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When legends speak, people listen – and few investors match the legendary status of Ray Dalio. The founder of Bridgewater Associates has built his firm from a 2-room apartment operation into the world’s largest hedge fund, with more than $150 billion in assets under management, and a net gain exceeding $46 billion.
Dalio believes that the next two to four years will see our global economic and political systems change in ways that are unpredictable now. And the key to survival, for investors, may be a wide-ranging stance in stocks. As Dalio says, “I want a highly diversified portfolio of assets that are not cash and bonds. I want geographic diversification as much as I want asset class diversification.”
Bearing this in mind, our focus shifted to Bridgewater's most recent 13F filing, which discloses the stocks the fund snapped up in the first quarter. Locking in on two tickers in particular, TipRanks’ database revealed that each has earned a “Strong Buy” analyst consensus and boasts significant upside potential.
These are new positions for Bridgewater that may shed some light on where Dalio wants to go as the market climate turns stormy. Let's take a closer look.
The Beauty Health Company (SKIN)
We’ll start in the self-care sector, with the Beauty Health Company. Beauty Health owns and distributes a range skin care and cosmetic brands, including its flagship brand, HydraFacial. The company take a health-centered approach, promoting healthy skin as the root of beauty; it’s products fill the gap between traditional cosmetics and medicinal skin treatments.
Beauty Health entered the public markets through a billion-dollar SPAC merger in 2021, and has been making something of a splash. The company reported $260.1 million in net sales for HydraFacial last year, and saw its customer base expand to 21,719 installed HydraFacial delivery systems in more than 90 countries. In March of this year, the company introduced a digitized upgrade to the HydraFacial delivery system, dubbed Syndeo, and saw 258 trade-ups to the new system before the end of Q1.
The company had other good news in 1Q22. Revenues expanded year-over-year, growing 58% to more than $75.4 million and the company reported a health mix in that total, with $33.8 million from consumables and $41.6 million from delivery systems. Beauty Health also boasts an enviable gross margin of 69%, boding well for the company's ability to advance toward profitability. Nevertheless, despite the company’s growing revenue picture, the stock is down by roughly half so far this year.
Ray Dalio appears to see the low share price as an opportunity. His Bridgewater firm made a significant buy in SKIN shares, totaling 255,552 shares. At the current market price, this bloc is worth $3.07 million.
5-star analyst Kyle Rose, of investment firm Canaccord, also sees plenty of reason for an upbeat outlook here. He writes, “SKIN reported yet another impressive print with the launch of the next-generation Syndeo platform underway…. SKIN views 2022 as its final investment year, as the company continues to scale infrastructure and invest in the ongoing launch of Syndeo… While some investors remain worried about the near-term margin impact of trade-ins/upgrades to Syndeo, we believe the company continues to prudently invest in key near/long-term growth initiatives that should lay a strong foundation from which it can harvest leverage in subsequent years (in 2023+). We see no reason to change our thesis given positive underlying momentum in the business.”
That thesis is a Buy rating on the stock which comes along with a $22 price target. If correct, investors could be lining their pockets with an 83% gain.(To watch Rose’s track record, click here)
Clearly, the bulls are out in force for this cosmetic brand – SKIN has a unanimous Strong Buy consensus rating based on 8 positive analyst reviews. The stock is currently priced at $12.02 and its average price target of $23.13 implies a robust 92% upside for the next 12 months. (See SKIN stock forecast on TipRanks)
Trimble Navigation (TRMB)
Now let’s shift our gears to an industrial tech company, Trimble Navigation. Trimble, based in Sunnyvale, California, provides software, hardware, and support services to a wide range of industries, including agriculture, building and construction, geospatial, government, transportation, and utilities, aimed at improving efficiency by connected the physical and digital worlds. Among the company’s products are global navigation satellite system receivers, inertial navigation systems, laser rangefinders, unmanned aerial vehicles, scanners, and software processing tools.
In recent weeks, Trimble has completed a move to streamline its own operations going forward. The company divested four subsidiary businesses to Precisional, one of the affiliates of The Jordan Company. Precisional is an industrial precision measurement firm; the divisions it picked up were Protempis, Spectra Precision Tools, LOADRITE, and SECO. The financial terms of the transaction were not disclosed.
A few days prior to the divestment announcement, Trimble released its 1Q22 financial results – and showed a quarterly record in total revenue. At $993.7 million, the top line was up 12% year-over-year. Annualized recurring revenue (ARR) also grew 12%, and reached $1.47 billion. The company reported non-GAAP net income of $184.8 million, which translated to a non-GAAP EPS of 73 cents. On a per-share basis, this income was up from 66 cents in 1Q21 – and beat the 68-cent forecast.
Ray Dalio must have liked what he saw here, because Bridgewater bought in to the tune of 143,439 shares. This new position is worth $9.32 million at current trading levels.
Piper Sandler’s 5-star analyst Weston Twigg is also optimistic on Trimble looking forward, saying ‘it has not seen any recessionary signals.’ Getting into details, Twigg goes on to write, “Revenue in Buildings & Infrastructure and Resources & Utilities were significantly above our estimates, reflecting strength in construction and agriculture. With respect to current events, TRMB has cut off HW sales to Russia/Belarus (roughly 2% of revenue), but it is redirecting these sales to other customers in backlog, so it should see limited impact in 2022; related increases in commodity food prices could create longer-term tailwinds as agricultural demand picks up elsewhere.”
"We believe TRMB is making significant progress toward its software-centric, higher-margin sales model, demonstrated by strong traction with its recently-launched Trimble Construction One platform, which is cloud-based, bundled construction management SW," Twigg summed up.
These comments support Twigg’s Overweight (i.e. Buy) rating on the stock, and his $100 price target indicates room for ~54% share growth ahead. (To watch Twigg’s track record, click here)
In general, the rest of the Street has an optimistic view of TRMB. The stock’s Strong Buy status comes from the 3 Buys and 1 Hold issued over the previous three months. Shares in TRMB are selling for $65.03 each, and the average target of $83.75 indicates a possible upside of ~29% from that level.(See TRMB stock forecast on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.