In this article, we discuss the 10 stocks that Ray Dalio was wrong about.
The past few months have not been kind to stocks as the market becomes more volatile in light of recession fears arising from an increase in interest rates that end up slowing growth. In this environment, investors are eagerly looking towards Wall Street titans for advice. One of these titans is Ray Dalio, the billionaire chief of Bridgewater Associates. Dalio controls over $150 billion in capital and he recently sat down with news platform CNBC to outline his overall outlook on the economy.
In his interview, Dalio underlined three themes that were affecting macroeconomics globally. These included too much debt, the internal political conflicts within nation states, and the competition between great powers for economic hegemony. When asked whether he thought that the central bank could succeed with a “soft landing” – bringing inflation down without slowing down growth, Dalio said he could not see that happening since there was too much debt and the Fed would not be able to raise rates enough to generate returns for investors.
Dalio also predicted that there was a “paradigm shift” at the stock market where investors were beginning to realize that cash or bonds, which had enjoyed a record four-decade bull run, were not good investments since they were not generating returns quick enough. Dalio noted that this had created a supply-demand issue where the Fed was selling, individuals were selling, and foreign investors were selling as well. Per the veteran investor, this would lead to a “squeeze” as there was too much financing at stake and the central bank would find it difficult to balance it.
Dalio also stressed that “cash is still trash” since investors were quickly losing buying power with cash in light of soaring inflation. He also noted that equities were “trashier” and an environment was being built where “real return assets” were the best investments. The latest moves that Dalio had made at the market outline some of his thoughts as well. Some of the top stocks in the portfolio of Bridgewater Associates at the end of March 2022 included The Procter & Gamble Company (NYSE:PG), Costco Wholesale Corporation (NASDAQ:COST), and Johnson & Johnson (NYSE:JNJ).
Our Methodology
The stocks were picked from the first quarter regulatory filings of Bridgewater Associates. The stocks that are a new addition to the portfolio, compared to filings for the fourth quarter of 2021, and are down at least 5% year-to-date as of June 6 were selected. Data from around 900 elite hedge funds tracked by Insider Monkey in the first quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.
Ray Dalio Was Wrong About These Stocks
10. Airbnb, Inc. (NASDAQ:ABNB)
Number of Hedge Fund Holders: 66
Percentage Decline in Share Price (YTD): 30.61%
Airbnb, Inc. (NASDAQ:ABNB) operates an online travel platform. Latest data shows that Bridgewater Associates owned over 198,000 shares of Airbnb, Inc. at the end of the first quarter of 2022 worth $34 million, representing 0.13% of the portfolio.
On June 3, Truist analyst Naved Khan maintained a Hold rating on Airbnb, Inc. stock and lowered the price target to $160 from $190, noting that there was “some degree of consumer sensitivity to inflationary pressure” in the travel sector.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Airbnb, Inc., with 3.3 million shares worth more than $575 million.
Just like The Procter & Gamble Company (NYSE:PG), Costco Wholesale Corporation (NASDAQ:COST), and Johnson & Johnson (NYSE:JNJ), Airbnb, Inc. is one of the stocks that elite investors are monitoring.
In its Q3 2021 investor letter, Tollymore Investment Partners, an asset management firm, highlighted a few stocks and Airbnb, Inc. was one of them. Here is what the fund said:
“Today disruptors are not typically seeking to replace incumbents entirely. Rather, they break the links in the customer journey, in doing so better aligning monetisation with value creation and minimising externalities. For example, Airbnb, Inc. broke the link between staying in residential property and owning it. Airbnb, Inc. is a specific example of a business model innovation which separated asset use from ownership. This is hardly a novel idea; it’s called renting. Rental models lend themselves to assets which are expensive and durable, and where usage is infrequent.”
9. Liberty Broadband Corporation (NASDAQ:LBRDA)
Number of Hedge Fund Holders: 26
Percentage Decline in Share Price (YTD): 27.11%
Liberty Broadband Corporation (NASDAQ:LBRDA) is a communications services firm. Latest filings show that Bridgewater Associates owned over 23,000 shares of Liberty Broadband Corporation at the end of the first quarter of 2022 worth $3.1 million, representing 0.01% of the portfolio.
On May 10, investment advisory Deutsche Bank maintained a Buy rating on Liberty Broadband Corporation stock and lowered the price target to $158 from $196. Analyst Bryan Kraft issued the ratings update.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Eagle Capital Management is a leading shareholder in Liberty Broadband Corporation, with 8.3 million shares worth more than $1.1 billion.
In its Q1 2022 investor letter, Alphyn Capital Management, an asset management firm, highlighted a few stocks and Liberty Broadband Corporation (NASDAQ:LBRDA) was one of them. Here is what the fund said:
“We part-financed the additions to Amazon and Wayfair by trimming some Liberty Broadband. Liberty Broadband Corporation is a HoldCo and tracking stock whose primary holding is Charter Communications. Charter benefits from its extensive network of cable assets that can provide higher bandwidth internet at better prices than offerings from traditional telecom and satellite carriers. Moreover, with excellent management and capital stewardship, Charter has increased its high-margin broadband subscriber base despite losing some video subscribers to “cord-cutting.”
Nevertheless, competition is intensifying, with telecom companies launching aggressive Fiber-To-The-Home upgrade plans and new entrants emerging with Fixed Wireless technologies. Cable’s co-axial lines are, for once, the inferior technology compared to FTTH. While Charter has many ways to upgrade its lines to remain competitive in the medium term, it no longer has a distinct advantage. As a result, in markets with fiber competition, cable companies typically have a 50% market share vs. the 80% market share they enjoy without fiber competition.
With Fixed Wireless, Cable has a strong advantage in owning the network for internet backhaul, but it is more difficult to predict the longer-term competitive environment. In both cases, moving from a near-monopoly to a duopoly, or longer-term an oligopoly, likely comes with weaker pricing power and slower subscriber growth. These considerations warranted trimming our Liberty Broadband Corporation position, and we will monitor developments closely.”
8. Discover Financial Services (NYSE:DFS)
Number of Hedge Fund Holders: 33
Percentage Decline in Share Price (YTD): 7.05%
Discover Financial Services (NYSE:DFS) provides digital banking products and related services. Securities filings reveal that Bridgewater Associates owned over 52,000 shares of Discover Financial Services at the end of March 2022 worth $5.7 million, representing 0.02% of the portfolio.
On May 12, Wolfe Research analyst Bill Carcache downgraded Discover Financial Services stock to Peer Perform from Outperform with a price target of $97, noting that a recession was likely to weigh on the stock in the near-term.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Discover Financial Services, with 900,734 shares worth more than $99 million.
7. Warner Bros. Discovery, Inc. (NASDAQ:WBD)
Number of Hedge Fund Holders: N/A
Percentage Decline in Share Price (YTD): 31.37%
Warner Bros. Discovery, Inc. (NASDAQ:WBD) operates as a media firm. According to the latest data, Bridgewater Associates owned more than 93,000 shares of Warner Bros. Discovery, Inc. at the end of the first quarter of 2022 worth $2.3 million, representing a small portion of the portfolio.
On June 2, Wolfe Research analyst Peter Supino maintained a Peer Perform rating on Warner Bros. Discovery, Inc. stock and lowered the price target to $20 from $30, noting that innovation and competition were accelerating in the media landscape.
Among the hedge funds being tracked by Insider Monkey, New York-based firm Laurion Capital Management is a leading shareholder in Warner Bros. Discovery, Inc., with 13.5 million shares worth more than $338 million.
In its Q1 2022 investor letter, Silver Ring Value Partners, an asset management firm, highlighted a few stocks and Warner Bros. Discovery, Inc. was one of them. Here is what the fund said:
“Discovery completed the acquisition of the Warner Media business from AT&T in April, and the combined business is now named Warner Bros. Discovery, Inc.. We are currently in the middle of an interesting technical event, following the spin-off special situation playbook.
The acquisition was structured as a spin-off of Warner Media, with AT&T shareholders receiving ~ 70% of the shares in the combined entity, or ~ 1.7B shares. Many of these shareholders owned AT&T for its phone business and its dividend. It appears that there has been elevated noneconomic selling as these shareholders exit regardless of price. On the other side, few if any investors want to buy the Warner Bros. Discovery, Inc. shares prior to this forced selling being over.” (Click here to read full text)
6. The Walt Disney Company (NYSE:DIS)
Number of Hedge Fund Holders: 113
Percentage Decline in Share Price (YTD): 30.68%
The Walt Disney Company (NYSE:DIS) operates as an entertainment company. Regulatory filings indicate that Bridgewater Associates owned over 209,000 shares of The Walt Disney Company at the end of March 2022 worth $28.7 million, representing 0.11% of the portfolio.
On June 2, Truist analyst Matthew Thornton maintained a Buy rating on The Walt Disney Company stock and lowered the price target to $135 from $160, noting that the price target was updated to reflect higher taxes and lower profits.
At the end of the first quarter of 2022, 113 hedge funds in the database of Insider Monkey held stakes worth $5.1 billion in The Walt Disney Company, up from 111 the preceding quarter worth $6.9 billion.
In addition to The Procter & Gamble Company (NYSE:PG), Costco Wholesale Corporation (NASDAQ:COST), and Johnson & Johnson (NYSE:JNJ), The Walt Disney Company is one of the stocks that hedge funds are buying.
In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and The Walt Disney Company was one of them. Here is what the fund said:
“The communication services sector was a weak spot in both the benchmark and the portfolio in the fourth quarter. The Walt Disney Company announced lower than expected streaming subscriber growth to the company’s Disney+ offering, attributable primarily to the content release schedule. The Walt Disney Company has been ramping up content spending given strong global response to Disney+, although production capability was temporarily impacted by COVID-19. We still believe Disney is on track to reach the subscriber outlook outlined at its December 2020 analyst day, driven by a very robust slate of content releases, particularly in the 2022–2024 time period.”
5. Dolby Laboratories, Inc. (NYSE:DLB)
Number of Hedge Fund Holders: 22
Percentage Decline in Share Price (YTD): 18.79%
Dolby Laboratories, Inc. (NYSE:DLB) markets audio and imaging technologies. Regulatory filings indicate that Bridgewater Associates owned over 5,800 shares of Dolby Laboratories, Inc. at the end of March 2022 worth $455,000, representing a small portion of the portfolio.
On May 12, Barrington analyst James Goss kept an Outperform rating on Dolby Laboratories, Inc. stock and lowered the price target to $90 from $115, noting that the firm was facing some near-term challenges related to shipments.
At the end of the first quarter of 2022, 22 hedge funds in the database of Insider Monkey held stakes worth $408 million in Dolby Laboratories, Inc., compared to 26 in the previous quarter worth $572 million.
In its Q1 2022 investor letter, Aristotle Capital Management, an asset management firm, highlighted a few stocks and Dolby Laboratories, Inc. was one of them. Here is what the fund said:
“Founded in 1965 and headquartered in San Francisco, Dolby Laboratories, Inc. designs and manufactures audio and visual products. Its technology makes images brighter, colors further refined and the audio experience more immersive by providing an enhanced ability to pinpoint the placement and volume of specific sounds. Products that utilize Dolby’s technology span both commercial and home theaters, televisions, sound bars, computers and mobile devices.
The company partners with music artists, movie directors and other content creators, teaching them how to properly leverage Dolby’s suite of products to create next-generation productions. Dolby Laboratories, Inc. generates revenue by licensing its technologies to software vendors and over 500 electronics manufacturers, the likes of which include Sony (SONY), Microsoft (MSFT), Samsung (OTC:SSNLF) and Apple (AAPL). The company’s end markets consist of Broadcast (39% of licensing revenue), Mobile (22%), Consumer Electronics (15%), PC (12%) and Other (12%). (Click here to read full text)
4. ALLETE, Inc. (NYSE:ALE)
Number of Hedge Fund Holders: 16
Percentage Decline in Share Price (YTD): 6.46%
ALLETE, Inc. (NYSE:ALE) operates as an energy company. According to the latest data, Bridgewater Associates owned more than 6,400 shares of ALLETE, Inc. at the end of the first quarter of 2022 worth $433,000, representing a small portion of the portfolio.
On May 23, Bank of America analyst Julien Dumoulin-Smith initiated coverage of ALLETE, Inc. stock with a Neutral rating and a price target of $63, noting that the firm relied on a small number of industrial customers in relation to peers and had limited load growth.
At the end of the first quarter of 2022, 16 hedge funds in the database of Insider Monkey held stakes worth $46 million in ALLETE, Inc., compared to 12 in the preceding quarter worth $46.9 million.
3. Donaldson Company, Inc. (NYSE:DCI)
Number of Hedge Fund Holders: 24
Percentage Decline in Share Price (YTD): 9.19%
Donaldson Company, Inc. (NYSE:DCI) makes and sells filtration systems. Securities filings reveal that Bridgewater Associates owned over 39,000 shares of Donaldson Company, Inc. at the end of March 2022 worth $2 million, representing a small portion of the portfolio.
On June 2, Baird analyst Richard Eastman maintained an Outperform rating on Donaldson Company, Inc. stock and lowered the price target to $61 from $65, noting that the updated target reflected “ongoing broad-based inflation”.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm Impax Asset Management is a leading shareholder in Donaldson Company, Inc., with 1.4 million shares worth more than $75 million.
2. Spirit AeroSystems Holdings, Inc. (NYSE:SPR)
Number of Hedge Fund Holders: 52
Percentage Decline in Share Price (YTD): 28.04%
Spirit AeroSystems Holdings, Inc. (NYSE:SPR) makes and sells aerostructures. Latest filings show that Bridgewater Associates owned over 6,400 shares of Spirit AeroSystems Holdings, Inc. at the end of the first quarter of 2022 worth $314,000.
On May 5, Susquehanna analyst Charles Minervino maintained a Positive rating on Spirit AeroSystems Holdings, Inc. stock and lowered the price target to $50 from $55, underlining that the firm was facing some production delays.
At the end of the first quarter of 2022, 52 hedge funds in the database of Insider Monkey held stakes worth $1 billion in Spirit AeroSystems Holdings, Inc., up from 45 in the previous quarter worth $872 million.
In its Q1 2022 investor letter, Aristotle Capital Management, an asset management firm, highlighted a few stocks and Spirit AeroSystems Holdings, Inc. was one of them. Here is what the fund said:
“Spirit AeroSystems Holdings, Inc. is a supplier of aerostructures to several aerospace and defense (A&D) companies, including Boeing, which is its largest customer. The company supplies fuselages, propulsion systems and wings for A&D companies. We expect Spirit to benefit from a recovery in aircraft production which was significantly curtailed over the past few years because of Boeing’s delayed recertification of the 737 MAX, following two major airline crashes. The airline and aerospace industries were also negatively impacted by the coronavirus pandemic, as both travel demand was curtailed and various governments restricted travel by their citizens. Spirit AeroSystems Holdings, Inc. is focused on improving its margins. The company’s mix of aircraft production should organically increase as a result of more 737 MAX production in the mix. The 737 MAX is Spirit’s most profitable product. Meanwhile, a reduction in 787 MAX production also helps the company’s margin, since Spirit loses money on this program. The company is also automating its manufacturing processes in its factories which should help margins. We expect an improvement in the balance sheet, as profitability improves, and deliveries of aircraft reduce the amount of inventory on the balance sheet. The company produced positive free cash flow in its most recent reported quarter. Consensus earnings estimates are $2.78 and $5.35 for fiscal years 2023 and 2024, respectively. Earnings revisions for 2023 and 2024 appear to have bottomed and begun increasing modestly.”
1. DoorDash, Inc. (NYSE:DASH)
Number of Hedge Fund Holders: 52
Percentage Decline in Share Price (YTD): 53.19%
DoorDash, Inc. (NYSE:DASH) is a logistics platform that connects merchants with consumers. Latest data shows that Bridgewater Associates owned over 18,000 shares of DoorDash, Inc. at the end of the first quarter of 2022 worth $2.1 million, representing a small portion of the portfolio.
On June 3, DA Davidson analyst Tom White maintained a Neutral rating on DoorDash, Inc. stock and lowered the price target to $82 from $135, noting that the updated target reflected “the broader multiple compression for technology growth stocks”.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Coatue Management is a leading shareholder in DoorDash, Inc., with 5.2 million shares worth more than $618 million.
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This article is originally published at Insider Monkey.
