Ray Dalio‘s Bridgewater Associates, which is one of the world’s largest hedge funds, revealed its equity portfolio in a filing with SEC. Bridgewater Associates is on its way of becoming a quant hedge fund. That’s why we decided to compare his top holdings against portfolios of 50+ billionaires to uncover the top five companies that the investment community is backing Dalio on. They comprise of Gilead Sciences, Inc. (NASDAQ:GILD), Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), International Business Machines Corp. (NYSE:IBM) and Devon Energy Corp (NYSE:DVN). Three of these companies were also part of Dalio’s top picks for the fourth quarter.
Now 65, Ray Dalio made his first investment when he was 12 years old. He bought Northeast Airlines for $300 and tripled his money when the airline merged with another company. Over the years, his investment acumen has only grown sharper, and he shares some of his investment principles in a self- published book by the same name “Principles”. These rules along with a profound understanding of macroeconomic variables helped him in predicting the financial crises in 2007. Dalio established Bridgewater Associates in 1975 and the firm claims to deliver annual returns of 13% after fees. The market value of the fund’s portfolio stood at $12.53 billion at the end of 2014. Bridgewater’s top three holdings were in Exchange Traded Funds and comprised of 86.95% of his portfolio value.
Before we dig deeper into the companies mentioned above, a word of warning for the investors is in order. Our research has shown that following top large-cap picks of distinguished hedge funds to outperform the market is a lost cause. We analysed the data from several 13F filings between 1999 and 2012 to form an equally weighted portfolio of 50 most popular hedge fund picks. The strategy underperformed the market by nearly 7.0 basis points per month. According to the latest filings, Apple Inc. (NASDAQ:AAPL) was the most popular stock among hedge funds. Microsoft Corporation was among the top 10 and Gilead Sciences Inc. was among the top 20. Hedge funds don’t have a lot of edge in picking large-cap stocks but the small cap pics of hedge funds, which we have been sharing since August 2012, has significantly outperformed the market. Our small-cap hedge fund strategy beat the S&P 500 ETF (SPY) by a staggering 76.7 percentage points since August 2012 through March 2015 and returned 132%.
Moving on to the first stock on our list, Gilead Sciences, Inc. (NASDAQ:GILD), which was on the top of Dalio’s portfolio with about 537,300 shares valued at $50.65 million at the end of December. The number of billionaires invested in the research-based biopharmaceutical company stood at 12, with the aggregate investment amounting to $914 million. Samuel Islay of Orbimed Advisors was one of them as he held some 4.25 million shares valued at $400.56 million. Gilead Sciences, Inc. (NASDAQ:GILD)’s hepatitis C treatments, $84,000 Sovaldi and $94,500 Harvoni are undisputed market leaders. The company’s fourth quarter financial results included Earnings per Share (EPS) of $2.43, which was $0.21 ahead of estimates and $7.3 billion revenues also came in $580 million higher than expected.
With 19 billionaires having a total investment of $10.6 billion, Apple Inc. (NASDAQ:AAPL) was the most popular stock among billionaires. The $719.88 billion company was Dalio’s second largest holding with about 259,500 shares valued at $28.65 million. Carl Icahn’s Icahn Capital LP and Fisher Asset Management, led by Ken Fisher, were two of the largest shareholders of Apple at the end of last year, owning 52.76 million shares valued at $5.82 billion and 10.76 million shares valued at $1.19 billion respectively.