Top 10 Stock Picks of Ray Dalio

In this article, we discuss the top 10 stock picks of Ray Dalio. If you want to skip our detailed analysis of these stocks, go directly to the Top 5 Stock Picks of Ray Dalio

Ray Dalio, the founder of Bridgewater Associates, is often called the manager of the “largest hedge fund in the world” keeping in mind the assets under his management. Dalio, certainly one of the most successful investors of the modern era, recently released a new book titled Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail that examines in detail the rise and fall of powerful nations and their currencies, drawing important business and investment lessons from them. A large section of the book is dedicated towards discussions around the US-China rivalry and the impact it has on the global economy. 

In a recent interview with finance website MarketWatch, the billionaire advised investors not to hold cash, but rather invest in a liquid, diversified portfolio of assets like stocks, bonds, commodities, and gold. Dalio said the diversification made sense because it seemed like inflation would be around for longer than expected. He also underlined that the US had both cyclical and monetary inflation, a concern for the long-term economic future of the country. Dalio noted that there wasn’t much the Federal Reserve could do in such a situation. 

Investors who want a deeper dive into the book and how the ideas discussed in it translate into investment strategy should check out the latest activity of Dalio at the market. Some of the top stocks in the portfolio of Bridgewater Associates at the end of September included Tesla, Inc. (NASDAQ:TSLA), JPMorgan Chase & Co. (NYSE:JPM), and Walmart Inc. (NYSE:WMT), among others discussed in detail below. 

Our Methodology

These were picked from the investment portfolio of Bridgewater Associates at the end of the third quarter of 2021. 

In order to provide readers with some context for their investment choices, the business fundamentals and analyst ratings for the stocks are also mentioned. 

The hedge fund sentiment around each stock was calculated using the data of 867 hedge funds tracked by Insider Monkey. 

Top 10 Stock Picks of Ray Dalio

Top Stock Picks of Ray Dalio

10. Abbott Laboratories (NYSE:ABT)

Number of Hedge Fund Holders: 63 

Abbott Laboratories (NYSE:ABT) makes and sells healthcare products. The hedge fund of Ray Dalio entered the fourth quarter of 2021 with more than 1.8 million shares of the company in the portfolio worth more than $220 million. 

On December 15, investment advisory Citi raised the price target on Abbott Laboratories (NYSE:ABT) stock to $154 from $141 and maintained a Buy rating. Analyst Joanne Wuensch issued the ratings update. 

Among the hedge funds being tracked by Insider Monkey, Ohio-based investment firm Diamond Hill Capital is a leading shareholder in Abbott Laboratories (NYSE:ABT) with 6.2 million shares worth more than $732 million.

Just like Tesla, Inc. (NASDAQ:TSLA), JPMorgan Chase & Co. (NYSE:JPM), and Walmart Inc. (NYSE:WMT), Abbott Laboratories (NYSE:ABT) is one of the stocks popular among elite investors.

In its Q2 2021 investor letter, Polen Capital, an asset management firm, highlighted a few stocks and Abbott Laboratories (NYSE:ABT) was one of them. Here is what the fund said:

“Abbott Laboratories was the lone detractor in the quarter as the company preannounced that revenue and earnings this year would be below their previous guidance. We still expect the company to grow earnings more than 20% this year and continue double-digit earnings growth in the years to come. However, weakness in COVID-19 testing revenue is primarily responsible for the guidance reduction. Abbott is a leader in multiple types of COVID-19 diagnostic tests, and the largely successful vaccine rollout globally is leading to less COVID testing than the company expected. Two years ago, these tests obviously accounted for $0 in revenue but recently accounted for nearly $10 billion in annualized revenues as of the fourth quarter of 2020. We have expected COVID testing revenues to decline sequentially every quarter and eventually level out at less than $1 billion per year. We are not surprised by the current reality, but the decline has been more rapid than what management had expected.

Abbott is a diversified medical products company with likely strong growth to come from its core businesses outside of COVID testing— our investment thesis was not dependent on pandemic related revenue. While the reduction in guidance is atypical for Abbott’s conversative management team, we do not believe it changes our long-term growth assumptions or the investment case in Abbott.”

9. Starbucks Corporation (NASDAQ:SBUX)

Number of Hedge Fund Holders: 58   

Starbucks Corporation (NASDAQ:SBUX) operates as a specialty coffee firm. Bridgewater Associates, as of the end of September, had over 2.2 million shares of the company worth $251 million in the portfolio. 

Starbucks Corporation (NASDAQ:SBUX) has an impressive dividend history stretching back over a decade. In November, the firm declared a quarterly dividend of $0.49 per share, in line with previous. The forward yield was 1.75%. 

Among the hedge funds being tracked by Insider Monkey, London-based investment firm Fundsmith LLP is a leading shareholder in Starbucks Corporation (NASDAQ:SBUX) with 10.7 million shares worth more than $1.1 billion. 

In its Q2 2021 investor letter, Polen Capital, an asset management firm, highlighted a few stocks and Starbucks Corporation (NASDAQ:SBUX) was one of them. Here is what the fund said:

“For Starbucks, we believe the underlying businesses for the company remain strong. Starbucks has grappled with the impact of the pandemic, but results have continued to show an ongoing post-pandemic recovery.”

8. McDonald’s Corporation (NYSE:MCD)

Number of Hedge Fund Holders: 58    

McDonald’s Corporation (NYSE:MCD) owns and runs fast food restaurants. In the filings for the third quarter, the fund detailed that it owned 1.4 million shares of the company worth $351 million, representing 1.92% of the portfolio. 

Barclays analyst Brian Mullan recently maintained an Overweight rating on McDonald’s Corporation (NYSE:MCD) stock and raised the price target to $300 from $298, noting that pandemic concerns for the firm were easing with no lasting impact on sales. 

At the end of the third quarter of 2021, 58 hedge funds in the database of Insider Monkey held stakes worth $3.3 billion in McDonald’s Corporation (NYSE:MCD), compared to 66 the preceding quarter worth $2.7 billion.

7. Costco Wholesale Corporation (NASDAQ:COST)

Number of Hedge Fund Holders: 55  

Costco Wholesale Corporation (NASDAQ:COST) operates membership warehouses that retail various products. Latest filings show that Bridgewater Associates is long on more than 850,594 shares in the firm worth $382 million, representing 2.09% of the portfolio. 

On December 3, Charlie Munger, one of the most famous value investors on Wall Street, praised the business model of Costco Wholesale Corporation (NASDAQ:COST) at an investor conference and said the stock could threaten Amazon in the retail business in the coming years. 

At the end of the third quarter of 2021, 55 hedge funds in the database of Insider Monkey held stakes worth $4.39 billion in Costco Wholesale Corporation (NASDAQ:COST), up from 54 in the preceding quarter worth $4.32 billion. 

In its Q1 2021 investor letter, Ensemble Capital, an asset management firm, highlighted a few stocks and Costco Wholesale Corporation (NASDAQ:COST) was one of them. Here is what the fund said:

“We saw these dynamics at play in the Fund. Some of the worst-performing stocks this quarter were among our best performers in Q1 2020. Another example was the market’s reaction to Costco Wholesale (1.5% weight in the Fund) during the quarter. From December 31, 2020 to March 8th, Costco shares declined 17% and dropped below their pre-pandemic high. The common rationale offered by sell-side analysts was that Costco would face difficult one-year “comps” (i.e. same-store sales, which compare sales from stores open for at least a year). Because so many consumers rushed to Costco ahead of shelter-in-place and subsequent quarantines, it will be harder for Costco to meaningfully beat those results when compared year-over-year. That may indeed be true, but we struggle to understand how Costco could be “less valuable” than it was a year earlier when it concurrently increased its membership base by over 7%, or 3.9 million members. With membership renewal rates around 90%, the vast majority of the new customers Costco brought in last year will be around for years to come.

Analysts also complained about Costco raising its already industry-leading minimum wage to $16/hour, with an average “effective” pay of $23-$24/hour when you include overtime and bonuses. Costco paying its employees “too much” has been a common gripe of Wall Street analysts for at least two decades. While the extra pay does indeed impact short-term profit margins, it also serves to make Costco more durable, as its flywheel (i.e. a virtuous value cycle) starts with happy employees. A 20-year chart of Costco stock price is evidence that this strategy works and we’re confident that it will continue to work.”

6. PepsiCo, Inc. (NASDAQ:PEP)

Number of Hedge Fund Holders: 61    

PepsiCo, Inc. (NASDAQ:PEP) is a food and beverage company. According to latest 13F data, the fund holds a stake in the firm worth more than $402 million, consisting of over 2.6 million shares. 

In October, UBS analyst Sean King had raised the price target on PepsiCo, Inc. (NASDAQ:PEP) stock to $172 from $170 and kept a Buy rating, lauding the accelerating revenue of the firm and a defensive earnings model heading into 2022. 

At the end of the third quarter of 2021, 61 hedge funds in the database of Insider Monkey held stakes worth $4 billion in PepsiCo, Inc. (NASDAQ:PEP), compared to 66 in the previous quarter worth $5 billion.

Along with Tesla, Inc. (NASDAQ:TSLA), JPMorgan Chase & Co. (NYSE:JPM), and Walmart Inc. (NYSE:WMT), PepsiCo, Inc. (NASDAQ:PEP) is one of the stocks that institutional investors are buying.

 

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Disclosure. None. Top 10 Stock Picks of Ray Dalio is originally published on Insider Monkey.