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.
With its stock price up by almost 64% over the last year, Apple Inc. (NASDAQ:AAPL) might be heading for yet new heights as the company launched its first smartwatch and a 12″ retina MacBook featuring haptic Force Touch sensors that enable users to send different software commands depending on how hard they press, at a special event last week.
Dalio’s third largest stake, Microsoft Corporation (NASDAQ:MSFT) comprising of 601,000 shares valued at $27.92 million was the second most popular company among billionaires after Apple Inc. (NASDAQ:AAPL), among those on this list; 14 billionaires held around $2.64 billion in the company’s stock at the end of the fourth quarter. For its second fiscal quarter Microsoft Corporation (NASDAQ:MSFT) reported an EPS of $0.71 which was in-line with the estimates and $26.47 billion in revenues that beat estimates by $140 million.
Despite a 15.4% drop in stock price over the last year, 10 billionaires had vested their trust and more importantly $13.34 billion in International Business Machines Corp. (NYSE:IBM) at the end of the fourth quarter. Warren Buffett of Berkshire Hathaway is one of the most bullish shareholders of the company, holding 76.97 million shares valued at $12.35 billion of the technology company. Investors including Duquesne Capital’s Stanley Druckenmiller, disagree with Buffet’s position. Druckenmiller believes that International Business Machines Corp. (NYSE:IBM)’s problems are secular rather than cyclical, and the share buy back program is not going to fix anything. Dalio’s stake in the company comprised of 147,100 shares valued at $23.61 million.
The steep decline in oil prices in June last year has led many energy companies like Devon Energy Corp (NYSE:DVN) to trade at favorable levels, provided of course that they are eventually able to come out of this price havoc relatively unscathed. While Dalio’s stake in the company stood at about 327,700 shares valued at $20.06 million, 8 other billionaires had also piled in $996.9 million into the energy company by the end of 2014. Ken Griffin of Citadel Investment Group held the highest holding with some 8.6 million shares valued at $529 million. Devon Energy Corp (NYSE:DVN)’s hedging strategy which involves 107 Mbbls/d hedged at $91 is expected to partly offset the slide in oil prices for most of this year.
Disclosure: none
