Ray Dalio's Bridgewater Associates manages an eye-popping $7.8-billion equity portfolio that includes 521 different stocks, including 210 new positions. Although Bridgewater Associates tends to turn over its portfolio holdings relatively quickly, tracking the purchases of the hedge fund can help shape your investment decisions by alerting you to new ideas. With that in mind, let's take a closer look at three of his biggest new bets.
No. 1: Ralph Lauren Corp (NYSE:RL)
Consumers have remained gun-shy when it comes to spending up for clothing. As a result, Ralph Lauren has been struggling to boost its bottom-line this year. However, a corner may be turning for the company.
Decisions to rationalize its product line and lower input costs helped Ralph Lauren's gross profit improve by 0.90% last quarter, and that led to the company delivering operating margin of 11.68%, which is better than the company's trailing 12-month average operating margin of 11.07%.
Since "A" index cotton prices have fallen during the fourth quarter in each of the past four years, and the holiday shopping season could boost inventory turn at retailers, Ralph Lauren could be in a better position to boost earnings next quarter, especially because a recent restructuring is expected to deliver annual cost savings of $110 million. If that ends up being the case, then Dalio's decision to invest nearly $20 million into Ralph Lauren's stock ahead of the holidays could prove to be savvy.
No. 2: FedEx Corp (NYSE:FDX)
Dalio also appears to be playing the holiday season "odds" with his $19.5 million stake in air-delivery Goliath FedEx.
Few companies are as agnostic to the whims of holiday shopping trends as FedEx. As long as consumers are shopping online, FedEx can make money delivering packages. Fortunately, shoppers are buying online in record numbers this year. According to Adobe's Digital Index, Cyber Monday sales increased 16% year over year, to $3.07 billion this year, topping estimates for sales growth of 12%.
Because Cyber Monday is as good a proxy for online holiday shopping as any, FedEx would seem to have a good shot at delivering better-than-hoped-for financials this quarter. That thinking is supported by FedEx's senior manager of global operations Dave Lusk, who recently predicted a record 317 million FedEx shipments between Black Friday and Christmas Eve. If FedEx hits that volume target, lower fuel costs could mean EPS growth for the company, and a profit for Bridgewater Associates.
No. 3: A T & T Inc. (NYSE: T)
AT&T's 5.6% dividend yield is as good of a reason as any for investors to want to be long its stock, but Dalio may be thinking a lot "bigger picture" than that. Instead, Dalio may be betting that AT&T's massive $49 billion buyout of DirecTV will begin paying off in 2016.
Previously, AT&T guided investors to expect that the DirecTV deal will begin boosting free cash flow and profit by next summer. That's promising, but it would be even better if AT&T could capture savings from the integration more quickly than it thinks. Currently, AT&T believes it will be able to carve out $1.6 billion in annual cost savings by the third year of the deal's closing.
If cash flow and earnings climb, and the integration timeline proves conservative, then paying about 12.2 times forward earnings per share to own AT&T shares may be a nifty bargain, especially because that valuation measure is near its 10-year low.
Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. The Motley Fool recommends FedEx. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.