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, one of the world's largest hedge fund companies -- and, in 2010 and 2011, running the best-performing hedge fund as well. Bridgewater was founded by Ray Dalio, who focuses on macroeconomic factors when he makes his investment decisions -- factors such as inflation, currency exchange rates, and GDP growth. He's clearly rather 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 33% of its value in the Vanguard Emerging Markets Stock ETF, 30% in the S&P 500 SDPR ETF, and 26% in the iShares MSCI Emerging Markets Index ETF.
Earlier this year, Dalio was so bullish on the stock market that he even suggested that people borrow money with which to invest. That's not the best approach for many, as it adds risk, but it did reflect the degree to which he's bullish.
The company's reportable stock portfolio totaled $11 billion in value as of March 31, 2013.
So what does Bridgewater Associates' latest quarterly 13F filing tell us? Here are a few interesting details:
The biggest new holdings are CenturyLink and General Electric. Other new holdings of interest include Southern Copper (NYSE:SCCO). Southern Copper posted first-quarter net profits down 20%, but its future seems brighter than its recent past. It's planning to nearly double its production over the next few years, and has been taking on a lot more debt. China's economic slowdown has hurt the company, but management expects demand in Asia to pick up soon.
Among holdings in which Bridgewater Associates increased its stake were Rite Aid (NYSE:RAD) and Silver Wheaton (NYSE:SLW). Beleaguered drugstore chain Rite Aid impressed some last quarter, posting a net gain instead of a loss, improving profit margins, and free cash flow growth. Still, it's carrying a lot of debt. Its most recent quarter featured more profitability, but that was more from cost-cutting than from operational growth. The company has been closing some stores and not opening many others, and April's same-store sales numbers were down. Rite Aid may ultimately succeed, but it faces tough competition.
Meanwhile, Silver Wheaton's stock has been ailing, despite the company's having a beautiful business model, where instead of engaging in actual (and risky) mining, it simply buys the rights to income from mines in exchange for financing. It has many investors excited recently, too, with a new deal it struck with Vale for rights to big chunks of Vale's gold production at two mines -- and management is very bullish, thinking there's a big chance that the mines will overproduce. The company is designed to prosper even if metals prices slump some.
Bridgewater Associates reduced its stake in lots of companies, including Freeport McMoRan Copper & Gold (NYSE:FCX). The world's largest publicly traded copper producer has seen its stock struggle lately, though it does offer a dividend yield of 3.8%. The company has diversified its operations considerably, by buying a pair of oil and gas producers. It was hurt by the price of copper falling and growth in China slowing.
Finally, Bridgewater Associates' biggest closed positions included Apollo Group and Hewlett-Packard. Other closed positions of interest include Corning (NYSE:GLW), which has struggled in recent years, in part due to low prices and demand for LCD substrates. The stock recently hit a 52-week high, but still sports a P/E ratio of 13. Some worry that Corning's acclaimed Gorilla Glass is threatened by rising interest in sapphire, while others argue that it's clearly a bargain at recent levels, with a forward P/E around 10.
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. 13-F forms can be great places to find intriguing candidates for our portfolios.