Ray Dalio owns these nine stocks and ETFs.
Ray Dalio is one of this era’s most successful investors. The billionaire founded Bridgewater Associates LP back in 1975, and it has navigated numerous economic cycles and political crises over the decades. Dalio is known as a macroeconomic thinker who focuses on big-picture trades and investment themes rather than getting bogged down in esoteric individual stock analysis. Dalio is known for developing the concept of risk parity, which uses the allocation of risk rather than capital. This is thought to make portfolios perform more smoothly in market downturns. In any case, Dalio’s unique approach is visible in Bridgewater Associates’ $17.2 billion stock and exchange-traded fund portfolio, which is quite different in constitution from most high-flying hedge funds. Here are his top nine holdings, in ascending order, as of the firm’s most-recent regulatory filings.
9. iShares Core MSCI Emerging Markets ETF (ticker: IEMG)
Bridgewater’s style is to use multiple ETFs to build its portfolio. With ETFs, such as this emerging markets fund, the company is able to layer on exposure to a wide range of assets in the U.S. and globally. In the case of emerging markets specifically, there’s a lot to like for 2022. IEMG has heavy exposure to China and Southeast Asia, which could be set for a big rebound after a rough past year. Elsewhere in emerging markets, the surge in the prices of metals and crude oil could power a swift economic comeback in countries such as Brazil and South Africa. Emerging markets have underperformed developed markets for many years, but this could be a turning point.
Bridgewater portfolio weighting: 2.89%
8. Alibaba Group Holding Ltd. (BABA)
Doubling down on that theme, next up is Alibaba. The Chinese e-commerce giant had a dismal 2021. Results slumped as Alibaba faced a slowdown in China along with falling earnings related to its investments in other subsidies and publicly traded Chinese equities. In addition, Chinese stocks as a basket slumped following escalating tensions with the U.S. The American government has hinted at potentially delisting Chinese equities from the New York Stock Exchange if certain accounting and compliance thresholds aren’t met. Some bargain hunters have started to step up after the rout, however. Alibaba shares are down around 60% from their all-time highs, and that could be a decent entry point.
Bridgewater portfolio weighting: 2.95%
7. Coca-Cola Co. (KO)
Consumer staples are back in fashion. Bridgewater holds large positions in various food and beverage companies, starting with Coca-Cola. The soda giant had a rough go of it during the height of the pandemic. Quarterly sales fell by 25% at one point, with many on-premise locations such as stadiums, movie theaters, restaurants and universities shutting their doors. Since then, the business has come roaring back. In the last quarter of 2021, Coca-Cola’s away-from-home sales topped 2019 levels for the first time since the pandemic started. Meanwhile, it is still enjoying a sales lift from its grocery store sales channel. Some clouds are on the horizon; Coca-Cola’s profit margins have dipped thanks to inflation and supply chain pressures. However, given Coke’s brand and global footprint, its long-term outlook remains promising.
Bridgewater portfolio weighting: 2.99%
6. Costco Wholesale Corp. (COST)
Costco was one of the big beneficiaries of pandemic shopping habits. The company posted some of its strongest quarterly results ever in 2020 as people flocked to its warehouse stores to stock up. While COST stock soared during that time period, many analysts expected the company to cool off as the economy reopened. So far, it hasn’t happened. According to recent Evercore ISI analysis, Costco’s rolling two-year sales growth is actually accelerating into 2022, even as most other retailers are slowing down. This is perhaps a result of Costco’s aggressive pricing strategy; in a time when inflation is crushing consumers, Costco’s consistent low prices are a relief. Shares certainly aren’t cheap at 40 times forward earnings. But Costco still has strong sales growth and momentum on its side.
Bridgewater portfolio weighting: 3.02%
5. Johnson & Johnson (JNJ)
Johnson & Johnson stock has gotten caught up in various negative news cycles over the past year. Between J&J’s up-and-down COVID-19 vaccine program and the lawsuits around its talc products, investors have had to endure a lot of unflattering headlines. The core business, however, keeps rolling along. J&J’s fourth-quarter earnings topped expectations and showed 10.4% year-over-year revenue growth. This came, in large part, as the firm’s medical devices division surged back to life after a pandemic-induced slowdown in 2020. J&J is planning to spin off its consumer products division in 2022, which could generate more volatility. However, the company remains a solid blue-chip stock despite all the recent news and controversy.
Bridgewater portfolio weighting: 3.08%
4. Pepsico Inc. (PEP)
A common thread in Bridgewater’s portfolio is getting exposure to the same theme through multiple different positions. So it goes with owning both Pepsico and Coca-Cola. Thus, an investor can reasonably interpret this as Dalio making a macro call on the recovery of the food and beverage industry and these businesses’ ability to adapt and thrive in a rising inflation environment. Pepsico may be ideally situated to benefit from increasing inflation. That’s in large part due to the company’s snack food division. Pepsico’s Frito-Lay arm has absolutely dominant brands in the salty snacks department, and consumers tend to not be too price conscious with those sorts of impulse purchases. As things stand today, PEP stock is trading around 25 times forward earnings and offers a reasonable 2.6% dividend yield.
Bridgewater portfolio weighting: 3.08%
3. Vanguard FTSE Emerging Markets ETF (VWO)
VWO is another emerging markets ETF. At first blush, it might seem odd to have two different emerging market funds in the top ten of one’s portfolio, but there’s a potential rationale for having both. They use different underlying indexes and thus don’t have precisely the same holdings. VWO, for example, doesn’t count South Korea as an emerging market, and thus excludes those stocks from its holdings, unlike the iShares Core MSCI Emerging Markets ETF. There are other nuances, such as differences in allocation to China and Taiwan, among other markets. In general, emerging market funds should obtain similar results, but it can pay to look into exact specifics of each ETF in a portfolio.
Bridgewater portfolio weighting: 4.83%
2. Procter & Gamble Co. (PG)
Procter and Gamble reflects Bridgewater’s continued appreciation of the consumer staples sector. Procter and Gamble had gotten the reputation that it couldn’t grow much anymore. In the late 2010s, revenue growth failed to keep up with inflation, and activists — including the famed Nelson Peltz — tried to shake up the company. In any case, it seems the current inflationary surge is just what Procter and Gamble needed. The company has pushed through aggressive price hikes on products and enjoyed an upturn in demand as people stocked up on essentials during the pandemic. Long story short, the company is now growing both revenues and earnings at a mid-to-high single digits rate. That will get the job done for this sort of firm. Shares aren’t particularly cheap at 26 times forward earnings, but P&G offers a rock-solid dividend of 2.2% and downside protection in choppy markets.
Bridgewater portfolio weighting: 4.93%
1. SPDR S&P 500 Trust ETF (SPY)
The popular S&P 500 ETF won’t win many awards for creativity, but it’s a sensible choice as a top holding for a broadly diversified portfolio. If a fund manager is bullish on America, there are few easier ways to grab a chunk of broad equity exposure than SPY. With its massive amount of assets under management and huge trading volume, SPY has plenty of liquidity for even the biggest of hedge funds to trade in and out of at lightning speed. Owning an S&P 500 ETF as one’s top position isn’t glamorous, but it does achieve cheap, reliable access to hundreds of the world’s most profitable and dynamic companies.
Bridgewater portfolio weighting: 5.2%
Bridgewater’s 9 top stock and ETF picks for 2022:
— SPDR S&P 500 Trust ETF (SPY)
— Procter & Gamble Co. (PG)
— Vanguard FTSE Emerging Markets ETF (VWO)
— Pepsico Inc. (PEP)
— Johnson & Johnson (JNJ)
— Costco Wholesale Corp. (COST)
— Coca-Cola Co. (KO)
— Alibaba Group Holding Ltd. (BABA)
— iShares Core MSCI Emerging Markets ETF (IEMG)
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Billionaire Ray Dalio’s 9 Top Stock and ETF Picks for 2022 originally appeared on usnews.com
Update 02/17/22: This story was previously published and has been updated with new information.
