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Sydnee Gatewood
Sydnee Gatewood
Articles (398) 

Ray Dalio’s Bridgewater Bets on Utilities in 4th Quarter

The hedge fund established 6 new positions in the space

Ray Dalio (Trades, Portfolio)’s Bridgewater Associates, the largest hedge fund in the world, released its fourth-quarter 2017 portfolio on Tuesday, listing 51 new positions.

Among the firm’s buys for the quarter were six utility companies: PG&E Corp. (NYSE:PCG), PPL Corp. (NYSE:PPL), Edison International (NYSE:EIX), Southern Co. (NYSE:SO), OGE Energy Corp. (NYSE:OGE) and Atmos Energy Corp. (NYSE:ATO).

PG&E

Having previously closed a position in PG&E in the third quarter of 2015, Bridgewater established a new holding of 846,531 shares for an average price of $56.04 per share. The holding was given 0.31% portfolio space.

The San Francisco-based electric utility company has a market cap of $20.26 billion; its shares were trading around $39.34 on Wednesday with a price-earnings (P/E) ratio of 12.30, a price-book (P/B) ratio of 1.06 and a price-sales (P/S) ratio of 1.18.

The Peter Lynch chart below shows the stock is trading below its fair value, suggesting it is undervalued.

1518563786810.png

GuruFocus rated PG&E’s financial strength 4 out of 10. Its profitability and growth was rated 5 of 10. The company’s trailing dividend yield is 3.95%. The dividend payout ratio is 48%.

The T Rowe Price Equity Income Fund (Trades, Portfolio) has the largest position in the company, holding 0.55% of its outstanding shares. David Dreman (Trades, Portfolio) and First Eagle Investment (Trades, Portfolio) also established positions during the quarter, while Richard Pzena (Trades, Portfolio) added to his holding.

PPL

The firm invested in 676,739 shares of PPL for an average price of $35.91 per share, expanding the portfolio 0.17%. It previously exited a position in the stock in the first quarter of 2017.

The Allentown, Pennsylvania-based energy company has a market cap of $21.14 billion; its shares were trading around $30.70 on Wednesday with a price-earnings ratio of 13.89, a price-book ratio of 1.98 and a price-sales ratio of 2.86.

According to the Peter Lynch chart below, the stock is slightly undervalued as it is trading below its fair value.

1518620686257.png

PPL’s financial strength was rated 4 out of 10 by GuruFocus. Its profitability and growth was rated 5 out of 10. The company’s trailing dividend yield is 5.14% and its forward dividend yield is 5.19%. The payout ratio is 71%.

With 0.14% of outstanding shares, First Eagle is the company’s largest guru shareholder. Jim Simons (Trades, Portfolio), Dreman and John Hussman (Trades, Portfolio) are also shareholders.

Edison International

After selling out of Edison in the first quarter, Bridgewater purchased a new 225,910-share holding for an average price of $76.20 per share, impacting the portfolio by 0.13%.

The Rosemead, California-based utility company has a market cap of $19.44 billion; its shares were trading around $59.66 on Wednesday with a price-earnings ratio of 13.65, a price-book ratio of 1.57 and a price-sales ratio of 1.64.

Based on the Peter Lynch chart below, the stock appears to be trading close to its fair value.

1518621632665.png

While Edison’s profitability and growth has a strong rating of 7 out of 10, according to GuruFocus, its financial strength is rated 4 out of 10. The company’s trailing dividend yield is 3.72% and its forward dividend yield is 4.03%. The payout ratio is 50%.

Of the gurus invested in Edison, Simons has the largest holding with 0.95% of outstanding shares. Pioneer Investments (Trades, Portfolio) also established a position in the stock during the quarter. Other guru shareholders include Pzena, Jeremy Grantham (Trades, Portfolio), Ruane Cunniff (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), NWQ Managers (Trades, Portfolio), John Hussman (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio).

Southern

Dalio’s firm bought 79,298 shares of Southern for an average price of $50.95 per share, giving it 0.03% portfolio space. The firm previously held the stock before selling out in the second quarter 0f 2016.

The Atlanta-based distributor of electricity and natural gas has a market cap of $44.33 billion; its shares were trading around $44.17 on Wednesday with a price-earnings ratio of 86.61, a price-book ratio of 1.84 and a price-sales ratio of 1.96.

The Peter Lynch chart below suggests the stock is overpriced as it is trading above its fair value.

1518622734657.png

Southern’s financial strength was rated 4 out of 10 by GuruFocus. Its profitability and growth was rated 6 of 10. The company’s trailing dividend yield is 5.15% and its forward dividend yield is 5.19%. The payout ratio is 438%.

The T. Rowe Price Equity Income Fund has the largest stake in Southern, holding 0.75% of outstanding shares. Pioneer Investments also established a holding in the stock during the quarter. While Pzena added to his position, Ken Fisher (Trades, Portfolio), Hotchkis & Wiley and Simons reduced their holdings.

OGE Energy

Having previously exited a position in OGE Energy in the second quarter, the firm established a new holding of 37,000 shares for an average price of $35.31 per share. The trade expanded the portfolio 0.01%.

The Oklahoma City-based utility company, which operates in Oklahoma and western Arkansas, has a market cap of $6.12 billion; its shares were trading around $30.64 on Wednesday with a price-earnings ratio of 16.04, a price-book ratio of 1.69 and a price-sales ratio of 2.66.

According to the Peter Lynch chart below, the stock is trading above its fair value, which suggests it is overpriced.

1518623643322.png

GuruFocus rated OGE’s financial strength 4 out of 10 and its profitability and growth 5 out of 10. The company’s trailing dividend yield is 4.11% and its forward dividend yield is 4.31%. The payout ratio is 65%.

With 1.1% of outstanding shares, Simons is the company’s largest guru shareholder. Pioneer Investments and Grantham are also shareholders.

Atmos Energy

Bridgewater invested in 8,004 shares of Atmos Energy for an average price of $87.88 per share, giving it 0.01% portfolio space.

The Dallas-based company, which is one of the largest natural gas-only distributors in the U.S., has a market cap of $8.9 billion; its shares were trading around $80.23 on Wednesday with a price-earnings ratio of 14.72, a price-book ratio of 1.91 and a price-sales ratio of 2.96.

Based on the Peter Lynch chart below, the stock appears to be trading close to its fair value.

1518624346131.png

Atmos’ financial strength was rated 4 out of 10 by GuruFocus. Its profitability and growth was rated 5 of 10. The company’s trailing dividend yield is 2.30% and its forward dividend yield is 2.41%. The payout ratio is 34%.

Simons has the largest position in Atmos, holding 0.26% of outstanding shares. Pioneer Investments also holds the stock.

Other trades

During the quarter, Bridgewater also added to its holdings in other utility companies, including Great Plains Energy Inc. (NYSE:GXP), Xcel Energy Inc. (NASDAQ:XEL), Alliant Energy Corp. (NYSE:LNT), CenterPoint Energy Inc. (NYSE:CNP), FirstEnergy Corp. (NYSE:FE) and Scana Corp. (NYSE:SCG).

While Dalio stepped down from his co-CEO role last April, he remains at the Westport, Connecticut-based hedge fund he founded as co-chief investment officer and co-chairman. The majority of Bridgewater’s long portfolio is composed of exchange-traded funds as of the end of the fourth quarter. Utilities make up 0.9% of the portfolio.

Disclosure: No positions.

About the author:

Sydnee Gatewood
I am an editorial assistant at GuruFocus. I have a BA in journalism and a MA in mass communications from Texas Tech University. I have lived in Texas most of my life, but also have roots in New Mexico and Colorado. Follow me on Twitter! @gurusydneeg

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