In this article, we reviewed Bridgewater Associates founder Ray Dalio’s portfolio adjustment strategies to cope up with the market volatility. We also discussed the top ten stocks billionaire Ray Dalio is buying. You can skip our detailed discussion and jump directly to Billionaire Ray Dalio is Buying These 5 Stocks.
Raymond Thomas Dalio’s $223 billion Bridgewater Associates is ranked among the world’s best and largest hedge funds. The 72-year-old investor has invented many commonly used financial practices, such as global inflation-indexed bonds, currency overlay, portable alpha, and risk parity. Born in New York City, Dalio founded Bridgewater Associates in 1975 in his apartment and has served as co-chief investment officer since 1985. LCH Investments ranks Dalio as the best hedge fund manager of all time, with net gains of $46.5 billion since inception.
Currently, the fund is looking to hold positions in well-established companies with strong business models and strong cash generation potential. Dalio’s firm, which lost $12.1 billion in 2020, has poured in billions of dollars of investments in consumer staple, consumer discretionary, healthcare, and communication stocks. Last year, investing in financial stocks, debt securities, and exchange-traded funds caused losses for this American billionaire, who is ranked 88th on the Forbes list of wealthiest people with a net worth of around $20 billion.
His hedge fund, which held $15.58 billion in 13F securities, ended the second quarter with only 23% of the portfolio in the financial sector compared to 81% at the end of 2019. During the second quarter, one of the most successful hedge fund managers doubled down his investments in top consumer discretionary holdings including Starbucks Corporation (NASDAQ:SBUX), Costco Wholesale Corporation (NYSE:COST), and McDonald’s Corporation (NYSE:MCD).
Ray Dalio also significantly increased his positions in Procter & Gamble Co (NYSE:PG), Johnson & Johnson (NYSE:JNJ), Walmart Inc. (NYSE:WMT) and PepsiCo, Inc. (NASDAQ:PEP) during the second quarter.
At the end of the second quarter, Ray Dalio held $736 million worth of position in Walmart Inc. (NYSE:WMT), which is his largest stock holding. Procter & Gamble Co (NYSE:PG) is the second-largest stock holding of Bridgewater Associates. Johnson & Johnson (NYSE:JNJ) is ranked third and PepsiCo, Inc. (NASDAQ:PEP) is ranked fifth in the list of top stocks Ray Dalio is buying.
Ray Dalio of Bridgewater Associates
Why should we pay attention to Ray Dalio’s stock picks? Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Let’s start digging into the 10 stocks billionaire Ray Dalio is buying.
Billionaire Ray Dalio is Buying These 10 Stocks
10. Danaher Corporation (NYSE:DHR)
Ray Dalio’s Bridgewater Associates Stake Value: $230 million
Bridgewater Associates 13F Portfolio: 1.48%
Number of Hedge Fund Holders: 78
Billionaire Ray Dalio’s confidence in Danaher Corporation (NYSE:DHR) appears to be working as shares of the health care equipment maker surged 46% so far this year. In the second quarter, Bridgewater lifted its existing stake in Danaher Corporation (NYSE:DHR) by 93% to 857,833 shares. In addition to share price gains, Danaher Corporation (NYSE:DHR) offers a quarterly dividend of $0.21 per share, yielding around 0.26%.
In the Q2 2021 investor letter of Cooper Investors, the fund mentioned Danaher Corporation (NYSE:DHR) and discussed its stance on the firm. Here is what Cooper Investors stated about Danaher Corporation (NYSE:DHR):
“During the quarter the Fund’s largest holding Danaher made a notable acquisition, spending US$9bn (~5% of its market cap) to buy privately held Aldevron, a leading player in the fast growing field of genomic medicine. Over the years Danaher has built up a unique portfolio of life science and diagnostic assets. Their key life sciences businesses involve providing the tools and services to research, develop and manufacture biotech drugs. For example, they are a key provider to over 400 COVID vaccine and therapeutic projects globally.
Aldevron expands Danaher’s capability into gene therapy. Aldevron is a supplier of key ingredients for the next generation of therapies, namely cell and gene therapy and mRNA vaccines. Aldevron is the leader in these fields and this deal puts Danaher in pole position to participate in the wave of innovation occurring in this space.
The acquisition multiple is high – Danaher are paying US$9bn for what today is a US$500m revenue business but growing 30% a year with 40% operating margins, in our view justifying the high price. Importantly, management can see an investment return in line with recent acquisitions. As a reminder Danaher’s history and skill set is acquiring businesses, it is how the company has been successfully built over 35 years. The shares were up 4% on the news and have gained nearly 20% for the quarter. Most companies would be sold down off the back of an announcement like this but Danaher has a long multi decade track record of successful acquisitions and this fits a similar enough pattern.
The opportunity is to grow Aldevron into a multibillion dollar business given the growth in genomics and RNA innovation that’s occurring and as more of these types of therapeutics become approved. Overall as a key supplier with deep global networks across life sciences and medical research Danaher is very well placed to continue growing with the innovation in biotech and diagnostic markets. It remains an incredibly well run company and a high conviction investment in the Fund.”
9. Starbucks Corporation (NASDAQ:SBUX)
Ray Dalio’s Bridgewater Associates Stake Value: $234 million
Bridgewater Associates 13F Portfolio: 1.50%
Number of Hedge Fund Holders: 63
Starbucks Corporation (NASDAQ:SBUX) is among the best dividend-paying companies. At present, Starbucks Corporation (NASDAQ:SBUX) offers a dividend yield of 1.80%. Starbucks Corporation (NASDAQ:SBUX) shares surged 30% in the last twelve months, thanks to robust financial growth and a strong outlook.
In the Q2 2021 investor letter, Polen Capital mentioned a few stocks including Starbucks Corporation (NASDAQ:SBUX). Here is what Polen Capital stated about Starbucks Corporation (NASDAQ:SBUX).
“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. Alibaba Group Holding Limited (NYSE:BABA)
Ray Dalio’s Bridgewater Associates Stake Value: $321 million
Bridgewater Associates 13F Portfolio: 2.06%
Number of Hedge Fund Holders: 146
Bridgewater Associates raised its stake in the largest Chinese e-commerce platform Alibaba Group Holding Limited (NYSE:BABA) by 2% to 1.41 million shares, according to the second-quarter filings. Alibaba Group Holding Limited (NYSE:BABA) shares fell sharply this year due to regulatory concerns.
According to Semper Vic Partners’ investor letter for Q2 2021, Alibaba Group Holding Limited (NYSE:BABA) is one of the firm’s top holdings. Here is what Semper Vic Partners’ stated about Alibaba Group Holding Limited (NYSE:BABA).
“It is hard to believe that it was over eight months ago that I wrote about our new investment which we had initiated late last year, Alibaba. As I mentioned at the time, I had long admired the access Alibaba provides Western investors across a host of consumer products companies to Chinese commerce and economy.
Alibaba has long provided exposure to China’s foremost commerce hubs, especially through the form of Taobao and Tmall (especially its Luxury Pavilion collections). With roughly one billion Chinese average annual consumers and roughly 260 million additional consumers outside of China, it is hard to imagine shopping in China without involvement in one manner or another with Alibaba.
Alibaba’s focus on serving the needs of both merchants and consumers alike has allowed it to deliver its e-commerce at amongst the lowest take rate of any leading retailers. Alibaba also provides investors access to China’s leading cloud business. Alibaba, in efforts to be transparent, has reported its cloud segment separately since 2017.
By reporting cloud results separately, Alibaba allows investors to measure the substantial extent to which Alibaba has exercised both the “capacity to reinvest” as well as Alibaba’s management’s “capacity to suffer.” Alibaba’s management team enjoys the “capacity to suffer” as the result of protection from Wall Street’s disruptive censures as a result of protection provided them by Alibaba’s founding shareholder, Jack Ma.
During decades of Alibaba’s greatest growth, Mr. Ma evidenced a preference for taking on projects which, more often than not, eroded reported profits as investments he selected for greatest long-term growth in intrinsic value on a per share basis burdened reported profits in the near term.
In addition to attractive businesses which possessed the ability to reinvest internally, Alibaba was well capitalized. In late 2020, as we sized up our potential investment interest in Alibaba, we realized that Alibaba had a rock-solid balance sheet and financials in general. Not only did Alibaba have nearly $71 billion in cash and short-term securities within the company, but they also had investments in a portfolio of over 100 independent, digitally disruptive start-up companies. While most start-up investments are in Chinese companies, there are portfolio companies that also include non-Chinese start-up businesses. Finally, Alibaba currently has over a 30 percent interest in Ant Financial, which at the time of our initial investment research had been recently valued at over $300 billion of estimated value…” (Click here to see the full text)
7. McDonald’s Corporation (NYSE:MCD)
Ray Dalio’s Bridgewater Associates Stake Value: $322 million
Bridgewater Associates 13F Portfolio: 2.07%
Number of Hedge Fund Holders: 66
McDonald’s Corporation (NYSE:MCD) is ranked sixth in the list of stocks Ray Dalio is buying. His hedge fund lifted its position in McDonald’s Corporation (NYSE:MCD) by 48% to $322 million worth of shares, according to the second quarter 13F filings. McDonald’s Corporation (NYSE:MCD) shares have surged 13% so far this year.
6. Costco Wholesale Corporation (NYSE:COST)
Ray Dalio’s Bridgewater Associates Stake Value: $333 million
Bridgewater Associates 13F Portfolio: 2.14%
Number of Hedge Fund Holders: 54
Bridgewater Associates increased its position in Costco Wholesale Corporation (NYSE:COST) by 49% to 2.14% of the entire portfolio. At the end of the second quarter, Bridgewater Associates held $333 million worth of shares of Costco Wholesale Corporation (NYSE:COST), making it the fifth-largest stock holding of Dalio. Costco Wholesale Corporation (NYSE:COST) shares soared 32% since the beginning of this year and the company currently offers a dividend yield of 0.69%.
Costco Wholesale Corporation (NYSE:COST) is among the top contributors to Ray Dalio’s portfolio performance this year. Other best-performing stocks include Starbucks Corporation (NASDAQ:SBUX), Danaher Corporation (NYSE:DHR), and McDonald’s Corporation (NYSE:MCD).
The number of long hedge fund bets dropped by 2 in recent months. Costco Wholesale Corporation (NASDAQ:COST) was in 54 hedge funds’ portfolios at the end of June.
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Disclosure: None. Ray Dalio is Buying These 10 Stocks is originally published on Insider Monkey.
