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Ray Dalio Was Wrong About These 10 Stocks

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·10 min read
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In this article, we discuss the 10 stocks that Ray Dalio was wrong about. If you want to read about some more stocks that Ray Dalio was wrong about, go directly to Ray Dalio Was Wrong About These 5 Stocks

The past few months have not been kind to stocks as the market becomes more volatile in light of recession fears arising from an increase in interest rates that end up slowing growth. In this environment, investors are eagerly looking towards Wall Street titans for advice. One of these titans is Ray Dalio, the billionaire chief of Bridgewater Associates. Dalio controls over $150 billion in capital and he recently sat down with news platform CNBC to outline his overall outlook on the economy.

In his interview, Dalio underlined three themes that were affecting macroeconomics globally. These included too much debt, the internal political conflicts within nation states, and the competition between great powers for economic hegemony. When asked whether he thought that the central bank could succeed with a “soft landing” - bringing inflation down without slowing down growth, Dalio said he could not see that happening since there was too much debt and the Fed would not be able to raise rates enough to generate returns for investors. 

Dalio also predicted that there was a “paradigm shift” at the stock market where investors were beginning to realize that cash or bonds, which had enjoyed a record four-decade bull run, were not good investments since they were not generating returns quick enough. Dalio noted that this had created a supply-demand issue where the Fed was selling, individuals were selling, and foreign investors were selling as well. Per the veteran investor, this would lead to a “squeeze” as there was too much financing at stake and the central bank would find it difficult to balance it.  

Dalio also stressed that “cash is still trash” since investors were quickly losing buying power with cash in light of soaring inflation. He also noted that equities were “trashier” and an environment was being built where “real return assets” were the best investments. The latest moves that Dalio had made at the market outline some of his thoughts as well. Some of the top stocks in the portfolio of Bridgewater Associates at the end of March 2022 included The Procter & Gamble Company (NYSE:PG), Costco Wholesale Corporation (NASDAQ:COST), and Johnson & Johnson (NYSE:JNJ). 

Our Methodology

The stocks were picked from the first quarter regulatory filings of Bridgewater Associates. The stocks that are a new addition to the portfolio, compared to filings for the fourth quarter of 2021, and are down at least 5% year-to-date as of June 6 were selected. Data from around 900 elite hedge funds tracked by Insider Monkey in the first quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.

Ray Dalio Was Wrong About These 10 Stocks
Ray Dalio Was Wrong About These 10 Stocks

Ray Dalio Was Wrong About These Stocks

10. Airbnb, Inc. (NASDAQ:ABNB)

Number of Hedge Fund Holders: 66 

 

Percentage Decline in Share Price (YTD): 30.61%  

Airbnb, Inc. (NASDAQ:ABNB) operates an online travel platform. Latest data shows that Bridgewater Associates owned over 198,000 shares of Airbnb, Inc. (NASDAQ:ABNB) at the end of the first quarter of 2022 worth $34 million, representing 0.13% of the portfolio. 

On June 3, Truist analyst Naved Khan maintained a Hold rating on Airbnb, Inc. (NASDAQ:ABNB) stock and lowered the price target to $160 from $190, noting that there was “some degree of consumer sensitivity to inflationary pressure” in the travel sector. 

Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Airbnb, Inc. (NASDAQ:ABNB), with 3.3 million shares worth more than $575 million.

Just like The Procter & Gamble Company (NYSE:PG), Costco Wholesale Corporation (NASDAQ:COST), and Johnson & Johnson (NYSE:JNJ), Airbnb, Inc. (NASDAQ:ABNB) is one of the stocks that elite investors are monitoring. 

In its Q3 2021 investor letter, Tollymore Investment Partners, an asset management firm, highlighted a few stocks and Airbnb, Inc. (NASDAQ:ABNB) was one of them. Here is what the fund said:

“Today disruptors are not typically seeking to replace incumbents entirely. Rather, they break the links in the customer journey, in doing so better aligning monetisation with value creation and minimising externalities. For example, Airbnb, Inc. (NASDAQ:ABNB) broke the link between staying in residential property and owning it. Airbnb, Inc. (NASDAQ:ABNB) is a specific example of a business model innovation which separated asset use from ownership. This is hardly a novel idea; it’s called renting. Rental models lend themselves to assets which are expensive and durable, and where usage is infrequent.”

9. Liberty Broadband Corporation (NASDAQ:LBRDA)

Number of Hedge Fund Holders: 26 

 

Percentage Decline in Share Price (YTD): 27.11%       

Liberty Broadband Corporation (NASDAQ:LBRDA) is a communications services firm. Latest filings show that Bridgewater Associates owned over 23,000 shares of Liberty Broadband Corporation (NASDAQ:LBRDA) at the end of the first quarter of 2022 worth $3.1 million, representing 0.01% of the portfolio. 

On May 10, investment advisory Deutsche Bank maintained a Buy rating on Liberty Broadband Corporation (NASDAQ:LBRDA) stock and lowered the price target to $158 from $196. Analyst Bryan Kraft issued the ratings update. 

Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Eagle Capital Management is a leading shareholder in Liberty Broadband Corporation (NASDAQ:LBRDA), with 8.3 million shares worth more than $1.1 billion.  

In its Q1 2022 investor letter, Alphyn Capital Management, an asset management firm, highlighted a few stocks and Liberty Broadband Corporation (NASDAQ:LBRDA) was one of them. Here is what the fund said: 

“We part-financed the additions to Amazon and Wayfair by trimming some Liberty Broadband. Liberty Broadband Corporation (NASDAQ:LBRDA) is a HoldCo and tracking stock whose primary holding is Charter Communications. Charter benefits from its extensive network of cable assets that can provide higher bandwidth internet at better prices than offerings from traditional telecom and satellite carriers. Moreover, with excellent management and capital stewardship, Charter has increased its high-margin broadband subscriber base despite losing some video subscribers to “cord-cutting.”

Nevertheless, competition is intensifying, with telecom companies launching aggressive Fiber-To-The-Home upgrade plans and new entrants emerging with Fixed Wireless technologies. Cable’s co-axial lines are, for once, the inferior technology compared to FTTH. While Charter has many ways to upgrade its lines to remain competitive in the medium term, it no longer has a distinct advantage. As a result, in markets with fiber competition, cable companies typically have a 50% market share vs. the 80% market share they enjoy without fiber competition.

With Fixed Wireless, Cable has a strong advantage in owning the network for internet backhaul, but it is more difficult to predict the longer-term competitive environment. In both cases, moving from a near-monopoly to a duopoly, or longer-term an oligopoly, likely comes with weaker pricing power and slower subscriber growth. These considerations warranted trimming our Liberty Broadband Corporation (NASDAQ:LBRDA) position, and we will monitor developments closely.”

8. Discover Financial Services (NYSE:DFS)

Number of Hedge Fund Holders: 33 

 

Percentage Decline in Share Price (YTD): 7.05%   

Discover Financial Services (NYSE:DFS) provides digital banking products and related services. Securities filings reveal that Bridgewater Associates owned over 52,000 shares of Discover Financial Services (NYSE:DFS) at the end of March 2022 worth $5.7 million, representing 0.02% of the portfolio. 

On May 12, Wolfe Research analyst Bill Carcache downgraded Discover Financial Services (NYSE:DFS) stock to Peer Perform from Outperform with a price target of $97, noting that a recession was likely to weigh on the stock in the near-term. 

Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Discover Financial Services (NYSE:DFS), with 900,734 shares worth more than $99 million.  

7. Warner Bros. Discovery, Inc. (NASDAQ:WBD)

Number of Hedge Fund Holders: N/A

 

Percentage Decline in Share Price (YTD): 31.37% 

Warner Bros. Discovery, Inc. (NASDAQ:WBD) operates as a media firm. According to the latest data, Bridgewater Associates owned more than 93,000 shares of Warner Bros. Discovery, Inc. (NASDAQ:WBD) at the end of the first quarter of 2022 worth $2.3 million, representing a small portion of the portfolio. 

On June 2, Wolfe Research analyst Peter Supino maintained a Peer Perform rating on Warner Bros. Discovery, Inc. (NASDAQ:WBD) stock and lowered the price target to $20 from $30, noting that innovation and competition were accelerating in the media landscape. 

Among the hedge funds being tracked by Insider Monkey, New York-based firm Laurion Capital Management is a leading shareholder in Warner Bros. Discovery, Inc. (NASDAQ:WBD), with 13.5 million shares worth more than $338 million.

In its Q1 2022 investor letter, Silver Ring Value Partners, an asset management firm, highlighted a few stocks and Warner Bros. Discovery, Inc. (NASDAQ:WBD) was one of them. Here is what the fund said:  

“Discovery completed the acquisition of the Warner Media business from AT&T in April, and the combined business is now named Warner Bros. Discovery, Inc. (NASDAQ:WBD). We are currently in the middle of an interesting technical event, following the spin-off special situation playbook.

The acquisition was structured as a spin-off of Warner Media, with AT&T shareholders receiving ~ 70% of the shares in the combined entity, or ~ 1.7B shares. Many of these shareholders owned AT&T for its phone business and its dividend. It appears that there has been elevated noneconomic selling as these shareholders exit regardless of price. On the other side, few if any investors want to buy the Warner Bros. Discovery, Inc. (NASDAQ:WBD) shares prior to this forced selling being over.” (Click here to read full text)

6. The Walt Disney Company (NYSE:DIS)

Number of Hedge Fund Holders: 113   

 

Percentage Decline in Share Price (YTD): 30.68% 

The Walt Disney Company (NYSE:DIS) operates as an entertainment company. Regulatory filings indicate that Bridgewater Associates owned over 209,000 shares of The Walt Disney Company (NYSE:DIS) at the end of March 2022 worth $28.7 million, representing 0.11% of the portfolio. 

On June 2, Truist analyst Matthew Thornton maintained a Buy rating on The Walt Disney Company (NYSE:DIS) stock and lowered the price target to $135 from $160, noting that the price target was updated to reflect higher taxes and lower profits. 

At the end of the first quarter of 2022, 113 hedge funds in the database of Insider Monkey held stakes worth $5.1 billion in The Walt Disney Company (NYSE:DIS), up from 111 the preceding quarter worth $6.9 billion.

In addition to The Procter & Gamble Company (NYSE:PG), Costco Wholesale Corporation (NASDAQ:COST), and Johnson & Johnson (NYSE:JNJ), The Walt Disney Company (NYSE:DIS) is one of the stocks that hedge funds are buying. 

In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and The Walt Disney Company (NYSE:DIS) was one of them. Here is what the fund said:

“The communication services sector was a weak spot in both the benchmark and the portfolio in the fourth quarter. The Walt Disney Company (NYSE:DIS) announced lower than expected streaming subscriber growth to the company’s Disney+ offering, attributable primarily to the content release schedule. The Walt Disney Company (NYSE:DIS) has been ramping up content spending given strong global response to Disney+, although production capability was temporarily impacted by COVID-19. We still believe Disney is on track to reach the subscriber outlook outlined at its December 2020 analyst day, driven by a very robust slate of content releases, particularly in the 2022–2024 time period.”

   

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Disclosure. None. Ray Dalio Was Wrong About These 10 Stocks is originally published on Insider Monkey.