Billionaire Ray Dalio’s Bridgewater Associates is one of the largest hedge funds in the world, with assets under management of over $100 billion. The fund recently filed its 13F with the SEC, disclosing many of its long equity positions as of the end of March. We have found that 13Fs can be useful to investors, even with the included information being a little old: the most popular small cap stocks among hedge funds, we have found, earn an average excess return of 18 percentage points per year (learn more about our small cap strategy). Of course, it’s also potentially useful to see what top managers are thinking in general. We have gone through the filing and compared it to previous reports from Bridgewater (see Dalio’s stock picks over time) and here are three big moves that the fund made in its portfolio during the first quarter of 2013:
Tech giants. The three largest single-stock holdings in Dalio’s portfolio at the end of March were Microsoft Corporation (NASDAQ:MSFT), Oracle Corporation (NASDAQ:ORCL), and Intel Corporation (NASDAQ:INTC) – tech companies with market caps of over $100 billion in each case. These businesses have had a range of reactions to the decline of the PC. Intel Corporation (NASDAQ:INTC) is currently in the worst shape, with net income falling 25% last quarter compared to the first quarter of 2012, though we can’t imagine the continuation of this trend being good for Microsoft Corporation (NASDAQ:MSFT) either (currently that company’s revenue and earnings are up, but it’s possible that that is due to the release of Windows 8 giving a temporary boost to the business). All three companies’ forward earnings multiples are in the 11-12 range. In Oracle Corporation (NASDAQ:ORCL)’s case this does represent a significant increase in earnings per share, even though the enterprise software company’s numbers have been about flat. Microsoft and Oracle Corporation (NASDAQ:ORCL) had made our list of the most popular tech stocks among hedge funds for the fourth quarter of 2012 (find more tech stocks hedge funds loved).
Lockheed Martin. After a number of tech companies- including those we’ve mentioned and EMC- the largest single-stock holding in the fund’s portfolio was its roughly 220,000 shares of Lockheed Martin Corporation (NYSE:LMT). The company recently reported an increase in earnings compared to the first quarter of 2012, but revenue was down slightly and there is a good deal of speculation that the business will be impacted by cuts in U.S. military spending. The trailing P/E of 12 is just a bit higher than what we see at other aerospace and defense companies. Billionaire Ken Griffin’s Citadel Investment Group reported a position of 1.2 million shares at the end of December (check out Griffin’s stock picks). Lockheed Martin pays a dividend yield of 4.5% at current prices and dividend levels.
Lockheed Martin Corporation (NYSE:LMT) might not be the best value in the aerospace industry, however, and so even with the yield it might be better to check out the company’s peers. Microsoft and Intel are potential value plays, we suppose, but we are skeptical that these companies will be able to maintain their current business going forward and with earnings multiples above 10 we wouldn’t call them “extremely” cheap; in Oracle Corporation (NASDAQ:ORCL)’s case, we think that we’d have to wait to see the company’s earnings actually growing before buying at these prices. For profit education, including Apollo, certainly looks cheap but has all of the components of a classic value trap and so we’d tread carefully when evaluating the company’s financials.
Disclosure: I own no shares of any stocks mentioned in this article.