Bridgewater Associates, the hedge fund founded by renowned billionaire investor Ray Dalio (Trades, Portfolio), is known for its culture of radical transparency, considering itself an “idea-meritocracy” where the best ideas win.
Founded in 1975, the Greenwich, Connecticut-based firm employs a host of analysts and quantitative traders to manage vast portfolios for numerous individual, institutional and sovereign clients. While Dalio stepped down from managing Bridgewater in 2017, he remains involved as the co-chairman and co-chief investment officer. The world’s biggest hedge fund also structures its management philosophy around a set of life principles that were established by Dalio.
At a Bloomberg Radar event on Sept. 7, the guru commented on opportunities in China amid the crackdowns across sectors like technology, online education and property, emphasizing that they cannot be overlooked.
“It’s a part of the world that one can’t neglect and not only because of the opportunities it provides but you lose the excitement if you’re not there,” Dalio said. “And so our objective is to be there both economically and investment-wise.”
Despite his current focus on Asian markets, as of the end of the second quarter, the consumer defensive sector had the largest representation in Bridgewater’s $15.59 billion equity portfolio with a weight of 28.46%.
According to GuruFocus portfolio data, the firm’s largest consumer defensive holdings as of the end of the three months ended June 30 were Walmart Inc. (WMT, Financial), Procter & Gamble Co. (PG, Financial), Coca-Cola Co. (KO, Financial), PepsiCo Inc. (PEP, Financial) and Costco Wholesale Corp. (COST, Financial).
Walmart
In the second quarter, Bridgewater increased its stake in Walmart (WMT, Financial) by 45.44% to 5.2 million shares. As its second-largest holding, the position accounts for 4.72% of the equity portfolio. GuruFocus estimates Dalio’s firm has gained 5.37% on the investment over its lifetime.
The Bentonville, Arkansas-based retailer, which operates a chain of hypermarkets, discount department stores and grocery stores, has a $412.86 billion market cap; its shares were trading around $147.97 on Wednesday with a price-earnings ratio of 41.71, a price-book ratio of 5.15 and a price-sales ratio of 0.74.
The GF Value Line suggests the stock is modestly overvalued currently based on historical ratios, past performance and future earnings projections.
GuruFocus rated Walmart’s financial strength 6 out of 10, driven by a comfortable level of interest coverage as well as a high Altman Z-Score of 4.76, indicating the company is in good standing. The return on invested capital also overshadows the weighted average cost of capital, suggesting good value creation is occurring as the company grows.
The company’s profitability scored a 7 out of 10 rating on the back of a declining operating margin, strong returns on equity, assets and capital that outperform more than half of its competitors and a high Piotroski F-Score of 8 out of 9, indicating business conditions are healthy. As a result of consistent earnings and revenue growth, Walmart also has a predictability rank of 2.5 out of five stars. According to GuruFocus, companies with this rank return an average of 7.3% annually over a 10-year period.
Of the many gurus invested in Walmart, Ken Fisher (Trades, Portfolio) has the largest stake with 0.45% of outstanding shares. Bill Gates (Trades, Portfolio)’ foundation trust, Jim Simons (Trades, Portfolio)’ Renaissance Technologies and Pioneer Investments also have significant positions in the stock.
Procter & Gamble
Dalio’s firm upped its Procter & Gamble (PG, Financial) position by 47.68% to 4.7 million shares, which represent 4.11% of the equity portfolio and is the fourth-largest holding. According to GuruFocus, Bridgewater has gained an estimated 5.39% on the investment since the third quarter of 2020.
The consumer goods giant headquartered in Cincinnati, which owns popular household brands like Gillette, Pampers, Tide and Charmin, has a market cap of $350.83 billion; its shares were trading around $144.29 on Wednesday with a price-earnings ratio of 26.32, a price-book ratio of 7.72 and a price-sales ratio of 4.93.
According to the GF Value Line, the stock is fairly valued currently.
Procter & Gamble’s financial strength was rated 6 out of 10 by GuruFocus on the back of a comfortable level of interest coverage as well as a robust Altman Z-Score of 5.17, which suggests the company is in good standing. The ROIC also eclipses the WACC, suggesting good value creation is occurring.
The company’s profitability fared even better, scoring a 7 out of 10 rating on the back of an expanding operating margin, strong returns that outperform a majority of industry peers and a high Piotroski F-Score of 8. Procter & Gamble also has a one-star predictability rank. GuruFocus says companies with this rank return an average of 1.1% annually.
With a 0.25% stake, Pioneer Investments is the company’s largest guru shareholder. Nelson Peltz (Trades, Portfolio), Diamond Hill Capital (Trades, Portfolio), Yacktman Asset Management (Trades, Portfolio), the Yacktman Fund (Trades, Portfolio) and the Global Franchise Portfolio also own the stock.
Coca-Cola
The firm added 45.27% to its holding of Coca-Cola (KO, Financial) during the quarter to 8.2 million shares. As the sixth-largest holding, the investment occupies 2.86% of the equity portfolio. GuruFocus data shows Bridgewater has gained an estimated 6.93% on the stock so far.
The Atlanta-based company, which is known for its iconic soft drink and other nonalcoholic beverages, has a $242.49 billion market cap; its shares were trading around $56.26 on Wednesday with a price-earnings ratio of 30.04, a price-book ratio of 10.89 and a price-sales ratio of 6.68.
Based on the GF Value Line, the stock appears to be fairly valued currently.
GuruFocus rated Coca-Cola’s financial strength 4 out of 10. In addition to adequate interest coverage, the Altman Z-Score of 4.22 indicates the company is in good standing. It is also creating value since the ROIC outshines the WACC.
The company’s profitability fared even better, scoring a 7 out of 10 rating on the back of an expanding operating margin, strong returns that outperform a majority of competitors and a moderate Piotroski F-Score of 6, which means conditions are typical for a stable company. Despite recording a decline in revenue per share over the past five years, Coca-Cola has a one-star predictability rank.
Warren Buffett (Trades, Portfolio) is Coca-Cola’s largest guru shareholder with a 9.27% stake. Other top guru investors are Pioneer Investments, Jeremy Grantham (Trades, Portfolio), Yacktman Asset Management (Trades, Portfolio), Simons’ firm, the T Rowe Price Equity Income Fund (Trades, Portfolio) and the Global Franchise Portfolio.
PepsiCo
Dalio’s firm boosted its PepsiCo (PEP, Financial) stake by 49.24% during the quarter to 2.6 million shares. Accounting for 2.54% of the equity portfolio, GuruFocus says it has gained an estimated 8.38% on the investment so far. It is Bridgewater’s seventh-largest holding.
The snacks and beverage giant, which is headquartered in Purchase, New York, has a market cap of $215.51 billion; its shares were trading around $155.93 on Wednesday with a price-earnings ratio of 26.35, a price-book ratio of 14.09 and a price-sales ratio of 2.9.
The GF Value Line suggests the stock is fairly valued currently.
PepsiCo’s financial strength was rated 4 out of 10 by GuruFocus. In addition to adequate interest coverage, the company is supported by a high Altman Z-Score of 3.83, indicating it is in good standing even though assets are building up at a faster rate than revenue is growing. The ROIC exceeds the WACC, implying that the company is able to create value while growing.
The company’s profitability scored an 8 out of 10 rating. Even though the operating margin is declining, the returns are outperforming a majority of industry peers. PepsiCo also has a moderate Piotroski F-Score of 6, and consistent earnings and revenue growth contributed to a three-star predictability rank. GuruFocus data shows companies with this rank return, on average, 8.2% annually.
With a 0.47% stake, Pioneer Investments is the company’s largest guru shareholder. Yacktman Asset Management (Trades, Portfolio)’s funds and Diamond Hill also have significant positions in PepsiCo.
Costco Wholesale
In the second quarter, Bridgewater increased its positoin in Costco (COST, Financial) by 49.79% to 843,268 shares. It accounts for 2.14% of the equity portfolio and is the firm’s eighth-largest holding. GuruFocus estimates Dalio’s firm has gained 25.16% on the investment over its lifetime.
The Issaquah, Washington-based wholesale retailer, which operates a chain of membership-only, big-box warehouse stores, has $205.56 billion market cap; its shares were trading around $465.30 on Wednesday with a price-earnings ratio of 43.71, a price-book ratio of 12.49 and a price-sales ratio of 1.1.
According to the GF Value Line, the stock is modestly overvalued currently.
GuruFocus rated Costco’s financial strength 7 out of 10. Although the company has issued approximately $1.4 billion in new long-term debt over the past three years, it is at an acceptable level as a result of sufficient interest coverage. It is also supported by a robust Altman Z-Score of 6.89, indicating the company is in good standing even though assets are building up at a faster rate than revenue is growing. The ROIC also surpasses the WACC, indicating good value creation in happening.
The company’s profitability also fared well with an 8 out of 10 rating, driven by an expanding operating margin, strong returns that outperform a majority of industry peers and a moderate Piotroski F-Score of 5. As a result of steady earnings and revenue growth, Costco also has a five-star predictability rank. GuruFocus has found companies with this rank return an average of 12.1% annually.
Fisher is the company’s largest guru shareholder with a 0.85% stake. Spiros Segalas (Trades, Portfolio), Pioneer Investments, Simons’ firm and Tom Gayner (Trades, Portfolio) also have large positions in Costco.
