Billionaire Ray Dalio Pulls the Trigger on 3 “Strong Buy” Stocks
There are experts out there in the stock market whose investing moves command respect. They’ve earned this through the long-term cultivation of a reputation for true savvy in finding solid returns – and few of these experts have the stature of billionaire financier Ray Dalio.
Dalio got his start trading commodity futures on Wall Street, and in 1975 he founded Bridgewater Associates from his New York City apartment. Today, with Dalio still at the helm, Bridgewater generates over $46 billion in revenue and has over $140 billion in assets under management.
Dalio has built his castle by sticking to three rules for his investments; First, he reminds us that “Diversifying well is the most important thing you need to do in order to invest well.” Dalio’s second tip is a reminder of the old market cliché that past performance will not guarantee a future return, but couched in his own style. He says, “Don't make the mistake of thinking those things that have gone up are better, rather than more expensive.” Finally, Dalio tells us to always “Do the opposite of what your instincts are.” Dalio would buy when others are selling, and sell when they are buying – and the results, in Bridgewater’s long-term success, are clear.
Looking to Dalio for investing inspiration, we used TipRanks’ database to find out if three stocks the billionaire recently added to the fund represent compelling plays. According to the platform, the analyst community believes they do, with all of the picks earning “Strong Buy” consensus ratings. Let’s jump right in.
Aptiv PLC (APTV)
Aptiv has a long history in the automotive industry, where it used the name Delphi and was a staple of Detroit’s supply chain from the mid-90s until 2017. At that time, it spun off its remaining powertrain activities, and changed both its name and focus. In its modern incarnation, Aptiv works on the fusion of high-tech and automotive technology. The company develops software, networking, and computing platforms geared toward improving vehicle safety and efficiency.
In January of this year, Aptiv unveiled ADAS, its open and scalable platform to enable software-defined vehicles while reducing complexity. The platform delivers high performance computing power to enhance connectivity and move a step closer to autonomous vehicle driving systems. The platform will also allow continuous updating over the vehicle’s lifespan.
In Q1, Aptiv showed $4 billion at the top line, up 20% year-over-year. Operating income was $437 million, up almost 11% yoy, and EPS came in at $1.03. The EPS was down from the $6+ reported one year ago, but was in in-line with the $1.04 reported in the two most recent quarters.
So, Aptiv is working to break new ground in automotive, and its work is turning a profit. It’s no wonder, then, that in Dalio added 256,497 shares to his existing holding in the stock in Q1 – an increase of more than 1,500%, and putting his stake in the company at $35.12 million at current valuation.
Turning now to the analysts, the stock boasts a strong fan base, which includes Raymond James' 5-star analyst Brian Gesuale.
“Business trends are solid, and a combination of typical conservatism and several uncontrollable industry dynamics (supply chain, input costs, etc.) leave ample opportunity for upward revisions and beats/raises through the balance of the year…. We continue to see APTV as one of the best positioned auto tech names to capitalize on the growth of green, connected, and autonomous technology adoption,” Gesuale noted.
Based on all of the above, the analyst rates APTV an Outperform (i.e. Buy), and his $200 price target implies an upside of 46% for the coming year. (To watch Gesuale’s track record, click here)
In general, the rest of the Street is in agreement. 11 Buys, 1 Hold and 1 Sell assigned in the last three months add up to a ‘Strong Buy’ consensus rating. In addition, its $170.33 average price target suggests 24% upside potential. (See APTV stock analysis on TipRanks)
Vroom, Inc. (VRM)
The second stock we're looking at, Vroom, is an online retailer that specializes in used cars, as well as parts and accessories, insurance, car rentals, and purchase financing. In short, Vroom is an online one-stop shop for automotive needs – for customers who aren’t looking to buy new, and are in the US.
Vroom was founded in 2012, and went public last summer. The IPO was priced at $22, and shares closed at $47.90 in the first day’s trading. Overall, Vroom raised $467.5 million putting its stock on the market.
In recent months, the company has been expanding its ‘last mile’ concierge service, delivering purchased vehicles and picking up customers’ old cars. The company added Detroit, LA, and Chicago to this service in May, and Denver in April.
Last week, the company released its Q1 results, its fourth as a public entity. The quarter marked the third consecutive sequential revenue gain, and saw the top line reach $591.1 million. E-commerce accounted for $422.3 million of that revenue, up 81% from the year before, and total online vehicle sales reached 15,504 units, for a 96% yoy gain.
Pulling the trigger on VRM in the first quarter, Bridgewater purchased over 47,000 shares. This is a new position in the stock for Dalio’s firm, and is currently worth $2.01 million.
Weighing in on the company for Wedbush, five-star analyst Seth Basham points to its Q1 results as an encouraging sign.
“VRM delivered solid 1Q21 results that exceeded buy side and sell side expectations… VRM is not only benefitting from strong market dynamics, but is also earning higher margins by nearly eliminating bottlenecks associated with its post-sales support processes and is investing to remain ahead of the growth in this and other key areas," Basham wrote.
The analyst summed up, "With these strong results, solid guidance and continued improvements, we believe VRM could top its unchanged FY21 y/y growth goals of 100%+ e-commerce units and 200% gross profit and it could raise these targets with 2Q21 results."
Unsurprisingly, Basham gives VRM shares an Outperform (i.e. Buy) rating, along with a $60 price target that implies an upside of ~41% for the next 12 months. (To watch Basham’s track record, click here)
With Buy reviews outnumbers Holds by 10 to 1, VRM shares have a solid Strong Buy consensus rating. The stock price is $42.60, and the average target, at $53.64, suggests a one-year upside of ~26%. (See VRM stock analysis at TipRanks)
Tempur Sealy (TPX)
From automotive, we’ll shift gears, slow down, and take a look at bedding. You probably don’t think much about your bed, mattress, or your pillow, but taken together, they’re big business. Tempur Sealy, which owns the well-known Tempur-Pedic, Stearns & Foster, and Sealy brands of bedding products, is a leader in the industry. Last year, the company saw its top—line revenue grow 18%, from $3.11 to $3.68 billion.
Over the past 12 months, TPX shares have gained an impressive 155%, more than doubling in value. While the company did see a short-lived dip in sales during the corona crisis, business has rebounded since and each of the last three quarters has exceeded $1 billion at the top line.
In April, TPX reported Q1 earnings, showing a 27% year-over-year increase in total revenue, along with EPS of 62 cents. The EPS number, while down sequentially from Q4, was up 121% year-over-year. The company reported a substantial yoy increase in net cash from operations, from $15 million to $86.3 million.
We’re looking at a solid company, with a firm foundation, aspects sure to attract an investor interested in diversity and returns. Dalio’s firm bought 199,649 shares of TPX in Q1. This was a new position for Bridgewater, but a substantial one; at the current share price, it is worth $7.24 million.
Among the bulls is Piper Sandler's 5-star analyst Peter Keith, who underscores the soundness of TPX investment.
“TPX's competitive positioning remains at an all-time high, the bedding industry has never been healthier, the consumer is in excellent shape, and International should show sequential improvement in trends into 2022. While supply chain constraints have resulted in some disruption, TPX expects headwinds to moderate substantially by the end of Q2,” Keith opined.
To this end, Keith rates TPX an Overweight (i.e. Buy), and gives it a price target of $50, suggesting a one-year upside of ~40%. (To watch Keith’s track record, click here)
Wall Street clearly agrees with Keith here, as the stock’s 8 reviews on file include 6 to Buy and just 2 to Hold, for a Strong Buy consensus rating. The trading price is $35.83 and the $46 average price target implies a 28% upside from that level. (See TPX stock analysis on TipRanks)
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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.