Bridgewater Associates’ 641 Inventory Portfolio | Prime 10 Holdings Analyzed


Bridgewater Associates’ Rules And Tradition

Bridgewater makes use of a principle-based strategy designed by its founder, Ray Dalio.

Dalio purchased his first inventory within the then-Northeast Airways on the age of 12, tripling his cash upon the airline’s following merger. He labored as a dealer on the NYSE flooring, earlier than ultimately main Bridgewater to turn into the world’s largest hedge fund.

In 2011, he self-published “Rules”, a 123-page quantity that sketches his funding and company administration philosophy based mostly on a lifetime of remark.

With a internet price of $20 billion and the world’s largest establishments in his clientele, Dalio’s rules have confirmed their utility.

Whereas Mr. Dalio’s rules are higher learn as a complete to completely grasp them, we now have summed up what we consider are 5 key takeaways that ought to be fairly related to any investor.

Takeaway #1: Observe Actual Diversification

The ‘holy grail’ of diversification is to seek out a number of investments with constructive anticipated returns which can be uncorrelated from each other. Most asset courses are extra correlated to at least one one other than one would possibly guess.

Bridgewater’s strategy to diversification is the ‘All Climate Portfolio‘. A well-diversified portfolio is prone to have decrease normal deviation for a given degree of return. This permits one to ‘leverage up’ the portfolio to match a extra risky asset, in an effort to generate superior returns.

Associated: See our modified Everlasting Portfolio for an additional tackle a extremely diversified portfolio.

By means of clever diversification, Bridgewater has been capable of obtain superior risk-adjusted returns.

Needless to say Bridgewater doesn’t essentially attempt to “beat the market.” The fund has purchasers like Authorities entities, that are extra interested by maintaining with inflation and the financial system. Danger-adjusted returns are extra essential on this case.

Takeaway #2: Keep away from False Dichotomies In Danger/Reward Tradeoffs

Ray Dalio emphasizes that choices don’t at all times have an either-or final result. There’s normally an answer simply out of view that permits each objectives to be achieved.

Takeaway #3: Systematize & Codify Your Determination Making

Every investor has completely different standards that they use to make funding choices.

In his funding technique (and that of Bridgewater Associates), Dalio explains how he’s an advocate of documenting decision-making standards in order that profitable actions might be replicated sooner or later.

Takeaway #4: Maintain An Funding Determination Log

That is fairly much like the third takeaway above, however as an alternative of replicating previous profitable methods, it goals to create new ones.

By writing down your current rationale for choices you make, it would let you get a much less distorted view of your views and views later. This can enhance your means of reflecting on previous selections and may help you in sharpening your future decision-making.

Associated: Funding Thesis Template | Observe & Enhance Your Investing Choices.

Takeaway #5: Be Cautious Of Pondering An Funding Is A Assured Success

Investing in equities at all times bears a certain quantity of danger… Many corporations that seem like “assured wins” could fail, and companies that appear laughable and determined could go on to be enormous successes.

Realizing that nothing is a very ‘can’t miss’ guess is a good psychological asset to have. Moreover, utilizing the ache of previous failures to develop as an investor must also be extremely valued.

Bridgewater Associates’ Portfolio & 10 Largest Public-Fairness Investments

Bridgewater Associates’ portfolio appears to be following intently Dalio’s diversification precept. The portfolio could be very diversified, numbering 641 particular person equities. Its high 10 holdings account for 40.7% of the entire capital invested.

Supply: 13F submitting, Creator

he Procter & Gamble Firm (PG):

The buyer staples sector has gained elevated investor curiosity over the previous few quarters, as its parts have been delivering resilient outcomes throughout a quite unsure market setting. That is the case with Procter & Gamble, which presently incorporates a close to all-time excessive LTM (Final Twelve Month) internet revenue of $14.51 billion.

The inventory is buying and selling at 34.9 instances its ahead internet revenue, which is on the excessive facet when taking a historic perspective of Procter & Gamble’s price-to-earnings ratio.

The corporate is a Dividend King, that includes 65 years of consecutive annual dividend will increase. Dividends have grown at a 5-year CAGR of 4.94%, however the newest DPS enhance was by 10%. The acceleration in dividend progress is probably going because of administration aiming to compensate traders for the elevated inflation ranges.

Bridgewater boosted its place by 10% in its newest submitting. The inventory presently accounts for 7.1% of the fund’s complete holdings. It’s its largest holding.

Coca-Cola Co. (KO) & PepsiCo, Inc. (PEP):

Coca-Cola and PepsiCo collectively account for round 9.0% of Bridgewater’s complete holdings. The buyer staples giants are each Dividend Aristocrats, boasting 59 and 50 years of consecutive annual dividend will increase, respectively. Each corporations possess a major moat of their respective classes. Consequently, their predictable enterprise mannequin and operations make them glorious sources for revenue technology.

By way of dividend progress, PepsiCo incorporates a considerably larger enhance tempo over the previous few years, displaying a 5-year DPS CAGR of seven.39% in opposition to Coca-Cola’s 3.71% throughout the identical interval.

PepsiCo’s and Coca-Cola’s money circulation stability are an important benefit to attaining sturdy returns over the long run, which is a worthwhile high quality for funds catering to such a various shopper base like Bridgewater.

Coca-Cola yields near 2.8%, whereas PepsiCo yields near 2.6%, probably because of its barely larger DPS progress prospects. Each yields are quite strong in at present’s ultra-low yield setting. Their valuation multiples are comparable, that includes a ahead P/E of roughly 25.

Bridgewater’s positions in Coca-Cola and PepsiCo have been elevated by 3% and 13%, respectively, in accordance with its newest filings.

Alibaba Group Holding Restricted (BABA):

Mr. Dalio has been an fanatic in regard to China’s investing potential for years. Alibaba, the Chinese language tech behemoth, has been in Bridgewater’s portfolio since 2018 and has since grown to its largest place. The corporate just lately reported its This autumn outcomes, delivering sturdy revenues of $38.3 billion, an 11.2% progress year-over-year.

Whereas Alibaba stays a extremely worthwhile firm, displaying internet revenue margins that usually surpass the 30%+ ranges, its shares have been just lately lagging because of the ongoing considerations surrounding Chinese language equities. The Chinese language authorities’s potential involvement in directing the corporate’s regulation has additionally been elevating questions amongst traders. That is the explanation the inventory’s P/E ratio has slid to a low of simply 11.4.

Therefore, whereas those that are interested by investing in China’s tech world are prone to discover Alibaba one of the vital engaging investments on the market, they need to additionally think about the underlying dangers concerned. Bridgewater hiked its Alibaba place by 29% throughout the quarter.

Johnson & Johnson (JNJ):

Following the theme of holding credible Dividend Aristocrats, Bridgewater has allotted round 4.5% of its property to the healthcare sector big, Johnson & Johnson. The corporate just lately posted quarterly revenues of $24.8 billion, 10.3% larger YoY, and third-quarter EPS of $2.13, implying a rise of 14.5% YoY.

The corporate’s outcomes have been strong throughout the 12 months, ensuing within the firm elevating its quarterly dividend as soon as once more by ~5% to $1.06 per share. J&J is on the unique Dividend Kings checklist, a gaggle of simply 40 shares with 50+ consecutive years of dividend will increase.

Having already delivered 59 years of consecutive annual will increase, traders are shopping for right into a high-quality firm with a extremely competent administration workforce. The inventory is buying and selling at a comparatively truthful valuation at 16 instances its ahead internet revenue, presenting an honest entry level for present traders.

The newest Johnson & Johnson place adjustment implied a 12% stake enhance.

Costco Wholesale Company (COST):

Costco’s distinctive client tradition has been a powerful driver within the firm’s long-term income progress. Whereas the enterprise itself is a low-margin one, Costco’s economies of scale are large, leading to important internet revenue.

In contrast to its opponents, the inventory has at all times attracted a premium valuation. At a ahead P/E of 39.8, the inventory is certainly not low-cost. Nonetheless, with its resilient money flows and natural progress, Costco’s premium valuation a number of could be justified.

In its newest quarterly report, internet gross sales elevated by 15.9%, to $51.9 billion, whereas EPS grew to $2.95, 36.2 larger YoY, comprising one other report of fantastic efficiency. We are able to see the inventory retaining its dear valuation, and consequently, its dividend yield to remain at lower than 1%.

The newest Costco place enhance was by simply 7%.

McDonald’s Company (MCD):

With McDonald’s, we will see as soon as once more how a lot Mr. Dalio and his funding workforce worth corporations which have confirmed their skill to ship sustainable long-term returns to their shareholders.

McDonald’s enterprise mannequin and model worth have remained resilient for many years, with the corporate elevating its dividend yearly for 46 consecutive years.

McDonald’s is on the unique Dividend Aristocrats checklist, a gaggle of 66 shares within the S&P 500 Index with 25+ consecutive years of dividend will increase.

The inventory ought to be comparatively recession-proof as effectively, as quick meals holds up very effectively even throughout financial downturns. At round 23.3 instances its ahead earnings, the inventory will not be low-cost however might make for a strong long-term holding.

Bridgewater raised its stake in McDonald’s Company by 15% throughout the quarter.

Walmart Inc. (WMT):

Walmart is the biggest firm on this planet by revenues, producing over $570 billion in annual gross sales. Its inventory is Bridgewater’s eighth-largest holding, accounting for simply over 3.3% of its complete portfolio. Regardless of having such a excessive publicity to the corporate, Bridgewater initially purchased into Walmart very just lately, in Q3 of 2020. Bridgewater is probably going betting on Walmart’s e-commerce gross sales increasing within the quick time period, as the corporate leverages its enormous logistics community to compete with Amazon (AMZN).

The fund’s conviction appears to be remaining sturdy general, as Bridgewater has grown its positions constantly via the 12 months. Nevertheless, it did trim its holding by round 43% as of its newest submitting.

The inventory is buying and selling at 20.7 instances its ahead internet revenue, correcting from its price-to-earnings ratio round a 12 months in the past. Walmart is a Dividend Aristocrat, counting 49 years of consecutive annual dividend will increase.

Abbott Laboratories (ABT):

Abbott Laboratories is Bridgewater’s ninth-largest holding, accounting for two.3% of its complete portfolio. The healthcare behemoth’s newest outcomes have been very sturdy. Particularly, in This autumn the corporate generated $11.468 billion in gross sales (58% exterior of the U.S.) representing a 7.2% enhance in comparison with This autumn-2020. Outcomes have been up throughout the board with Diagnostics, Established Prescription drugs, Medical Gadgets, and Vitamin gross sales rising 2.9%, 4.9%, 15.1%, and 5.5% respectively.

Adjusted earnings-per-share for the 12 months equaled $5.21, forward of prior steerage, in comparison with $3.65 in 2020.

The corporate’s outcomes have been sturdy throughout the 12 months, ensuing within the firm elevating its quarterly dividend as soon as once more by ~4.4% to $1.88 per share. Abbott Laboratories is on the unique Dividend Kings checklist, a gaggle of simply 40 shares with 50+ consecutive years of dividend will increase.

Bridgewater raised its stake in Abbott Laboratories by 16% throughout the quarter.





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