Ray Dalio and Warren Buffett are both at the top of their profession: Dalio’s Bridgewater Associates usurped the title of best-performing money management firm in history from George Soros in recent years. Warren Buffett of Berkshire Hathaway is the preeminent investor of the century with a long track record of above-average returns.
As investors, they could not be more different. Warren Buffett famously assesses the strength of companies’ fundamentals when researching stocks, looking for good but cheap businesses. Ray Dalio is a macro investor who hunts for companies poised to benefit from macro events he predicts based on his unique economic model. Yet, in the intersection of their views lie several stocks they both embrace. The largest on the list are: General Electric (GE), Johnson & Johnson (JNJ) and Davita (DVA).
These results were found using GuruFocus’ Aggregated Portfolio Screener, which finds the stocks that two or more investors like.
General Electric (GE)
Ray Dalio owns 886,750 shares of GE, valued as $18 million as of March 31, 2012, which accounts for 0.28% of his equity portfolio. Warren Buffett owns 7,777,900 shares of GE, valued as $156 million as of March 31, 2012, which accounts for 0.21% of his equity portfolio.
General Electric matches Buffett’s “buy and hold forever” type of company. He bought his holding over five years ago, and it is one of the largest and most diversified industrial corporations in the world. From 2002 to 2008, its revenue increased annually except for one year, and it has produced steady cash flow over $20 billion for the last decade. In the fourth quarter of 2011, GE generated record cash from industrial operating activities of $5.5 billion.
Revenue at GE declined 2 percent in 2011 over 2010, and was up 7 percent excluding the impact of NBC Universal. General Electric sold its majority stake in NBCUniversal to Comcast in January 2011.
The company, which was hit hard by the financial crisis, had to slash its dividend from $1.24 a year in 2008 to $0.61 a year in 2009. In December 2011, it was able to increase its quarterly dividend for the fourth time in two years as its financial situation improved. The raise was $0.02 to $0.17.
Ray Dalio has also bought and sold shares of GE for over five years. Most recently, he sold 218,600 shares in the first quarter at an average price of $19. Last year, he bought and sold shares in each quarter as the stock vacillated between a broad 52-week range of $14 to $21, reflecting his shorter-term strategy.
General Electric has a market cap of $196.29 billion; its shares were traded at around $18.65 with a P/E ratio of 13.5 and P/S ratio of 1.3. The dividend yield of General Electric stocks is 3.7%.
Johnson & Johnson (JNJ)
Ray Dalio owns 222,093 shares of JNJ, valued as $15 million as of March 31, 2012, which accounts for 0.23% of his equity portfolio. Warren Buffett owns 29,018,127 shares of JNJ, valued as $1.9 billion as of March 31, 2012, which accounts for 2.5% of his equity portfolio.
Warren Buffett had been holding Johnson and Johnson for a long-term period, but recently began reducing his stake, selling a total of 13,606,436 shares in 2011.
In March 2012, Buffett said that he would consider selling his stake in the company because of its recent problems. “J&J obviously has messed up in a lot of ways in the last few years," he said on a CNBC interview. “You know, my friend Jim Burke used to run that and it does not have the reputation now that it had, you know, a few years back. It's still got a lot of wonderful products and it's got a wonderful balance sheet and all of that, but there have been too many mistakes made at Johnson & Johnson.”
He added that the company was “still an attractive business at its price,” but if he needed money it would be on his sell list.
J&J has had several product recalls in recent years and most recently, in the first quarter of 2012, it had a suspension of manufacturing at its McNeil Consumer Healthcare facility in Pennsylvania that significantly impacted U.S. sales of over the counter medicines.
Ray Dalio also sold about half of his much smaller holding in the first quarter and has made numerous short-term trades of the company for over five years.
Johnson & Johnson is engaged in the manufacture and sale of a broad range of products in the health care field in many countries of the world. Johnson & Johns has a market cap of $169.62 billion; its shares were traded at around $62.53 with a P/E ratio of 12.3 and P/S ratio of 2.6. The dividend yield of Johnson & Johns stocks is 3.9%. Johnson & Johns had an annual average earnings growth of 7.2% over the past 10 years. GuruFocus rated Johnson & Johns the business predictability rank of 4-star.
Ray Dalio owns 151,263 shares of DVA, valued as $14 million as of March 31, 2012, which accounts for 0.21% of his equity portfolio. Warren Buffett owns 6,000,000 shares of DVA, valued as $541 million as of March 31, 2012, which accounts for 0.72% of his equity portfolio.
It is speculated that newly purchased Davita was a stock chosen by one of Buffett’s new investment managers. The company has an outstanding balance sheet with a 10-year annual revenue growth rate of 18.6%, 17.8% for EBITDA and 10.8 percent for free cash flow. It bears $1.9 billion in cash and about $5 billion in long-term liabilities and debt.
Davita provides kidney dialysis treatment to patients with chronic kidney failure and end state renal disease. It has 1,841 outpatient dialysis centers in the U.S. serving about 145,000 patients each week. There are almost 400000 kidney patients who undergo dialysis in the U.S. in every year. Davita has a small international presence with 15 dialysis centers in three countries outside the U.S. It also leads the nation in many areas measuring quality of care.
In the first quarter of 2012, Davita acquired 28 centers and opened 13 in the U.S. It also opened four centers outside the U.S. It raised its operating income guidance for 2012 to $1.23 billion to $1.31 billion, from its previous estimate of $1.2 billion to $1.2 billion.
Though the industry is quite consolidated which will limit future acquisitions, the company expects to achieve growth also through an expected increase in the number of patients each year, de novos and same-store growth and financial leverage possible in the form of additional debt or buying back stock, Davita CEO Kent Thiry said on the first quarter conference call.
The company is also expecting pricing pressure on the cost of care per patient due to higher pharma expense, wage and benefit costs and travel costs.
Davita Inc. has a market cap of $7.52 billion; its shares were traded at around $83.83 with a P/E ratio of 14.2 and P/S ratio of 1.1. Davita Inc. had an annual average earnings growth of 17.8% over the past 10 years. GuruFocus rated Davita Inc. the business predictability rank of 3.5-star.
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