The stock market has investors on a roller coaster of emotions in 2022. The S&P 500 index got off to its worst start since 1970, and the tech-heavy Nasdaq Composite index is down by more than 26% from the all-time high it touched in November.
Investing during volatile markets can be difficult, especially when you see many of your investments declining in value. However, billionaires know that down markets can present excellent opportunities. Ray Dalio's Bridgewater Associates, the world's largest hedge fund (as ranked by assets under management), added several stocks to its portfolio in the second quarter. Here are three that caught my eye.
Image source: Getty Images.
1. PayPal Holdings
PayPal Holdings (PYPL 1.96%) was a big winner from the pandemic, which shifted many people toward greater use of digital payments. The company added over 122 million accounts in 2020 and 2021, and its revenue grew by 43%.
However, 2022 has been less favorable to the payment company, and management has cut its revenue guidance multiple times this year. Through the first six months of the year, the company's revenue growth was 8%, far below management's initial expectations for 18%. The stock price is down 70% from its all-time high. But it has attracted the interest of other billionaire investors, including activist investor Elliot Investment Management.
PayPal CEO Dan Shulman called the second quarter the company's "low-water mark for the year." Management is looking to slash $900 million in costs this year and invest these savings into high-conviction growth opportunities to improve profit margins and increase customer engagement. The company remains a huge player in the digital payments industry, and its current price has billionaires scooping up the stock. Bridgewater added over 1.1 million shares of PayPal in Q2, increasing its position by 1,000%. Its stake is currently worth $116 million, based on Tuesday's closing price of $91.80.
2. WisdomTree Investments
WisdomTree Investments (WT 0.22%) provides investors with exchange-traded products (ETPs), including exchange-traded funds (ETFs). Customers can buy WisdomTree's ETPs for investment exposure to equities, commodities, fixed income, cryptocurrencies, and alternative investments. It has $74.3 billion in assets under management (AUM), including $47.3 billion in U.S. ETFs.
WisdomTree is a relatively small player in the ETP industry, ranking 15th in the world in a business dominated by BlackRock's iShares funds, which have $3.3 trillion in AUM. Vanguard and State Street round out the top three.
Still, investors piled into WisdomTree's products in the second quarter. Inflows into its products were $3.9 billion, its best quarter of inflows since 2015, mainly driven by its fixed income products.
WisdomTree is in a fast-growing space, but it has failed to keep pace with its bigger counterparts, and Bridgewater may be betting on the company continuing to see strong inflows into its fixed-income products. In the second quarter, Bridgewater Associates added more than 2 million shares of WisdomTree, an investment of about $11 million based on Tuesday's closing price of $5 per share.
3. Interactive Brokers
Interactive Brokers (IBKR 1.39%) provides tech-savvy investors with electronic brokerage services, allowing its customers to trade stocks, options, futures, bonds, ETFs, and other products. The company has worked for over 40 years, automating its trading platform and becoming a low-cost provider of broker-dealer services to investors.
In the first half of this year, the company's revenue fell by 21% and its net income fell 27%, due in part to tough year-over-year comparisons. Last year, it experienced significant gains from selling its investment in Up Fintech Holding Limited along with active trading amid the meme stock frenzy.
On a positive note, its customer accounts grew 36% from last year to 1.9 million. Growth over the last five years has been solid for the broker, too, with revenue and net income increasing at 15% and 25% compounded annually. In the second quarter, Bridgewater added 1 million shares of Interactive Brokers, bringing its total stake to $75 million based on Tuesday's closing price of $60.74 per share.
