In this article, we discuss the 5 best cheap stocks to buy according to billionaire Dalio. If you want to see more cheap stocks in Dalio’s portfolio, go to the 11 Best Cheap Stocks To Buy According To Billionaire Dalio.
5. Cleveland-Cliffs Inc. (NYSE:CLF)
Stock Price: $13.98
Ray Dalio’s Bridgewater Associates’ Holdings: $11.46 million
Percentage of Ray Dalio’s Bridgewater Associates’ Portfolio: 0.05%
Number of Hedge Fund Holders: 29
Cleveland-Cliffs Inc. (NYSE:CLF) is an Ohio-based integrated steel producer that has the distinction of being the biggest manufacturer of flat-rolled steel in North America.
Cleveland-Cliffs Inc. (NYSE:CLF) is working on becoming more sustainable as it intends to lower its carbon emissions by 25% by the end of this decade. In a research note issued to investors on September 28, David Coleman at Argus assigned Cleveland-Cliffs Inc. (NYSE:CLF) stock a target price of $23 with a Buy rating. The analyst highlighted that the company’s stock price had declined substantially due to the weak economic outlook causing metal prices to plummet globally. However, despite the grim outlook, Coleman sees solid profitability for Cleveland-Cliffs Inc. (NYSE:CLF) in 2023.
Analysts think Cleveland-Cliffs Inc. (NYSE:CLF) is trading at a discount to its fair value and should be valued around at least 7x NTM EBITDA. This would translate into a market capitalization of $14.9 billion, 90% higher than the current levels. The company’s fundamentals have made it one of the best cheap stocks in Dalio’s Q2 portfolio.
Of the 895 hedge funds in Insider Monkey’s database, 29 funds held a stake in Cleveland-Cliffs Inc. (NYSE:CLF) as of Q2 2022.
4. Tencent Music Entertainment Group (NYSE:TME)
Stock Price: $4.15
Ray Dalio’s Bridgewater Associates’ Holdings: $15.15 million
Percentage of Ray Dalio’s Bridgewater Associates’ Portfolio: 0.06%
Number of Hedge Fund Holders: 14
Tencent Music Entertainment Group (NYSE:TME) is a Shenzhen-based provider of music streaming services to the Chinese market. The company has over 800 million users across its platforms like Kugou Music, Kuwo Music, QQ Music, and WeSing.
On August 31, Tencent Music Entertainment Group (NYSE:TME) entered into a partnership with Billboard. The deal aims to leverage the technology of Tencent Music and combine it with the global brand power of Billboard to promote Chinese music across the world. Tencent Music Entertainment Group (NYSE:TME) has been aggressively working on reducing its content costs. The company has reworked its agreement with some of the music labels and brought down its expenses related to bandwidth and storage capability. These developments are expected to result in an expansion of Tencent Music Entertainment Group’s (NYSE:TME) gross profit margin.
Here’s what Bireme Capital said about Tencent Music Entertainment Group (NYSE:TME) in its Q4 2021 investor letter:
“We initiated one material long position during Q4, in a Chinese company called Tencent Music (TME).
One of the largest positions of the since-imploded Archegos fund, TME has fallen from $20 in Jan 2021 to less than $7 today, implying an enterprise value (net of cash) of less than $8b. We think this is extremely cheap for the dominant online music platform in China that currently generates $5b in revenue and $570m of trailing net profits.
With over 800m users across its many apps, Tencent Music is the primary way that people in China interact with online music. Today, the majority of revenue comes from virtual gifts sent to streamers in its “Social Entertainment” segment, which has grown revenue from $300m in 2016 to $2.9b in 2020. Within this segment, the most popular app is WeSing, a karaoke app with hundreds of millions of users in China. While competition from platforms such as Douyin (the Chinese version of TikTok) is increasing, WeSing continues to generate substantial profits for TME.”
3. Vipshop Holdings Limited (NYSE:VIPS)
Stock Price: $8.70
Ray Dalio’s Bridgewater Associates’ Holdings: $21.48 million
Percentage of Ray Dalio’s Bridgewater Associates’ Portfolio: 0.09%
Number of Hedge Fund Holders: 22
Vipshop Holdings Limited (NYSE:VIPS) is a Guangzhou, China-based online discount retailer that caters to the demand of the Chinese market.
On August 22, Ashley Xu at Credit Suisse upgraded Vipshop Holdings Limited’s (NYSE:VIPS) stock from a Neutral to an Outperform rating and increased the target price from $10.30 to $12. The analyst anticipates healthy bottom-line growth for the company as revenue begins to improve. Vipshop Holdings Limited (NYSE:VIPS) is also expected to benefit from effective cost controls. The analyst highlighted that Vipshop Holdings Limited (NYSE:VIPS) has stopped issuing self-subsidized coupons and made its cost structures efficient. All these factors would improve the company’s profit margins. Furthermore, the share buyback is expected to increase the EPS outlook for Vipshop Holdings Limited (NYSE:VIPS) and result in upward revisions by analysts.
Oakmark Funds presented its stance on Vipshop Holdings Limited (NYSE:VIPS) in its Q3 2021 investor letter. Here’s what the firm said:
“Vipshop Holdings ADR (China) offers a differentiated value proposition to its customers via its online product sales and distributions services. We like that the business model is asset-light due to inventory being predominantly on consignment and logistics outsourced to a third party. We believe the company should generate meaningful free cash flow moving forward.”
2. Warner Bros. Discovery, Inc. (NASDAQ:WBD)
Stock Price: $11.79
Ray Dalio’s Bridgewater Associates’ Holdings: $29.71 million
Percentage of Ray Dalio’s Bridgewater Associates’ Portfolio: 0.13%
Number of Hedge Fund Holders: 68
Warner Bros. Discovery, Inc. (NASDAQ:WBD) is a New York-based mass entertainment and media conglomerate.
Warner Bros. Discovery, Inc.’s (NASDAQ:WBD) HBO Max finished the most recent quarter with a subscriber base of 92.1 million users. The leading streaming platform currently has a presence in 61 countries and intends to enter 190 countries by 2026. This would mean that the company would see its subscribers grow significantly in the future.
Experts believe that Warner Bros. Discovery, Inc. (NASDAQ:WBD) stock is trading at a very cheap valuation as compared to the multiples of Netflix, Inc. (NASDAQ:NFLX) and the Walt Disney Company (NYSE:DIS). Warner Bros. Discovery, Inc.’s (NASDAQ:WBD) valuation is expected to double in the next 12 months from current levels. The growth outlook merits the inclusion of Warner Bros. Discovery, Inc. (NASDAQ:WBD) as one of the best cheap stocks in Dalio’s portfolio.
Here’s what Distillate Capital Partners LLC said about Warner Bros. Discovery, Inc. (NASDAQ:WBD) in its Q2 2022 investor letter:
“Warner Bros. Discovery was the next largest position added to the portfolio and came after a nearly-50% price decline in the quarter. Consequently, the stock offers a mid-teens free cash flow yield and is expected to earn nearly half of its enterprise value in free cash over the next three years.”
1. Ford Motor Company (NYSE:F)
Stock Price: $12.18
Ray Dalio’s Bridgewater Associates’ Holdings: $51.43 million
Percentage of Ray Dalio’s Bridgewater Associates’ Portfolio: 0.22%
Number of Hedge Fund Holders: 46
Ford Motor Company (NYSE:F) is a Detroit, Michigan-based manufacturer of automobiles.
Baron Funds shared its outlook on Ford Motor Company (NYSE:F) in its Q1 2022 investor letter. Here’s what the firm said:
“Ford (NYSE:F) is another example of typical industrial manufacturing business executive mindsets. The April 18, 2022, Bloomberg Businessweek cover story features Ford CEO Jim Farley behind the wheel of an electrified Ford F-150 Lightning. The article is titled, “Hey Elon, THIS is a truck.” I thought the article was terrific. One idea especially stood out to me. Since the F-150 is such a popular vehicle, it “argued for a gradual approach to electrification. Essentially the company retrofitted an existing F-150 with an electric powertrain rather than develop an entirely new truck.” No all-in financial and operation bet by this company on electrification.”
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