number of Hedge Fund Holders: 53
Based in Seattle, Washington, Starbucks Corporation (NASDAQ:SBUX) is a multinational retailer of specialty coffee, operating in more than 80 countries. Starbucks Corporation is recognized for its roasted whole beans and ground coffees, ready-to-drink beverages, and multiple food products.
Starbucks Corporation has consistently featured on Dalio’s portfolio since Q3 2020, although his fund first purchased a position in the company back in Q4 2010. Securities filings for Q4 2021 revealed that Bridgewater Associates owns 2.56 million Starbucks Corporation shares, worth $299.5 million, accounting for 1.74% of the total portfolio.
On February 1, Starbucks Corporation declared a quarterly dividend of $0.49 per share, which was distributed on February 25, for shareholders of record on February 11.
Starbucks Corporation on March 16 announced its share repurchase program of $20 billion for 2022, which will be returned to shareholders over the next three fiscal years. The company also plans to expand to roughly 55,000 licensed stores across 100 markets by 2030.
On March 17, JPMorgan analyst John Ivankoe upgraded Starbucks Corporation to Overweight from Neutral with an unchanged price target of $101. The analyst believes that Starbucks Corporation can maintain its “affordable luxury status” and that valuation can drive stock outperformance, and the shares “show very favorable risk/reward dynamics”.
A total of 53 hedge funds were bullish on Starbucks Corporation in Q4 2021, compared to 58 funds in the last quarter. Andy Brown’s Cedar Rock Capital is a prominent shareholder of Starbucks Corporation, with 4.1 million shares worth close to $481 million.
Here is what Polen Global Growth has to say about Starbucks Corporation in its Q4 2021 investor letter:
“We trimmed Starbucks as a source of funding and to edge our weighting down. While the company has managed well through a difficult environment, we recognize that lockdowns are categorically challenging for this business. Starbucks has a robust mobile order and pay platform fueled by a sophisticated app as well as a strong loyalty program, but this doesn’t alter the fact that the store-based retail business is important to the company. As a result, we felt a smaller weighting was appropriate.”
6. Walmart Inc. (NYSE:WMT)
Bridgewater Associates’ Stake Value: $409,741,000
Percentage of Bridgewater Associates’ 13F Portfolio: 2.38%
Number of Hedge Fund Holders: 63
Walmart Inc. (NYSE:WMT) is an Arkansas-based wholesale retailer that operates a chain of supercenters, supermarkets, hypermarkets, warehouse clubs, cash and carry stores, and discount stores. Ray Dalio owns 2.8 million Walmart Inc. shares as of Q4 2021, worth approximately $410 million, representing 2.38% of the total investments for the period.
On February 17, Walmart Inc. declared a $0.56 per share quarterly dividend, a 1.8% increase from its prior dividend of $0.55. With a forward yield of 1.68%, the dividend is payable on April 4, to shareholders of record on March 18.
Morgan Stanley analyst Simeon Gutman on February 22 lowered the price target on Walmart Inc. to $165 from $170 and kept an Overweight rating on the shares, stating that the Q1 baseline for Walmart Inc. was unclear regarding the divestment of its UK and Japan businesses.
Among the hedge funds tracked by Insider Monkey, 63 funds were bullish on Walmart Inc. at the end of December 2021, compared to 71 funds in the earlier quarter. Bill & Melinda Gates Foundation Trust is the leading shareholder of the company, with roughly 7 million shares worth $1 billion.
Just like JD.com, Inc., The Procter & Gamble Company, and Alibaba Group Holding Limited, Walmart Inc. is a significant holding in Ray Dalio’s fund.
5. McDonald’s Corporation (NYSE:MCD)
Bridgewater Associates’ Stake Value: $449,661,000
Percentage of Bridgewater Associates’ 13F Portfolio: 2.61%
Number of Hedge Fund Holders: 57
McDonald’s Corporation is a multinational fast food company that operates globally. Hiking its position in McDonald’s Corporation by 16% in Q4 2021, Bridgewater Associates owns 1.67 million shares of the company, worth approximately $450 million. The stock accounts for 2.61% of the fund’s total Q4 portfolio.
On March 14, Oppenheimer analyst Brian Bittner lowered the price target on McDonald’s Corporation to $280 from $290 and kept an Outperform rating on the shares. The analyst observed that McDonald’s Corporation stock declined 9% since Russia invaded Ukraine on February 24, and investors should take advantage of the pullback. The headwinds for EPS in 2022 are due to losses from incurring short-term costs despite operations being cut in Russia, and the analyst’s 3% lower 2023 EPS estimate assumes that Russia and Ukraine’s EPS contribution falls to zero.
According to the fourth quarter database of Insider Monkey, 57 hedge funds were long McDonald’s Corporation, with combined stakes of $2.24 billion. Renaissance Technologies is the biggest shareholder of the company, with 1.75 million shares worth $470.4 million.
4. The Coca-Cola Company (NYSE:KO)
Bridgewater Associates’ Stake Value: $514,581,000
Percentage of Bridgewater Associates’ 13F Portfolio: 2.99%
Number of Hedge Fund Holders: 70
The Coca-Cola Company (NYSE:KO) is a multinational beverage manufacturer and distributor, offering a range of sparkling soft drinks, flavored water, energy and sports drinks, and alcoholic beverages.
Ray Dalio first invested in The Coca-Cola Company back in Q4 2010, but sold off his stake repeatedly over the years. In Q3 2020, the billionaire purchased shares of The Coca-Cola Company, and the stake was elevated in the fourth quarter of 2021 by 4%. The hedge fund held a $514.5 million position in The Coca-Cola Company, which accounts for 2.99% of the total Q4 investments.
On February 17, The Coca-Cola Company declared a $0.44 per share quarterly dividend, a 4.8% increase from its prior dividend of $0.42. The dividend is distributable on April 1, to shareholders of record on March 15.
Evercore ISI analyst Robert Ottenstein on March 15 lifted the price target on The Coca-Cola Company to $70 from $63 and kept an Outperform rating on the shares, citing different drivers for multiple expansion, including an improved business model, strong product portfolio, positive long-term outlook, and share buybacks driving a double-digit return to shareholders.
Among the hedge funds tracked by Insider Monkey, 70 funds were bullish on The Coca-Cola Company at the end of December 2021, up from 61 funds in the quarter earlier. Berkshire Hathaway is the leading shareholder of The Coca-Cola Company, owning 400 million shares worth $23.6 billion.
3. Costco Wholesale Corporation (NASDAQ:COST)
Bridgewater Associates’ Stake Value: $519,806,000
Percentage of Bridgewater Associates’ 13F Portfolio: 3.02%
Number of Hedge Fund Holders: 57
Costco Wholesale Corporation (NASDAQ:COST) is a merchandise retailer of dry groceries, appliances and electronics, health and beauty products, hardware, and sporting goods, among others.
In the third quarter of 2020, Ray Dalio acquired a stake in Costco Wholesale Corporation, and in Q4 2021, the billionaire added 8% to his position, holding 915,635 shares worth approximately $520 million.
Costco Wholesale Corporation published its Q4 results on March 3, posting earnings per share of $2.92, topping estimates by $0.18. The quarterly revenue jumped roughly 16% year-over-year to $51.90 billion, surpassing consensus by almost $396 million. Deutsche Bank analyst Krisztina Katai raised the price target on Costco Wholesale Corporation to $491 from $482 and kept a Hold rating on the shares on March 7, following the Q4 results.
A total of 57 hedge funds were bullish on Costco Wholesale Corporation at the end of December 2021, up from 55 funds in the quarter earlier. Fisher Asset Management is the biggest shareholder of the company, with more than 4 million shares worth $2.3 billion.
Here is what Ensemble Capital has to say about Costco Wholesale Corporation in its Q1 2021 investor letter:
“We saw these dynamics at play in the Fund. Some of the worst-performing stocks this quarter were among our best performers in Q1 2020. Another example was the market’s reaction to Costco Wholesale (1.5% weight in the Fund) during the quarter. From December 31, 2020 to March 8th, Costco shares declined 17% and dropped below their pre-pandemic high. The common rationale offered by sell-side analysts was that Costco would face difficult one-year “comps” (i.e. same-store sales, which compare sales from stores open for at least a year). Because so many consumers rushed to Costco ahead of shelter-in-place and subsequent quarantines, it will be harder for Costco to meaningfully beat those results when compared year-over-year. That may indeed be true, but we struggle to understand how Costco could be “less valuable” than it was a year earlier when it concurrently increased its membership base by over 7%, or 3.9 million members. With membership renewal rates around 90%, the vast majority of the new customers Costco brought in last year will be around for years to come.
Analysts also complained about Costco raising its already industry-leading minimum wage to $16/hour, with an average “effective” pay of $23-$24/hour when you include overtime and bonuses. Costco paying its employees “too much” has been a common gripe of Wall Street analysts for at least two decades. While the extra pay does indeed impact short-term profit margins, it also serves to make Costco more durable, as its flywheel (i.e. a virtuous value cycle) starts with happy employees. A 20-year chart of Costco stock price is evidence that this strategy works and we’re confident that it will continue to work.”
2. PepsiCo, Inc. (NASDAQ:PEP)
Bridgewater Associates’ Stake Value: $530,141,000
Percentage of Bridgewater Associates’ 13F Portfolio: 3.08%
Number of Hedge Fund Holders: 60
PepsiCo, Inc. (NASDAQ:PEP) is an American multinational beverage manufacturer and distributor that has featured on Ray Dalio’s portfolio since Q3 2020. As of the end of the December quarter of 2021, Ray Dalio’s fund owns over 3 million PepsiCo, Inc. shares, worth $530.1 million. The stock accounts for 3.08% of the fund’s total Q4 holdings.
On March 8, PepsiCo, Inc. became another consumer staples manufacturer that is looking for options for its Russian division. The company is possibly looking at writing off the value of the unit, but it is a complex matter since the operations in Russia are too large to be closed down entirely, and the region is the third largest contributor to PepsiCo, Inc.’s revenue. However, PepsiCo, Inc. will have to divest its Russian business if the war does not come to an end and institutional investors pressure the company to follow the footsteps of McDonald’s and Coca Cola.
Wells Fargo analyst Chris Carey lowered the price target on PepsiCo, Inc. to $170 from $175 and kept an Equal Weight rating on the shares on March 9. PepsiCo, Inc.’s asset portfolio is top-quality, but the analyst believes that consensus and guidance feels high, even after accounting for higher pricing and savings versus PepsiCo, Inc.’s guidance for the future.
Fundsmith LLP is the largest shareholder of PepsiCo, Inc., with 10.4 million shares worth $1.80 billion. Overall, 60 hedge funds were bullish on PepsiCo, Inc. at the end of December 2021.
Here is what Saturna Capital Amana Funds has to say about PepsiCo, Inc. in its Q4 2021 investor letter:
“Given the likelihood of rising inflation and interest rates ahead, we anticipate adjustments to the portfolio to reduce exposure to highly valued stocks dependent on low interest rates to support terminal year valuations, while seeking investments in companies more correlated with a return to economic normalcy. We sold our positions in Pepsi. We believe Pepsi to be a well-run firm, but its products are not in keeping with an ESG mandate. Additionally, it has entered a joint venture to produce and distribute alcoholic beverages, making it ineligible for the portfolio.”
1. The Procter & Gamble Company (NYSE:PG)
Bridgewater Associates’ Stake Value: $848,840,000
Percentage of Bridgewater Associates’ 13F Portfolio: 4.93%
Number of Hedge Fund Holders: 67
The Procter & Gamble Company is a manufacturer of branded consumer packaged goods, operating in the beauty, grooming, healthcare, fabric and home care, and family care segments. In Q4 2021, Ray Dalio increased his The Procter & Gamble Company stake by 11%, holding more than 5 million shares worth $848.8 million.
On March 8, The Procter & Gamble Company announced the suspension of all new capital investments in Russia and “significantly reducing” its portfolio to focus on basic hygiene, health, and personal care items. Institutional shareholders have advised the company to pause its operations in Russia entirely amid sanctions.
Deutsche Bank analyst Steve Powers on March 16 lowered the price target on The Procter & Gamble Company to $173 from $179 and kept a Buy rating on the shares. The analyst noted that the management was confident, but he also cited near-term volatility and recently emerging headwinds, which led to the slashed price target.
In Q4 2021, 67 hedge funds reported owning stakes in The Procter & Gamble Company, valued at $66 billion, compared to 69 funds in the earlier quarter, holding stakes in The Procter & Gamble Company worth $64 billion. GQG Partners is the leading shareholder of the company, with 7.5 million shares worth $1.2 billion.
You can also take a look at 10 Dividend Stocks Redditors Buy for Early Retirement and 10 Dividend Stocks Warren Buffett is Backing in 2022.
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This article is originally published at Insider Monkey.
