Bridgewater Associates, the investing firm founded by Ray Dalio (Trades, Portfolio) in 1975, recently disclosed its 13F report for the first quarter of 2022, which ended on March 31.
Bridgewater takes a principled approach to investing, applying standardized methods to deal with recognizable market patterns. Dalio’s investment innovations such as risk parity, alpha overlay and “All Weather” are recognized as having changed the way global institutions approach investing, As a global macro-investment manager, the firm diversifies itself with investments in 150 different markets. Its management strategy is based on creating an “idea meritocracy” where fund managers employ radical truth and radical transparency, encouraging open and honest dialogue and allowing the best thinking to prevail.
According to Bridgewater’s latest 13F report, its top common stock buys for the quarter were Alibaba Group Holding Ltd (BABA, Financial), Procter & Gamble Co (PG, Financial), Johnson & Johnson (JNJ, Financial) and Medtronic PLC (MDT, Financial). It also added to three emerging market ETFs: the iShares MSCI Emerging Markets ETF (EEM, Financial), the iShares Core MSCI Emerging Markets ETF (IEMG, Financial) and the Vanguard FTSE Emerging Markets ETF (VWO, Financial).
Investors should be aware that 13F reports do not provide a complete picture of a guru’s holdings. They include only a snapshot of long equity positions in U.S.-listed stocks and American depository receipts as of the quarter’s end. They do not include short positions, non-ADR international holdings or other types of securities. However, even this limited filing can provide valuable information.
Emerging market ETFs
Bridgewater increased its stake in the iShares MSCI Emerging Markets ETF (EEM, Financial) by 120.19% for a total holding of 19,621,771 shares. At the quarter’s average price of $47.19 per share, this added 1.95% to the equity portfolio.
The firm also added 92.47% to the iShares Core MSCI Emerging Markets ETF (IEMG, Financial) position for a total of 15,960,820 shares, adding 1.72% to the equity portfolio at the average price of $168.01 per share for the quarter.
Finally, the firm increased its investment in the Vanguard FTSE Emerging Markets ETF (VWO, Financial) by 35.18%, bringing the total number of shares owned to 22,717,958. The trade added 1.10% to the equity portfolio, with shares averaging $47.99 apiece during the quarter.
These three ETFs are all focused around the same theme – emerging markets. They are meant to provide easy exposure to emerging markets for those who don’t have expertise on the markets in question, as well as easy diversification for portfolio stability.
Despite the different names, these ETFs are all very similar in terms of their largest holdings; it’s mainly in the smaller holdings where they differentiate themselves from each other. The number one holding for all of them is Taiwan Semiconductor Manufacturing Co. Ltd. (TSM, Financial). Other stocks that make it into the top 10 lists for all three of these ETFs include Samsung Electronics Ltd. (XKRX:005930, Financial), Tencent Holdings Ltd (HKSE:00700, Financial), Meituan (HKSE:03690, Financial) and Infosys Ltd. (INFY, Financial).
Alibaba Group Holding Ltd
The firm’s top individual stock buy of the quarter was Alibaba Group Holding Ltd (BABA, Financial); it increased this holding by 75.25% for a total of 7,480,545 shares. The trade added 1.41% to the equity portfolio. During the quarter, shares traded for an average price of $115.52.
Alibaba is a Chinese multinational conglomerate with holdings in e-commerce, retail, Internet and technology assets, among many others. By volume, Alibaba is the largest e-commerce company in the world, with millions of merchants and hundreds of millions of users.
The stock has been under pressure for the past couple of years due to the big tech crackdown in China as well as the introduction of legislation in the U.S. to potentially de-list the stocks of foreign companies that do not submit to U.S. audits.
Both of these issues seem to be in the process of being resolved, though Alibaba is not completely out of hot water yet, which is why it is still significantly undervalued based on the GF Value chart despite a three-year revenue per share growth rate of 38.2% and a three-year Ebitda per share growth rate of 16.8%.
Procter & Gamble Co
The firm upped its stake in Procter & Gamble Co (PG, Financial) by 31.5% for a total holding of 6,823,611 shares. At the quarter’s average share price of $156.55, the trade had a 1.01% impact on the equity portfolio.
Procter & Gamble is a Cincinnati, Ohio-based consumer goods giant that specializes in personal care, home care and hygiene products. Its brands names include Tide, Oral-B, Gain and Bounty, among others.
The company’s strong brand names, its enormous international scale and the nature of its products give it reliable revenue streams and a certain level of pricing power. While it will likely still suffer some from inflation, it does offer a modest dividend yield of 2.46% to help make up for it.
The company has a three-year revenue per share growth rate of 5.2% and a three-year Ebitda per share growth rate of 8.5%. Combined with the dividend yield, the long-term return potential could end up being roughly in line with inflation, giving it potential as a “safety stock.”
Johnson & Johnson
The firm added another 40.26% to its Johnson & Johnson (JNJ, Financial) investment for a total stake of 4,345,002 shares. During the quarter, shares traded for an average price of $170.01, so the trade added 0.89% to the equity portfolio.
A New Jersey-based company that is more than a century old, Johnson & Johnson develops and sells a range of medical devices and pharmaceuticals as well as consumer goods related to personal care and hygiene.
Johnson & Johnson is a Dividend King, meaning it has raised its dividend for at least 50 straight years. Its current dividend yield is 2.41%. The stability provided by its wide range of products and geographies means the company has pricing power, but at the same time, it would have to do something extraordinary to move the needle.
Overall, the outlook for Johnson & Johnson seems similar to that of Procter & Gamble; we can likely expect the products to continue selling even as prices are raised, though the nature of the type of business limits upside potential just as much as downside potential. This company has a three-year revenue per share growth rate of 5.5% and a three-year Ebitda per share growth rate of 6.8%.
Medtronic PLC
The firm established a new stake worth 1,880,088 shares in Medtronic PLC (MDT, Financial), giving it a 0.84% weight in the equity portfolio at the quarter’s average share price of $105.61.
Medtronic is an Irish-American medical device company. It develops and sells a wide variety of medical devices that treat over 70 conditions. Although it is headquartered in Ireland for tax reasons, it generates the majority of its revenue in the U.S.
The company is best known for its revolutionary cardiac devices, including battery-powered and miniature pacemakers. It also produces insulin pumps and diabetes therapies. A focus on chronic conditions allows Medtronic to generate high recurring revenues.
Though growth has slowed in recent years, the company is still profitable, with return on invested capital exceeding weighted average cost of capital and margins that are outperforming 77% of other companies in the medical devices and instruments industry.
Portfolio overview
As of the quarter’s end, the firm held shares in 970 stocks valued at a total of $24.80 billion. The turnover for the period was 38%.
The top holding was the Vanguard FTSE Emerging Markets ETF with 4.23% of the equity portfolio, followed by Procter & Gamble with 4.20% and the iShares Core MSCI Emerging Markets ETF with 3.58%.
By sector, the firm was most invested in consumer defensive, health care and consumer cyclical stocks.
