In this piece, we will take a look at the 10 best growth stocks to buy now according to Ray Dalio.
Ray Dalio is one of the most successful investors in Wall Street’s history. He has invested through his firm Bridgewater Associates, and according to Insider Monkey’s research, Bridgewater had a 13F portfolio worth $19.7 billion as of Q1 2024 end. What’s more, is that we also looked at the top hedge funds on Wall Street as part of our coverage of 23 Best Hedge Funds of All Time and discovered that Bridgewater Associates ranked in the top five due to its $30 billion in gains since inception.
Looking at these, it’s clear that Dalio and his firm must be doing at least something right. Ray Dalio is a macro player who not only loves to look at the broader trends that affect the economy, but he also loves diversification and selling stocks at the right time. This approach differs from several other hedge funds which choose to focus on specific companies or are proponents of buying and holding stocks for the long term. Dalio’s strategy allows his fund to manage a changing economic and investment climate, as part of what is dubbed an All Weather Strategy.
However, despite his success, 2024 has been a mixed year for Bridgewater Associates. The firm, currently headed by CEO Nir Bar Dea, is currently shaking things up as its Pure Alpha fund has lost 4% for the last four years. This fund also had one of its worst years in history in 2023, but the changes do appear to be making their mark. This is because in Q1, the fund posted 16% in returns which were higher than the 4.59% in gains made by global hedge funds.
As for Dalio, even though he has moved forward from directly overseeing Bridgewater’s affairs, the investment guru regularly shares his wisdom with the world. He started 2024 by listing five key forces that will play a dominant theme in the investment environment this year. In a LinkedIn post, the billionaire shared that these forces are those that determine how the economy, the American and global political systems, forces of nature, and humanity’s innovation work.
While these forces are important for 2024, Dalio’s life’s work has focused on studying them over the course of the years and analyzing how they match similar trends in history. This makes his investment approach one of the most unique ones in the industry, and it appears to be yielding results as between 1991 and 2022, Bridgewater’s Pure Alpha fund has delivered 11.4% in average annual returns.
Dalio is also one of the few investors in the world who takes a serious approach to studying history and understanding the implications on the broader investing environment. Ever eager to share his insights, the famed investor gave a talk at Columbia Business School in April. Commenting on the investment approach at Bridgewater, the billionaire shared his values, philosophy, and guiding beacons for the process. He started out by sharing that he began his career by trading commodities because they had low margin requirements which would let him make more money. The stock market crash of 1982, which forced Dalio to borrow $4,000 from his father to pay bills was also critical in formulating his investment approach. As we’ve mentioned above, diversification is a key theme of Dalio’s All Weather Strategy, and the market crash influenced this approach:
And the way I looked at the risk, is I said, it’s like I, I, had a visual image that there’s this jungle there. And if I can cross the jungle without getting killed to the other side I would be okay. But I have to go through that, and then, or I could stay on the safe life side. And not take those risks. And how would I do that? And that was a problem that I had to figure out. And I realized two things I needed to do. I needed to diversify because it’s like my 15 uncorrelated returns stream mantra. I’ve realized that if I can have debts, 15 good uncorrelated return streams that I could reduce my risk by 80% with keeping the same expected returns.
So that was a big thing. And the other thing is I realized that I needed to do it with people who were on the mission who could see what I couldn’t see. I wanted people that we would stress test each other and challenge each other. We all see differently. Each one of you, have what you see is different from the way other people see. And, and when you start to have an appreciation of how people see things differently and you can get through that, that’s a great power. And so, I, it was like going into the jungle with others who were on the same mission with me. And we’d protect each other and so on.
Finally, before we get to Ray Dalio’s top growth stock picks, it’s also important to understand why such stocks are important particularly in today’s investment environment. US economic growth slowed down to 1.6% in Q1 from 2.4% in Q4 2023. At the same time, while the stock market has flourished on the AI front, other sectors have shown that persistently high inflation and tight credit conditions are making their mark. Since the economy is the sum product goods and services produced, firms whose revenue growth outpaces the consumer price index (CPI) inflation of 3.3% for May and the GDP growth are adding more customers to their top line instead of simply matching economic trends. Combining such stocks with the investment principles of the legendary Ray Dalio can help gain a better understanding of some of the market’s top sectors.
With these details in mind, let’s take a look at the top growth stocks that Ray Dalio and Bridgewater Associates have invested in.
Our Methodology
To make our list of Ray Dalio’s top growth stocks, we analyzed Bridgewater Associate’s 13F filings for Q1 2024 and picked out ten stocks with strong fiscal year annual revenue growth among the top 80 stocks.
10. Mondelez International, Inc. (NASDAQ:MDLZ)
Latest Fiscal Year Annual Growth Rate: 14.35%
Bridgewater Associates’ Q1 2024 Investment: $149 million
Mondelez International, Inc. (NASDAQ:MDLZ) is one of the biggest confectionery companies in the world. While this would appear to lend its business a relative sense of stability due to stable demand, the reality has been quite different. Mondelez International, Inc. (NASDAQ:MDLZ) has been battling with high cocoa prices for quite some time now, and these carry the risk of eroding its market share. Cocoa, for those out of the loop, hit a whopping $11,000 per metric ton in April 2024 due to crop disease and industry dynamics in Africa. Big ticket names like Mondelez International, Inc. (NASDAQ:MDLZ) often hedge their commodity raw materials, which allows them to purchase cocoa at pre determined prices. However these contracts have a fixed life, and if Mondelez International, Inc. (NASDAQ:MDLZ) is unable to find creative solutions to the high prices, then the future might be quite different for the firm.
The impact of high cocoa on Mondelez International, Inc. (NASDAQ:MDLZ)’s business was also present in Carillon Tower Advisors’ Q1 2024 investor letter where it shared:
As a major producer of chocolate, Mondelez saw its shares drop as investors worried about a dramatic rise in the price of cocoa. Mondelez does have hedges in place, but the company will need to raise prices to offset rising costs, particularly in Europe. Consumers across the globe are dealing with high cumulative inflation in the products that the company produces. In many cases consumers are buying less volume.
9. Intuitive Surgical, Inc. (NASDAQ:ISRG)
Latest Fiscal Year Annual Growth Rate: 14.49%
Bridgewater Associates’ Q1 2024 Investment: $87.2 million
Intuitive Surgical, Inc. (NASDAQ:ISRG) is a leading edge medical technology company that is known globally for its robotic surgery systems. The firm’s daVinci robotic surgery platform enjoys a strong competitive edge in the market since there are few alternatives available. This positions Intuitive Surgical, Inc. (NASDAQ:ISRG)’s stock relatively well in the highly competitive medical technology and equipment market as developing a comparable platform comes with significant investment costs, technological complexity, and barriers to entry. Key to Intuitive Surgical, Inc. (NASDAQ:ISRG)’s success though is its ability to continuously announce upgrades to its surgical robots and ensure that customer relationship management is flawless. This is because while the firm makes money from selling the robots, an equally important chunk of revenue also comes from providing support services to hospitals.
Baron Funds mentioned Intuitive Surgical, Inc. (NASDAQ:ISRG) in its Q1 2024 investor letter. Here is what the firm said:
Intuitive Surgical, Inc. sells the da Vinci surgical robotic system for minimally invasive surgical procedures. The stock rose after the company announced the planned launch of the da Vinci 5, its next-generation, multiport robotic system. The new system has 10,000 times the computing power of its predecessor and features over 150 design upgrades such as force feedback, improved visualization, and productivity enhancements. Intuitive plans to launch the device at a small number of customers in the U.S. before releasing it more broadly. We think the da Vinci 5 will enable Intuitive to continue to generate strong revenue and earnings growth and maintain its competitive edge.
