Ray Dalio’s Bridgewater Associates has filed its 13F with the SEC for the reporting period of March 31, disclosing an equity portfolio containing 328 positions and valued at $12.83 billion. While Dalio’s equity portfolio is majority invested in the finance sector because of three multi-billion dollar positions in index funds, he has a greater investment in the technology sector than in any other when it comes to his individual long positions in public companies. We’ve already looked at Dalio’s top picks, which are led by Apple Inc. (NASDAQ:AAPL), so we’ll spotlight the billionaire investor’s favorite tech stocks in this article.
It wasn’t a particularly strong first quarter for Dalio’s equity portfolio, which returned just 0.9% according to our metric, which generated the weighted average returns of his fund’s 329 long positions at the beginning of the year, in companies with a market cap of at least $1 billion. That figure was dragged down by some of his top technology picks, including in chipmakers Micron Technology Inc. (NASDAQ:MU) and Intel Corporation (NASDAQ:INTC), two semiconductor stocks which also hammered the returns of billionaire investors David Einhorn, Andreas Halvorsen, and Seth Klarman during the quarter. However, Dalio’s Bridgewater Pure Alpha II returned 14.50% through the first quarter as his macro strategy fund scored big betting on a strengthening US greenback.
Another tech stock that didn’t do Dalio any favors in the first quarter was Microsoft Corporation (NASDAQ:MSFT). His second-largest tech bet and third-largest long position overall heading into 2015 lost 11.84% during the first quarter. Dalio did slash his Microsoft holding during the quarter greatly however, by 83%, reducing it to 100,045 shares valued at $4.07 million. While we don’t know when the majority of the position was sold off, it seems unlikely it was prior to Microsoft’s January earnings report and resultant plunge in share prices, given Dalio’s bullish move on the stock in the fourth quarter.
Let’s move to Dalio’s top pick, which is of course Apple Inc. (NASDAQ:AAPL), being also his top overall stock pick, as mentioned. Dalio’s stake in Apple Inc. (NASDAQ:AAPL), which owns one of the most profitable businesses ever, was nearly tripled during the quarter, to 732,997 shares with a value of $91.21 million, more than double the investment Dalio has in any other company. Apple was again the most popular stock among hedge funds as of this morning, though approximately 70% of funds had yet to process their latest 13F filings with the SEC.
All eyes are on the Apple Watch now as well as Apple’s growth in China as it prepares to enter the next phase of its evolution. To the latter point, there is cause for concern over the fact that smartphone sales in China have already started to regress and what that may mean for Apple’s attempts to wrest more market share away from Chinese companies like Xiaomi (which has plans of its own to head west and wrest some market share from Apple). Billionaire Carl Icahn still owns the largest position in Apple among the investors we track, with 52.76 million shares.
We move next onto Dalio’s investments in chipmakers, which include the aforementioned Micron Technology Inc. (NASDAQ:MU) and Intel Corporation (NASDAQ:INTC), which sit in second and fifth place respectively among his tech picks, in addition to Microchip Technology Inc. (NASDAQ:MCHP), which ranks fourth. Dalio’s Micron holding is valued at $22.11 million and consists of 814,974 shares, while he holds 570,303 shares of Intel worth $17.83 million. Lastly, he holds 414,394 shares of Microchip Technology Inc. (NASDAQ:MCHP) valued at $20.26 million.
Dalio has held shares of both Intel and Microchip dating back to 2013, when they ranked as two of his best dividend stocks among his top stock picks. Both remain solid dividend stocks to this day, with Intel Corporation (NASDAQ:INTC) paying $0.24 quarterly with a yield of 2.91% while Microchip Technology Inc. (NASDAQ:MCHP) pays $0.36 quarterly with a yield of 2.90%. However, the dividend yields of both stocks have declined from their October 2013 levels of 3.9% and 3.5% respectively.
While both Micron and Intel had weak quarters along with the rest of the semiconductor industry as a whole, Microchip Technology Inc. (NASDAQ:MCHP) was one of the few stocks in the sector to perform well, gaining 9.18%. Dalio increased his position in the company by 60% during the quarter, while also expanding his stake in Micron Technology Inc. (NASDAQ:MU) by 121%, though he cut his Intel holding by 19%. Value investors Donald Yacktman and Tom Gayner hold positions in Intel, while billionaire Ken Griffin owns a stake in Microchip Technology.
Lastly is Dalio’s position in International Business Machines Corp. (NYSE:IBM), consisting of 136,044 shares with a value of $21.84 million, his third-most valuable position in a tech company. Dalio has owned a chunk of International Business Machines Corp. (NYSE:IBM) since early 2013 and shares are down by about 15% since then. In fact they are down dating all the way back to the third quarter of 2011 when Warren Buffett opened his $10 billion position in the business intelligence and computer services company. While Buffett added yet more shares to his position during the first quarter as he continues to staunchly stand by the stock, Dalio decreased his own position by 7%. International Business Machines Corp. (NYSE:IBM) is up by 8% year-to-date and has also hiked its quarterly dividend to $1.30, giving it a 3% yield. However IBM’s sales declined for the 12th straight quarter, down by 11.9% year-over-year following the shedding of several underperforming businesses as it turns its eyes towards the cloud like so many other tech giants.
Why are we interested in the 13F filings of a select group of hedge funds headed by masterminds like Ray Dalio? We use these filings to determine the top 15 small-cap stocks held by these elite funds, based on 16 years of research that show their top small-cap picks are much more profitable than both their large-cap stocks and the broader market as a whole. These small-cap stocks beat the S&P 500 Total Return Index by nearly one percentage point per month in our backtests, which were conducted over the period of 1999 to 2012. Moreover, since the beginning of forward testing from August 2012, the strategy worked just as our research predicted, outperforming the market every year and returning 141% over the past 32 months, trouncing the returns of the S&P 500 ETF (SPY) by more than 135% (see more details). We release our latest quarterly stock picks tomorrow, be sure to check them out.
Disclosure: None
