Billionaire Ray Dalio’s Top 5 Small-Cap Stock Picks

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1. Zai Lab Limited (NASDAQ:ZLAB)

Value of Bridgewater Associates’ 13F Position: $12.33 million

Number of Hedge Fund Shareholders: 32

Topping the list of Ray Dalio’s top small-cap stock picks is another Chinese pharmaceutical company, Zai Lab Limited (NASDAQ:ZLAB). Bridgewater Associates was one of the 32 hedge funds long ZLAB on December 31, owning 196,144 shares, a 23% increase from the previous quarter.

Zai Lab Limited (NASDAQ:ZLAB) shares are down 62% over the last year, which has some analysts saying there’s an extreme value disconnect in the stock right now. Several analysts, including Citi’s Yigal Nochomovitz, have price targets that are 2x-5x higher than the stock’s current levels.

The recent weakness has partly been attributed to misinformation being spread across media outlets concerning how Congress’ H. R. 1155 bill regarding a ban on imported goods from China’s Xinjiang region that utilized forced labor, would impact the company. Zai Lab does not believe the bill will impact it in any way.

ClearBridge Investments is another big fan of Zai Lab Limited (NASDAQ:ZLAB), which ranked as the ClearBridge International Growth EAFE Strategy’s only Chinese stock at the end of Q3. The fund explained why in its Q3 2021 investor letter:

“Biotechnology company Zai Lab is now our only holding in China. The government wants to grow the domestic health care space as part of its social mission, so although Zai is not a big position, we still believe it is a growth story with immense optionality. The stock was hurt in the quarter by negative sentiment spreading into more areas of the Chinese market.”

You can also take a peek at the 10 Undervalued Dividend Kings To Buy In 2022 and 10 Smart Home Technology Stocks To Buy Today.

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