We recently compiled a list of the 10 Best Growth Stocks To Buy Now According To Billionaire Ray Dalio. In this article, we are going to take a look at where NVIDIA Corporation (NASDAQ:NVDA) stands against the other growth stocks.
Ray Dalio is one of the most successful investors in Wall Street’s history. He has invested through his firm Bridgewater Associates, and according to Insider Monkey’s research, Bridgewater had a 13F portfolio worth $19.7 billion as of Q1 2024 end. What’s more, is that we also looked at the top hedge funds on Wall Street as part of our coverage of 23 Best Hedge Funds of All Time and discovered that Bridgewater Associates ranked in the top five due to its $30 billion in gains since inception.
Looking at these, it’s clear that Dalio and his firm must be doing at least something right. Ray Dalio is a macro player who not only loves to look at the broader trends that affect the economy, but he also loves diversification and selling stocks at the right time. This approach differs from several other hedge funds which choose to focus on specific companies or are proponents of buying and holding stocks for the long term. Dalio’s strategy allows his fund to manage a changing economic and investment climate, as part of what is dubbed an All Weather Strategy.
However, despite his success, 2024 has been a mixed year for Bridgewater Associates. The firm, currently headed by CEO Nir Bar Dea, is currently shaking things up as its Pure Alpha fund has lost 4% for the last four years. This fund also had one of its worst years in history in 2023, but the changes do appear to be making their mark. This is because in Q1, the fund posted 16% in returns which were higher than the 4.59% in gains made by global hedge funds.
As for Dalio, even though he has moved forward from directly overseeing Bridgewater’s affairs, the investment guru regularly shares his wisdom with the world. He started 2024 by listing five key forces that will play a dominant theme in the investment environment this year. In a LinkedIn post, the billionaire shared that these forces are those that determine how the economy, the American and global political systems, forces of nature, and humanity’s innovation work.
While these forces are important for 2024, Dalio’s life’s work has focused on studying them over the course of the years and analyzing how they match similar trends in history. This makes his investment approach one of the most unique ones in the industry, and it appears to be yielding results as between 1991 and 2022, Bridgewater’s Pure Alpha fund has delivered 11.4% in average annual returns.
Dalio is also one of the few investors in the world who takes a serious approach to studying history and understanding the implications on the broader investing environment. Ever eager to share his insights, the famed investor gave a talk at Columbia Business School in April. Commenting on the investment approach at Bridgewater, the billionaire shared his values, philosophy, and guiding beacons for the process. He started out by sharing that he began his career by trading commodities because they had low margin requirements which would let him make more money. The stock market crash of 1982, which forced Dalio to borrow $4,000 from his father to pay bills was also critical in formulating his investment approach. As we’ve mentioned above, diversification is a key theme of Dalio’s All Weather Strategy, and the market crash influenced this approach:
And the way I looked at the risk, is I said, it’s like I, I, had a visual image that there’s this jungle there. And if I can cross the jungle without getting killed to the other side I would be okay. But I have to go through that, and then, or I could stay on the safe life side. And not take those risks. And how would I do that? And that was a problem that I had to figure out. And I realized two things I needed to do. I needed to diversify because it’s like my 15 uncorrelated returns stream mantra. I’ve realized that if I can have debts, 15 good uncorrelated return streams that I could reduce my risk by 80% with keeping the same expected returns.
So that was a big thing. And the other thing is I realized that I needed to do it with people who were on the mission who could see what I couldn’t see. I wanted people that we would stress test each other and challenge each other. We all see differently. Each one of you, have what you see is different from the way other people see. And, and when you start to have an appreciation of how people see things differently and you can get through that, that’s a great power. And so, I, it was like going into the jungle with others who were on the same mission with me. And we’d protect each other and so on.
Finally, before we get to Ray Dalio’s top growth stock picks, it’s also important to understand why such stocks are important particularly in today’s investment environment. US economic growth slowed down to 1.6% in Q1 from 2.4% in Q4 2023. At the same time, while the stock market has flourished on the AI front, other sectors have shown that persistently high inflation and tight credit conditions are making their mark. Since the economy is the sum product goods and services produced, firms whose revenue growth outpaces the consumer price index (CPI) inflation of 3.3% for May and the GDP growth are adding more customers to their top line instead of simply matching economic trends. Combining such stocks with the investment principles of the legendary Ray Dalio can help gain a better understanding of some of the market’s top sectors.
With these details in mind, let’s take a look at the top growth stocks that Ray Dalio and Bridgewater Associates have invested in.
Our Methodology
To make our list of Ray Dalio’s top growth stocks, we analyzed Bridgewater Associate’s 13F filings for Q1 2024 and picked out ten stocks with strong fiscal year annual revenue growth among the top 80 stocks.
A close-up of a colorful high-end graphics card being plugged in to a gaming computer.
NVIDIA Corporation (NASDAQ:NVDA)
Latest Fiscal Year Annual Growth Rate: 125.85%
Bridgewater Associates’ Q1 2024 Investment: $636 million
NVIDIA Corporation (NASDAQ:NVDA) is unsurprisingly the top revenue growth stock in Ray Dalio’s portfolio. The firm’s fortunes have soared due to the strong demand for its AI GPUs, which are industry leading when it comes to performance. One particular competitive advantage of NVIDIA Corporation (NASDAQ:NVDA)’s GPUs is the CUDA platform. CUDA is the firm’s proprietary software which enables users to use the chips for AI and other associated workloads. NVIDIA Corporation (NASDAQ:NVDA) also benefits from close ties to its customers, through which it guides them on the most efficient ways in which to use its products. CUDA sets it apart from products from smaller rival AMD, and it has allowed it to target some of the biggest firms in the world with its products.
However, the fact that its products are pricey and that its biggest customers have adequate resources to develop their own AI chips means that NVIDIA Corporation (NASDAQ:NVDA) is constantly in a rush to launch the latest products and prove its mettle. Big ticket firms the likes of Microsoft, Google parent Alphabet, and Facebook parent Meta have all designed and used their custom chips or are designing their own chips, even for AI workloads. This makes the future quite interesting for NVIDIA Corporation (NASDAQ:NVDA).
Baron Funds, whose largest investment position was in NVIDIA Corporation (NASDAQ:NVDA) as of Q1 2024 end, was cognizant of the firm’s innovational lead when it comes to the well known S Curve. Here is what the fund said in its Q1 2024 investor letter:
We are early on the adoption S-curve – most companies are still in the proof of concept stage while very few are ready for production today. Hurdles in implementing AI include data prep, model adaptation and fine-tuning, and embedding of AI into existing workflows. There is a lot of innovation taking place to reducing these hurdles – from tools and infrastructure that help companies build and run AI models more easily, to third-party AI models exposed via Application Programming Interfaces (APIs) that enable companies to use them without building their own models from scratch. NVIDIA’s ecosystem across developers, system integrators, cloud providers and independent software vendors, and internal software innovation are lowering these hurdles as well. For example, one of the most interesting announcements at the GTC conference were NVIDIA Inference Microservices – or NIMs, which are APIs to easily access open-source models (NVIDIA already has dozens of models available) without the need to worry about model optimizations, security, patching, or sending data to third parties. NIMs could ease AI adoption for enterprises while also driving incremental monetization for NVIDIA, priced at $4,500/GPU or at $1/GPU hour if used on the cloud, and increase the stickiness of NVIDIA’s platform.
Overall NVDA ranks 1st on our list of the best growth stocks to buy according to billionaire Ray Dalio. You can visit 10 Best Growth Stocks To Buy Now According To Billionaire Ray Dalio to see the other growth stocks that are on hedge funds’ radar. While we acknowledge the potential of NVDA as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
