Billionaire Ray Dalio founded Bridgewater Associates, one of the world’s largest funds, in 1973. Dalio earned a Bachelor of Arts/Science from Long Island University and an MBA from Harvard Business School. He officially gave up his role as CEO of Bridgewater Associates in 2011, continuing to serve as co-CEO, a position he shares with Robert Prince and Greg Jensen. Bridgewater Associates has recently disclosed its 13F filing with the Securities and Exchange Commission for the reporting period of March 31. The equity portfolio of Bridgewater Associates contains $12.83 billion in equities and consists of 328 positions. Dalio’s latest filing shows a strong commitment to the finance sector with around 87% of his invested capital in equities being tied up in the sector, though his largest holdings (aside from index funds): Apple Inc. (NASDAQ:AAPL), Potash Corp./Saskatchewan (USA) (NYSE:POT), Johnson & Johnson (NYSE:JNJ) and The Coca-Cola Co (NYSE:KO), spanned a variety of sectors.
We pay attention to hedge funds and prominent investors because historically, a select group of their top stock picks (their small-cap picks) delivered superior risk-adjusted returns. Our research has shown that the 50 most popular large-cap stocks among hedge funds had a monthly alpha of about six basis points per month, while the 15 most popular small-cap stocks delivered a monthly alpha of 80 basis points between 1999 and 2012. This means investors would have generated a double-digit alpha per year simply by imitating the 15 most popular small-cap stocks among hedge funds. Moreover, we have been tracking the performance of these small-cap stocks since the end of August 2012, during which time it’s obtained returns of more than 139% vs. a less than 60% gain for the S&P 500 ETF (SPY) (see the details here).
Let’s take a look now at Ray Dalio’s top picks as of the end of March. On the top spot in his portfolio as far as individual companies goes is Apple Inc. (NASDAQ:AAPL), in which the fund holds 732,997 shares valued at $91.21 million. The tech giant, which is the most valuable company in the world with a market cap of $739.60 billion and owns one of the most profitable businesses ever, recently announced its stellar performance for the first three months of 2015, with an increase of more than 30% in net income to $13.57 billion, or $2.33 diluted EPS, compared to the year-ago quarter. Apple Inc. (NASDAQ:AAPL)’s stock gained almost 52% in the last 52 weeks, remaining one of the most popular stocks among hedge funds. Heavyweight Carl Icahn remains one of the bullish investors in the iPhone and Watch maker, holding 52.76 million shares valued at $5.82 billion as of the end of 2014.
Next is the world’s largest fertilizer company, Potash Corp./Saskatchewan (USA) (NYSE:POT), in which Bridgewater Associates doubled its position to 1.22 million shares during the first quarter, valued at $39.31 million. The company announced for the first three months of 2015, net income of $370 million or $0.44 diluted EPS, compared to estimates of $0.50 EPS by Yahoo analysts. The Canadian company recently announced a $250,000 donation to the United Nations World Food Programme in support of the April 26 Nepal Earthquake. Jean-Marie Eveillard’s First Eagle Investment Management was the largest shareholder of Potash Corp./Saskatchewan (USA) (NYSE:POT) in our database at the end of 2014, followed by Andreas Halvorsen‘s Viking Global and Adage Capital Management managed by Phill Gross and Robert Atchinson.
We move next to Johnson & Johnson (NYSE:JNJ) a pharmaceutical and health products giant headquartered in New Brunswick, New Jersey. Dalio boosted his position in Alex Gorsky’s company to 268,093 shares valued at $26.97 million. Johnson & Johnson (NYSE:JNJ) reported net income of $4.32 billion or $1.53 diluted EPS for the first quarter of 2015. As CEO Alex Gorsky said “The company delivered strong underlying growth in the first quarter driven by new products and the strength of the core business. Of note is the continued robust growth of the Pharmaceutical business and the solid performance of our Consumer brands”. Other shareholders that held large positions in Johnson & Johnson (NYSE:JNJ) were Ken Fisher’s Fisher Asset Management with 10.42 million shares valued at $1.09 billion, followed by Donald Yacktman’s Yacktman Asset Management and Cliff Asness’ AQR Capital Management with 8.61 million and 4.46 million shares, respectively.
Lastly we come to The Coca-Cola Co (NYSE:KO), in which Dalio’s fund initiated a new position of 577,774 shares worth $23.43 million. The largest beverage company in the world has more than 500 sparkling and still brands and an extensive distribution system in more than 200 countries globally, with 1.9 billion servings of its beverages consumed daily. In order to, as President of Coca-Cola North America Sandy Douglas said “…reinforce our successful efforts to move forward with our refranchising plans in the U.S. as we implement a more agile, modern, customer-focused beverage partnership model”, The Coca-Cola Co (NYSE:KO), announced letters of intent with Coca-Cola Bottling Co. and Clark Beverage Group, two U.S. bottling partners, granting them additional expanded territories. For the first quarter, the company reported net income of $1.56 billion, or $0.35 diluted EPS. The largest hedge fund holdings in The Coca-Cola Co (NYSE:KO) are held by Warren Buffett‘s Berkshire Hathaway with 400 million shares, Donald Yacktman’s Yacktman Asset Management and Eagle Capital Management run by Boykin Curry.
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