Here's What the Biggest Hedge Fund Has Been Buying

Every quarter, many money managers have to disclose what they've bought and sold, via "13F" filings. Their latest moves can shine a bright light on smart stock picks.

Today, let's look at Bridgewater Associates, the world's largest hedge fund company -- and, in 2010 and 2011, provider of the best-performing hedge fund as well. Bridgewater was founded by Ray Dalio, who focuses on macroeconomic factors as he makes his investment decisions -- factors such as inflation, currency exchange rates, and GDP growth. He's clearly skilled, as the size of Bridgewater attests.

It can be hard to find sufficient promising places to park your money when you have so many billions to invest, but Bridgewater partly solves that problem with index funds, recently holding about 34% of its reportable stock portfolio value in the Vanguard Emerging Markets Stock ETF, 29% in the S&P 500 SDPR ETF, and 25% in the iShares MSCI Emerging Markets Index ETF for a total of 89%.

Earlier this year, Dalio was so bullish on the stock market that he even suggested that people borrow money to invest. That's not the best approach for many, as it adds risk, but it did reflect Dalio's confidence in public equities.

The company's reportable stock portfolio totaled $11.9 billion in value as of Sept. 30, 2013.

Interesting developments
So what does Bridgewater Associates' latest quarterly 13F filing tell us? Here are a few interesting details.

The biggest new holdings are Hewlett-Packard and Ralph Lauren. Other new holdings of interest include General Electric (NYSE: GE  ) . General Electric has been transforming itself into a leaner, meaner, and more profitable" company. It's not done, either -- it's spinning off its retail finance business. GE has a lot of plans, such as reducing its share count, and has been winning hefty contracts, such as a $700 million one in Saudi Arabia. Its third quarter offered growing margins, a big backlog of orders, and double-digit growth aims for its industrial business. GE's more than $125 billion in cash and equivalents gives it a lot of power and flexibility. CEO Jeff Immelt has spoken of focusing on reliability. Many see General Electric stock as a solid value. It yields 2.8%.

Among holdings in which Bridgewater Associates increased its stake were Micron Technology (NASDAQ: MU  ) and Corning (NYSE: GLW  ) . Micron shares have more than tripled over the past year and are near a 52-week high. Micron has been making some smart moves, such as buying the Japanese company Elpida, which has made Micron the world's second-largest DRAM maker. The new company has twice Micron's previous memory capacity, more pricing power, and a bigger relationship with Apple. Micron Technology recently announced a new, higher-performing processor architecture that's likely to compete with Intel offerings. Micron's recently reported fourth quarter was solid, topping expectations. With its forward P/E ratio near 10, many still see great value in the stock, and some investing legends have been buying.

Corning recently saw its stock surge 25% to a two-year high on news of a major deal with Samsung, with many still seeing a lot more upside in the stock. Its Gorilla Glass has been a great contributor to the company, installed in more than 1 billion mobile devices. Corning has doubled its dividend in less than three years, and it now yields 2.3%. The company has been buying back billions of dollars' worth of shares, too.

Bridgewater Associates reduced its stake in lots of companies, including Broadcom (NASDAQ: BRCM  ) and Vale (NYSE: VALE  ) . Communications chipmaker Broadcom has bulls optimistic about its presence in the new iPhones and in Nexus 5 devices. That bodes well for Broadcom's bottom line, and a recent acquisition might prove to be a game changer for it, too. It has been investing heavily in LTE technology, but bears worry that it's having trouble growing its business. Broadcom stock yields 1.7%.

Brazil-based Vale has been focusing on its most promising opportunities, such as iron, while cutting costs aggressively, cutting back on its investments, and selling assets. It also recently took advantage of a chance to cut billions off its $16 billion tax obligations to Brazil. Demand from China seems to be growing, which bodes well for Vale. Vale stock does offer a dividend, but it has fluctuated quite a bit. With a forward P/E ratio near 7, the stock seems attractive.

Finally, Bridgewater Associates' biggest closed positions included Tesoro and Cognizant Technology Solutions.

We should never blindly copy any investor's moves, no matter how talented the investor. But it can be useful to keep an eye on what smart folks are doing. 13F forms can be great places to find intriguing candidates for our portfolios.

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  • Report this Comment On December 06, 2013, at 1:43 PM, JimBo11 wrote:

    It appears that the investors are becoming “irrational exuberant” to stocks like MU, INTC, Yahoo, HPQ and SWKS ( some of them on your list), the PE’s are way too high to me. Especially MU and Yahoo, there is no clear and sustain earning in the pike to me; if the Korean or the Chinese decides to lower their price for the products for competitive purposes, the earnings for MU and Alibaba (Yahoo) will disappear. The stock price will come down again. If you are a speculator or momentum trader, it may be OK, just don’t hold the stocks for long.

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