Bridgewater Associates is a trendsetter on Wall Street.
Bridgewater Associates, founded by Wall Street legend Ray Dalio, is one of the most widely followed hedge funds across the globe, with total assets of $235.5 billion, according to the firm’s Form ADV from Oct. 10, 2022. This year has gone well for Dalio, with Bridgewater’s flagship Pure Alpha II fund up 22% year to date, well ahead of the Dow Jones Industrial Average, which is down 7.7% as of Nov. 16. While Dalio may be on the way out (Dalio announced he’s stepping down as leader of Bridgewater, although he’ll stay active as an investor), the hedge fund still carries significant weight on Wall Street and all eyes are on his every investment move. What’s under the hood for Dalio and Bridgewater with its recent U.S. Securities and Exchange Commission Form 13F update? Here’s a snapshot.
Procter & Gamble Co. (ticker: PG)
Bridgewater curbed its holdings in the blue-chip consumer goods giant in the third quarter, shaving 131,715 shares off of its PG position. P&G, the owner of favored household brands like Pampers, Tide and Bounty, has seen its stock slide by 5.5% over the past three months and is down 11.2% on a year-to-date basis through Nov. 16. P&G reported its most recent quarterly earnings on Oct. 19, beating expectations with core earnings per share of $1.57 and sales rising by 1.3% to $20.6 billion, beating the analyst consensus of $20.3 billion. Consumer staples stocks like Procter & Gamble are considered solid defensive investments during periods of market volatility and uncertainty. Currently, Bridgewater owns 6.6 million shares of PG stock, worth about $835 million.
Johnson & Johnson (JNJ)
The blue-chip global pharmaceutical and health care product producer has been a mainstay holding in Bridgewater’s portfolio in recent years. Dalio first started loading up on Johnson & Johnson during the initial U.S. COVID-19 outbreak in the first quarter of 2020. As the pandemic has abated, and as Americans are pulling back on COVID-19 vaccines, J&J’s revenue growth slowed as well. As of Sept. 30, 2022, J&J saw a 1.9% increase in quarterly revenue year over year. J&J’s plan to spin off its consumer business into a newly public company by late 2023 was considered a bullish catalyst. That rosy expectation hasn’t translated into a robust stock price, as JNJ stock has risen a tepid 1.4% this year as of Nov. 16. Bridgewater currently holds 4.7 million shares of JNJ stock worth $769.8 million. That’s up from 4.3 million shares in the second quarter.
PepsiCo Inc. (PEP)
Dalio is rarely one to put all of his eggs in one basket, and that goes double for two of the largest beverage and consumer food product companies in the world: PepsiCo and Coca-Cola Co. (KO). Just like Coca-Cola, PEP has seen its share price waning of late. The stock is down 1.1% over the past three months, but it has bounced back by 4.8% over the past 30 days — a welcome sight in an otherwise listless stock market. Overall, PEP is up 2.7% on a year-to-date basis through Nov. 16. Yet things could be looking up. In the most recent quarter, PepsiCo reported 8.8% revenue growth in Q3 along with $2.7 billion in net income. Bridgewater holds roughly 4 million shares of PEP stock worth $656.5 million.
Coca-Cola Co. (KO)
Coca-Cola is yet another blue-chip consumer staples stock that is an excellent defensive play in a tough market environment. Coca-Cola shares had demonstrated their resilience through mid-2022, but the share price slid 6.3% over the past three months, generating a year-to-date total return (which stood at 10% through Aug. 23) of 4.5% as of Nov. 16. In the most recent quarter, Coca-Cola reported 10% net revenue growth and $2.8 billion in net income, both upgrades over Q2. Coca-Cola has also been a top long-term holding of fellow billionaire and Berkshire Hathaway Inc. (BRK.A, BRK.B) CEO Warren Buffett, putting Dalio in good company. Bridgewater holds roughly 11.47 million shares of KO stock, worth about $642 million.
iShares Core MSCI Emerging Markets ETF (IEMG)
Dalio has slashed Bridgewater’s stake in IEMG in the third quarter, selling 408,000 shares. That move continues the trend of Bridgewater backing away from some of its Chinese investments — a trend that had intensified in the second quarter. Dalio had sold some of his larger Chinese market positions, dumping all of the shares of Chinese stocks Alibaba Group Holding Ltd. (BABA), JD.com Inc. (JD), Bilibili Inc. (BILI) and NetEase Inc. (NTES). IEMG, an emerging markets exchange-traded fund, or ETF, is only about 25% exposed to China. Currently, Bridgewater holds 14.9 million shares of the fund, down from 15.3 million in Q2, leaving Bridgewater’s stake in IEMG at about $640 million, down from $751 million in the second quarter.
iShares Core S&P 500 ETF (IVV)
The iShares Core S&P 500 ETF is a low-turnover, decent-dividend-paying S&P fund that tracks the S&P 500. It’s very similar to another benchmarked stock market index, the SPDR S&P 500 ETF Trust (SPY), giving Dalio two large stock ETFs that enable him to diversify his exposure to the S&P 500. Dalio was basically treading water with IVV in Q3, adding 61,000 shares, a 3% quarterly increase, after raising his stake by 51% in the second quarter. Bridgewater now owns 1.76 million shares of the IVV fund worth about $631 million.
Costco Wholesale Corp. (COST)
Costco, the giant membership warehouse retailer, appeared to be rewarding Dalio for his faith in the big-box consumer market in the first half of 2022. With COST stock down 5.2% over the past three months (but up 15.3% over the past month going into the holiday season), Bridgewater shaved some of its COST allocations in the last quarter, as the retailer fell victim to the same weaker consumer sentiment most retailers are experiencing in 2022. In May, Costco reported fiscal third-quarter same-store sales growth of 10.8%, however. Dalio sold 11,554 shares from Bridgewater’s COST stake in the period ended Sept. 30. The firm now holds about 1.2 million shares of COST stock worth around $566.5 million.
Vanguard Emerging Markets Stock Index Fund (VWO)
Vanguard Emerging Markets Stock Index Fund, an ETF, is another popular fund that invests in emerging-market stocks. Like IVV complements SPY in Bridgewater’s portfolio, VWO is a way for Dalio to diversify his fund’s bet on emerging-market economies such as China, Taiwan and Brazil. VWO is heavily exposed to geopolitical risks in East Asia. Chinese and Taiwanese stocks make up roughly 40% of the fund’s holdings. Bridgewater continued its recent shedding of VWO in the third quarter, selling 667,600 of its shares, but the firm still holds 14.8 million shares worth $539 million.
Walmart Inc. (WMT)
Walmart has stayed resilient as other retail behemoths have dipped into negative territory in recent months. WMT is up 13.9% for the past month and up 6.6% over the past three months through Nov. 16, and indicates it will have staying power right through the holidays. Walmart typically performs capably in hard times, as its low-price, low-discount mindset appeals to shoppers in good and bad economies. The company generated strong third-quarter earnings and stepped up with a proposed $20 billion buyback program, even as inflation still vexes Main Street consumers. For Dalio, WMT’s resilience isn’t a signal to buy. In fact, it’s just the opposite, as Bridgewater sold 668,000 shares in the past quarter, leaving about 4 million shares with a share value of $523 million.
SPDR S&P 500 ETF Trust (SPY)
Dalio sold off 380,000 shares of SPY in Q3, knocking the fund’s percentage of holdings from 2.95% to 2.65%. Does that mean Dalio is backing off his bet that the U.S. stock market is up off the mat and is in robust recovery mode, even with high inflation and rising interest rates? Yes and no. The S&P 500 is weighted by market capitalization, meaning its top holdings include Apple Inc. (AAPL), Microsoft Corp. (MSFT) and Amazon.com Inc. (AMZN), and those are the companies that Dalio believes in and wants to cordon off a sizable section of Bridgewater’s fund portfolio to accommodate. But Dalio will prune SPY shares if needed. Bridgewater owned more than 1.8 million shares of the SPY ETF in Q2, but in Q3 it cut shares to 1.5 million with a value of about $523 million.
Billionaire Ray Dalio’s 10 top stock and ETF holdings:
— Procter & Gamble Co. (PG)
— Johnson & Johnson (JNJ)
— PepsiCo Inc. (PEP)
— Coca-Cola Co. (KO)
— iShares Core MSCI Emerging Markets ETF (IEMG)
— iShares Core S&P 500 ETF (IVV)
— Costco Wholesale Corp. (COST)
— Vanguard Emerging Markets Stock Index Fund (VWO)
— Walmart Inc. (WMT)
— SPDR S&P 500 ETF Trust (SPY)
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Billionaire Ray Dalio’s 10 Top Stock and ETF Picks originally appeared on usnews.com
Update 11/17/22: This story was published at an earlier date and has been updated with new information.
