In this article, we discuss the 10 European stocks billionaire Ray Dalio is shorting. You can skip our analysis of the economic environment and go directly to Billionaire Ray Dalio is Shorting These 5 European Stocks.
Billionaire Ray Dalio’s Bridgewater Associates has gone short on European stocks by placing a $10.5 billion bet against them, according to a report by Bloomberg. The largest hedge fund in the world has doubled its short position on the European stocks within a short period of one week. This is the biggest bet against the European stocks taken by the Westport, Connecticut-based hedge fund in the last two years. Bridgewater Associates has disclosed short positions in 28 companies. All these companies are a member of the Euro Stoxx 50 Index.
The hedge fund has initiated the short positions following reports that the economic growth in the Eurozone is slowing down due to rising prices. Furthermore, the German government has warned that the increase in gas prices could cause a collapse in the energy markets. This trigger could be similar to how the financial crisis of 2008 was prompted by the bankruptcy of Lehmann Brothers.
Short selling is a trading strategy that traders employ to benefit from the decline in stock prices. The move by Bridgewater Associates, where Dalio also serves as one of the five co-Chief Investment Officers (CIO), has come at a time when interest rates are rising to counter the impact of increasing inflation and fears related to the recession are growing with every passing day. However, it could not be determined whether Bridgewater Associates has taken the short positions to hedge its overall portfolio or whether these bets are made independently to generate pure profits for the hedge fund with an asset under management (AUM) of roughly $150 billion.
Since the start of the conflict between Russia and Ukraine earlier this year, the price of energy and staples has risen significantly. The increasing energy and staples prices are being transferred to the customers, which is limiting their buying power.
Greg Jensen, a co-CIO at Bridgewater Associates, stated in an interview with Bloomberg TV that the recent correction in the market does not make up for the rally experienced in the last decade, and this provides more room for correction in the US and the European markets. However, he refrained from commenting on the firm’s short bet on the European market.
Before the current short bet of $10.5 billion, Bridgewater Associates had taken a short bet of $14 billion against European equities in 2020 and a bigger position of $22 billion in 2018. These numbers could be even higher as the hedge funds are only mandated to disclose a holding of 0.5% or more of the total company.
Let’s take a look at the 10 European stocks that billionaire Ray Dalio is shorting.
Billionaire Ray Dalio is Shorting These 10 European Stocks
10. TotalEnergies SE (NYSE:TTE)
TotalEnergies SE (NYSE:TTE) is a French integrated energy company that is facing challenges on all fronts due to inflation. The French oil refineries of TotalEnergies SE (NYSE:TTE) went on a 24-hour strike as the workforce demanded higher wages to counter the impact of inflation.
The earnings of the energy major have risen due to rising crude oil and natural gas prices. However, the labor union intends to stop fuel deliveries by pipeline, train, and truck. TotalEnergies SE (NYSE:TTE) has guaranteed that its network of gasoline stations will not run out of fuel despite this disruption. The strike has impacted the 119,000 Feyzin refinery, 240,000 barrels per day (BPD) Gonfreville refinery, and La Mede bio-refinery. The French government also intends to put more pressure on TotalEnergies SE (NYSE:TTE) to provide customers with fuel at economical prices by offering them new rebates or extending the current ones.
TotalEnergies SE (NYSE:TTE) was held by 20 hedge funds at the end of Q1 2022.
9. Siemens Aktiengesellschaft (OTC:SIEGY)
Siemens Aktiengesellschaft (OTC:SIEGY) is a German conglomerate focused on healthcare, industry, infrastructure, and transport. The company has around 303,000 employees globally.
Siemens Aktiengesellschaft (OTC:SIEGY) has significant exposure to economic cycles, and the increasing likelihood of a recession makes it a short bet for retail investors and hedge funds. Furthermore, the company is heavily exposed to supply chain disruptions and COVID-19-related lockdowns. In the energy, power, and transportation businesses, Siemens Aktiengesellschaft (OTC:SIEGY) faces heavy competition. The increasing competition is expected to harm the company’s bottom-line margins and EPS.
Siemens Aktiengesellschaft (OTC:SIEGY) has also come under pressure after incurring a €600 million impairment charge during Q2 FY22 for exiting Russia. Since the start of the year, the ADRs of Siemens Aktiengesellschaft (OTC:SIEGY) have lost 36.8% of their value.
8. SAP SE (NYSE:SAP)
SAP SE (NYSE:SAP) is a German software company involved in the development and execution of enterprise software solutions for managing business operations and customer relations.
On June 20, Charles Brennan at Jefferies lowered the price target on SAP SE (NYSE:SAP) from €120 ($127.32) to €110 ($116.71) and maintained a Hold rating on the stock. The analyst thinks that the management has prepared investors for soft Q2 2022 results, and the institutional investors are also prepared for such an outcome. Since the start of the year, SAP SE (NYSE:SAP) stock has lost 30% of its value as it has been impacted by concerns related to rising inflation along with a weak economic outlook. Furthermore, SAP SE (NYSE:SAP) has also been affected by the start of the conflict between Russia and Ukraine earlier this year. The company revealed that it had lost $318.30 million in revenue due to businesses closing down in Russia.
Polen Capital discussed its stance on SAP SE (NYSE:SAP) in its Q1 2022 investor letter. Here’s what the firm said:
“In our opinion, SAP is demonstrating that their cloud transition and RISE with SAP strategy are working. We added to our position upon evidence that CEO Christian Klein’s strategy is bearing fruit, and the stock trading down to an attractive valuation during the quarter. The strategy and sell-off are connected, and we believe it provided an opportunity for long- term shareholders. The company recently reported weak 2022 margin and FCF guidance. This was expected if cloud growth accelerated – which it has. Current cloud backlog has accelerated to a mid-20% growth rate, and the S/4 HANA Cloud Backlog and Cloud Sales have accelerated as well. Cloud, which tends to be a very sticky business with high recurring revenue, is now a >$10bn business and represents roughly 40% of sales.
Our research shows this should only increase over the next five years. If management continues to successfully execute its strategy, the transition should create a mechanical lift to margins and greater levels of FCF. We believe SAP is a durable business led by capable management that is poised to deliver high-quality mid-teens earnings growth over the next five years.”
SAP SE (NYSE:SAP) was held by 19 hedge funds at the end of Q1 2022.
7. Sanofi (NASDAQ:SNY)
Sanofi (NASDAQ:SNY) is a French pharmaceutical giant that is focused on consumer healthcare, pharmaceuticals, and vaccines.
Unlike other pharmaceutical giants, the company has a heavy reliance on a single drug, Dupixent. The drug treats moderate-to-severe eczema and contributes 14% to the top line of Sanofi (NASDAQ:SNY). AbbVie Inc. (NYSE:ABBV) and Pfizer, Inc. (NYSE:PFE) have come up with similar products, and this is expected to negatively impact the market dominance of Sanofi (NASDAQ:SNY).
Furthermore, Sanofi (NASDAQ:SNY) was unable to come up with a vaccine against COVID-19, and the company is still lacking behind in the mRNA technology. This has left Sanofi (NASDAQ:SNY) behind its competitors in terms of financial and share price performance since the start of the pandemic. The success of Dupixent has given the company some respite, but as the dominance of the drug fades away, Sanofi (NASDAQ:SNY) is likely to see tough times going forward.
Sanofi (NASDAQ:SNY) was mentioned in the Q3 2021 investor letter of Dodge & Cox Stock Fund. Here’s what the firm said about the company:
“Sanofi (3.5% position) is a diversified, global pharmaceuticals company with leading positions in vaccines, consumer health products, rare diseases, and emerging markets. Despite a favorable business mix, Sanofi has underperformed its peers in new product development, commercial execution, and profit growth. A new management team, recruited in 2018-19, has made progress turning the company around. Its drug pipeline is improving, targets for higher margins are being met, and earnings per share are growing. Sanofi also pays a 4% dividend yield, maintains a strong balance sheet, and has relatively low exposure to potential pressures from U.S. drug pricing.”
Sanofi (NASDAQ:SNY) was held by 19 hedge funds as of Q1 2022. On the other hand, Pfizer Inc. (NYSE:PFE), Alibaba Group Holding Limited (NYSE:BABA), and The Procter & Gamble Company (NYSE:PG), in which Dalio has major stakes, are more popular among elite hedge funds.
6. Bayer Aktiengesellschaft (OTC:BAYRY)
Bayer Aktiengesellschaft (OTC:BAYRY) is a German pharmaceutical and life sciences company.
The company’s Roundup weed killer is in the news as thousands of lawsuits have been filed against it, stating that the weed killer causes cancer. The sentiments were shared by the US Supreme Court as it did not overturn an $87 million award against Bayer Aktiengesellschaft (OTC:BAYRY) imposed by a lower court in California. Alberta and Alva Pilliod were diagnosed with cancer after spraying Roundup weed killer on their fields for three decades. The jury had awarded $2 billion to the plaintiffs, but the judge reduced it to $87 million. Out of the seven trials filed against Roundup, Bayer Aktiengesellschaft (OTC:BAYRY) has lost three trials and has been charged with millions of dollars in damages.
Unlike Bayer, Dalio is bullish on Pfizer Inc. (NYSE:PFE), Alibaba Group Holding Limited (NYSE:BABA), and The Procter & Gamble Company (NYSE:PG) as of Q1 2022.
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Disclose. None. Billionaire Ray Dalio is Shorting These 10 European Stocks is originally published on Insider Monkey.