In this article we present the list of Top 10 Stocks Billionaire Ray Dalio Just Bought. Click to skip ahead and see the Top 5 Stocks Billionaire Ray Dalio Just Bought.
Ray Dalio is the billionaire Founder, Co-Chairman and Co-Chief Investment Officer of Bridgewater Associates, the largest hedge fund in the world with over $140 billion in assets under management. Dalio founded the firm in 1973, initially running it out of his 2-bedroom apartment in New York and lead the firm for nearly four decades before handing over the reins of CEO in 2011.
Bridgewater Associates has been one of the most successful hedge funds in the world, delivering average annualized gains of 10.4% since 1991 and making Dalio one of the 50 richest people in the world with a net worth of $16.9 billion according to Forbes. However that figure was down from $18 billion in April as Bridgewater has hit a major rough patch in 2020. Its flagship Pure Alpha II fund had lost 18.6% through August, leading to $3.5 billion in client redemptions through July.
It’s not the first time that Bridgewater has been stung hard by a challenging market; it suffered big losses during the dot-com crash in 2000 (22%) and the financial crisis in 2008 (20%), but bounced back from those showings with strong multi-year runs shortly afterwards, which included 20%+ gains between 2002 and 2004 and 45% and 25% gains in 2010 and 2011 respectively.
According to Bridgewater’s latest 13F filing for the reporting period of September 30, the firm made several large changes to the composition of its 13F portfolio during Q3 as its computer models attempt to find their footing in the coronavirus era. Of particular note is the massive investments made in consumer staples, consumer discretionary, and healthcare stocks during the quarter, resulting in Bridgewater having arguably its most diversified 13F portfolio in a decade (not factoring in positions in index funds, which Bridgewater traditionally invests heavily in).
A renowned speaker and author, Dalio recently discussed the ascendant Chinese market while addressing the Caixin Summit on November 14, making the case that China is an attractive place to move capital to and that Bridgewater needs to invest a “significant portion” of its portfolio in Chinese assets given their macro tailwinds.
While none of Dalio’s largest new stock buys were Chinese-centric, many of them do operate in the country. In addition, Bridgewater raised its stakes in several Chinese holdings during Q3, including Alibaba Group Holding Limited (NYSE:BABA), its top stock pick, JD.com (NASDAQ:JD), Baidu, Inc. (NASDAQ:BIDU), and Huazhu Group Limited (NASDAQ:HTHT).
Ray Dalio’s reputation as a brilliant investor is intact despite the firm’s latest struggles, but the same can’t be said about hedge funds’ reputation as a whole, which has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. That doesn’t mean their consensus stock picks can’t provide great value. 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 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17. 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 enewsletter below to receive our stories in your inbox.
Now then, let’s check out the top 10 stocks billionaire Ray Dalio bought heading into the final quarter of 2020.
10. Danaher Corporation (NYSE:DHR)
We begin with Danaher Corporation (NYSE:DHR), which Dalio’s Bridgewater Associates bought 172,543 shares of in Q3, valued at $37.15 million at the end of September. Bridgewater is the latest in a long line of hedge funds to pour into Danaher over the past two years, as hedge fund ownership of DHR has risen by more than 50% during that time.
Danaher was one of the top performing stocks in Q3 for Daniel Loeb’s Third Point, gaining 21.77%, and the stock has continued to climb even higher in Q4. In his Q3 investor letter, Loeb cited the strong accretion Danaher was achieving from its $21.4 billion acquisition of GE Biopharma, which was completed at the end of Q1. Danaher grew adjusted earnings by 30% year-over-year in Q2 and then outdid themselves by twice as much in Q3, growing adjusted earnings by 60% year-over-year while also more than doubling its free cash flow generation.
9. Estee Lauder Companies Inc (NYSE:EL)
Next up is beauty products company Estee Lauder Companies Inc (NYSE:EL), which Dalio expects big things from after buying 175,579 shares worth $38.32 million on September 30. Hedge fund ownership of EL has more than doubled since the end of 2016 among the funds tracked by Insider Monkey.
Polen Capital Management, which likewise added Estee Lauder to its portfolio during Q3, praised the company’s online sales growth and aggressive promotional tactics in its Q3 investor letter, stating:
“While Estée Lauder also has brick-and-mortar exposure, it has been successfully shifting its business online. In the most recent quarter, online accounted for roughly 40% of sales in both the U.S. and China, with online sales growing swiftly on a large base. Estée Lauder is the global market leader in prestige beauty products, which is a large and growing market. We believe competitive advantages consist of brands and economies of scale, similar in concept and execution to Nike and Adidas. Global cosmetics companies, and Estée Lauder in particular, have been pulling away from the “also-rans” as a result of their scale, global reach, capital, and new omnichannel and social capabilities. Like Nike and Adidas, Estée Lauder successfully executes the flywheel of reinvesting billions of dollars into supporting its brands. Last year, Estée Lauder spent ~$3.5B on advertising and promotion. This equates to ~24% of revenue, which is a hurdle consistently too high for new entrants to clear.”
8. Mondelez International Inc (NASDAQ:MDLZ)
Mondelez International Inc (NASDAQ:MDLZ) is the first of several food and beverage related stocks that Dalio took big stakes in during Q3. In the case of snack foods giant Mondelez, Bridgewater bought 686,216 shares during the September quarter, establishing a position worth $39.42 million heading into Q4.
Mondelez shares have returned to pre-Covid levels thanks to a 9% surge in November thanks in part to company being able to massively grow its online sales during the pandemic. In Gabelli Asset’s Q2 2020 investor letter, the fund, which owned 1.21 million MDLZ shares on June 30, said that Mondelez continues to execute on its revenue growth plans and that the company has been successful in further monetizing its coffee assets.
7. Abbott Laboratories (NYSE:ABT)
433,463 shares of Abbott Laboratories (NYSE:ABT) were added to Bridgewater’s 13F portfolio during Q3, giving the fund a $47.17 million stake in the healthcare company. There was a surge in hedge fund ownership of Abbott Laboratories during Q3 2019 and the stock reached its highest levels of ownership yet at the end of June 2020, being in the 13F portfolios of 67 of the select group of high performing hedge funds tracked by Insider Monkey.
Polen Capital Management also discussed its position in Abbott Laboratories, which it added to during Q2, during its Q3 investor letter, praising the company for its leadership role in developing Covid-19 diagnostic tests:
“Abbott Laboratories has also shown resilience. Abbott’s consumer-facing businesses collectively grew almost 10% in the first half of the year. Its Medical Devices business has also recovered swiftly with procedure volumes returning to 90% of pre-COVID levels in the quarter, and the company has been a leader in the development of various COVID-19 diagnostic tests.”
6. McDonald’s Corporation (NYSE:MCD)
Rounding out the first-half of our look at Dalio’s biggest new holdings bought during Q3 is McDonald’s Corporation (NYSE:MCD). Bridgewater held a $77.02 million position in the fast food chain on September 30, consisting of 350,908 MCD shares. Hedge funds were extremely bearish on McDonald’s between 2016 and 2018, before sentiment rebounded slightly over the past two years.
Investment advisory firm Horizon Kinetics expressed some concern over McDonald’s business model in a high inflation environment during its Q1 commentary, stating that with inflation likely to rise in the coming years, businesses with high fixed costs like McDonald’s could suffer greatly from uneven inflationary distribution. It points out that should food or packaging costs, which account for about 30% of a typical fast-food restaurant’s costs, surge by an amount greater than McDonald’s can reasonably pass on to consumers without losing them as customers, its profit margins could shrivel up.
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