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Stocks That Have Dropped the Most Since Ray Dalio Bought Them
Posted by: Holly LaFon (IP Logged)
Date: September 27, 2012 09:18PM
For a value investor, a stock’s price dropping usually merits further investigation. Most Gurus buy stocks when they consider them cheap. Therefore, when one of their stocks drops, it may mean it is an even better deal than when they bought it, or it did not appreciate the way they anticipated. Ray Dalio runs what was considered the most successful hedge fund, Bridgewater Associates, for the last two years running. His investment picks are also informed by his position on the macro environment. These are the stocks that have dropped the most in price since he bought them: Dell Inc. (DELL), Cliffs Natural Resources (CLF), Lam Research Corp. (LRCX) and Coach Inc. (COH).
Dell Inc. (DELL)
Dalio established a position in Dell in the first quarter of 2009, buying 419,750 shares when the price dropped to an average of $9.50 per share. He then traded it intermittently over the years and most recently made his largest purchase on record of 1,095,550 shares at an average price of $14 in the second quarter of 2012. Dell has dropped 30% since he bought it, the biggest loss of all of his holdings. It trades for about $10 on Thursday.
In the second quarter, when Dalio made his big purchase, the stock lost almost 25%, including a 17% single-day drop in May. That day, the company announced its first quarter results and second quarter guidance below analysts’ expectations.
In its fiscal first quarter 2013, Dell announced that its revenue declined 4% year over year, and net income declined 33%. It said it expects second quarter revenue to be up 2% to 4% sequentially, below analysts’ estimates.
Dell is working toward transforming into an enterprise services and solutions provider. Enterprise solutions and services businesses reached 50% of its gross margin in the second quarter. The company continued to generate free cash flow, which totaled $4.9 billion in the previous four quarters.
The stock declined further when the company announced further declines in its second quarter announced August 21. The company’s revenue declined 8% and net income declined 13% year over year, on slowed PC sales and a challenging macroeconomic and competitive environment.
“Our performance in the second quarter provided another proof-point that our long-term strategy is right,” said Brian Gladden, Dell chief financial officer. “We continued our progress in shifting the mix of our business to higher-margin enterprise solutions, led by solid growth in our server, networking, services, and Dell IP storage businesses.
Cliffs Natural Resources (CLF)
Dalio bought 248,138 shares of Cliffs Natural Resources at an average price of $56 in the second quarter. The stock has declined about 30% since then to trade for $40 per share on Thursday.
Cliffs Natural Resources Inc., formerly Cleveland-Cliffs Inc., is an international mining company, a producer of iron ore pellets in North America and a supplier of metallurgical coal to the global steelmaking industry.
Cliffs Natural Resources Inc. has a market cap of $5.83 billion; its shares were traded at around $39.83 with a P/E ratio of 4.8 and P/S ratio of 0.9. The dividend yield of Cliffs Natural Resources Inc. stocks is 6.1%. Cliffs Natural Resources Inc. had an annual average earnings growth of 25.2% over the past five years.
Cliffs Natural Resources has reported some disappointing results in 2012. Revenue declined 10% year over year, driven by lower year-over-year pricing for the company’s commodity products. Its sales margin also declined 39% due to higher labor, mining and maintenance costs.
Lam Research Corp. (LRCX)
Dalio established a position in Lam Research in the first quarter of 2010, buying 36,400 shares at an average price of $35.50, and traded numerous times since then. Most recently, he bought 147,839 shares at an average price of $39.50 in the second quarter of 2012. The stock has dropped approximately 21% since then.
Lam Research Corporation designs, manufactures, markets and services semiconductor processing equipment used in the fabrication of integrated circuits. Lam Research Corporation has a market cap of $6 billion; its shares were traded at around $31.78 with a P/E ratio of 15.9 and P/S ratio of 2.2.
Lam Research merged with Novellus Systems, a leading provider of advanced process equipment for the global semiconductor industry, on June 4, 2012, which the company believes will deliver “the potential for accelerated growth.” Its second-quarter results reflected 20 days of combined financial results. The company’s revenue that quarter was $741.8 million and net income was $18.1 million, compared to $659 million and $45.6 million the previous year.
Coach Inc. (COH)
Dalio bought 7,169 shares of Coach at an average price of $68.50 in the second quarter of 2012. The stock has declined approximately 21% since then, to trade for $54 on Thursday. This represents a mere 0.0062% of Dalio’s massive $6.7 billion portfolio.
Coach Inc. is a designer, producer and marketer of high-quality, modern, American classic accessories that complement the diverse lifestyles of discerning women and men. Coach Inc. has a market cap of $16.15 billion; its shares were traded at around $54.32 with a P/E ratio of 16 and P/S ratio of 3.4. The dividend yield of Coach Inc. stocks is 2.1%. Coach Inc. had an annual average earnings growth of 26.2% over the past 10 years. GuruFocus rated Coach Inc. the business predictability rank of 3.5-star.
Coach shares have declined 11% year to date. In their fourth quarter results reported July 31, Coach had sales of $1.16 billion, up 12% from $1.03 billion in the prior year. Net income was $251 million, or $0.86 earnings per share, up 24% and 27%, respectively, from $202 million and $0.68 per share the prior year.
The company benefited from efforts to grow its international business, become a market leader in men’s accessories and digital sales. The company also accelerated its acquisition of Asian distributors and increased its distribution in emerging markets such as China.
To see Ray Dalio’s portfolio, go here. To see more stocks that are trading for less than Gurus’ paid for them, try GuruFocus’ Guru Bargain Screener.
Guru Discussed: Ray Dalio: Current Portfolio, Stock Picks
Stocks Discussed: DELL, CLF, LRCX, COH,