Ray Dalio’s Bridgewater Associates was founded in 1975. It's based in Westport, Connecticut and currenty has more than 900 employees. Ray Dalio, a jazz musician’s son, made his first trade at the age of 12. He received his BA from Long Island University and MBA from Harvard Business School. Dalio won a “Lifetime Achievement” award from a couple of different sources. Bridgewater is one of theworld's largest hedge funds, managing approximately $35 Billion.
Ray Dalio explains his investment process on Bridgewater’s website as follows:
We believe the best way to manage money is to separate investment alpha (value-added return from active management) from beta (return from passively holding a portfolio) and then create optimal portfolios of each. At Bridgewater, we manage money for clients across most major asset classes by replicating a client benchmark and overlaying the benchmark with our optimal alpha strategy, Pure Alpha®. Clients specify their desired targeted level of risk.
To generate alpha, we follow a fundamental and systematic investment process. By fundamental, we seek to understand the timeless and universal influences on global markets. By systematic, we pre-specify all of our investment criteria, allowing us to debate and test their merits and implement decisions with objectivity and thoroughness. This process gives us the ability to make better decisions and create more diversified portfolios, producing more consistent performance.
Bridgewater manages a variety of asset classes including currencies, bonds, equities and commodities. Total equity investments are $6.8 Billion, with $2.8 Billion of that in ETFs. Three-quarters of the ETF investment is the S&P 500 ETF trust and 25% is Vanguard Emerging Markets Fund. He had invested in 659 different stocks during the past year. In his latest 13F filings, he had 435 stocks in his portfolio. Of those, 199 are long term picks that have been in the portfolio for more than a year. Insider Monkey, your source for free insider trading data, compiled the performance of his largest long term stock positions:
1. Vanguard Emerging Market ETF (NYSEARCA:VWO): Dalio had $690 Million worth of VWO at the end of September. The stock returned 22% since September 2009, slightly underperforming SPY’s 23% return. Dalio increased his VWO holdings marginally during the third quarter of 2010. Emerging markets didn't start 2011 as well as developed markets.
2. Teradyne Inc (NYSE:TER): Bridgewater had $56 Million in TER. The stock returned 87% in the last 16 months, beating the market by a huge margin. Dalio increased his TER holdings by 71% during the third quarter of 2010. Bridgewater’s best performing long term pick was TER.
3. Computer Sciences Corp (NYSE:CSC): Bridgewater’s $47.5 Million investment returned 4% since September 2009, underperforming the SPY. Dalio increased his CSC holdings 54% during the third quarter of 2010. Currently, the stock trades at $55.
4. Applied Materials Inc (NASDAQ:AMAT): Dalio had $47 Million of AMAT at the end of September. The stock underperformed SPY by 2 percentage points during the past 16 months. Dalio increased his AMAT holdings by 111% in the third quarter of 2010. That was a very timely move. AMAT returned 40% since then, beating the market by a huge margin. Even though he wasn’t successful at beating the SPY since he started accumulating AMAT, Dalio noticed when AMAT was extremely cheap and doubled down. His bet paid off handsomely. David Tepper has AMAT in his portfolio and made bullish bets on semiconductors during third quarter.
5. Novellus Systems Inc (NASDAQ:NVLS): Bridgewater had $45.7 Million of NVLS shares. The investment returned 79% during the last 16 months. Dalio increased his NVLS holdings by 90% during the third quarter of 2010. NVLS returned 43% since then, beating the market by a huge margin. Novellus is one of the 20 stocks Wall Street analysts expect to dive the most.
6. Microsoft Corp (NASDAQ:MSFT): Bridgewater had almost $44.6 Million of MSFT. The investment returned 8%, underperforming SPY over the last 16 months. Dalio increased his holdings by 36% in the third quarter of 2010. MSFT returned 13% since then, underperforming the SPY by 1.4 percentage points. Whitney Tilson is extremely bullish about Microsoft, expecting it to reach $35 in 2011. Jana Partners, Brevan Howard, and Scoggin Capital Management are among the other hedge funds with large positions in Microsoft.
7. Jabil Circuit (NYSE:JBL): Bridgewater Associates had $40.6 Million of JBL stock, which returned 54% since September 2009. JBL holdings increased by 61%, according to the latest 13F forms filled at the end of September.
8. Tellabs Inc (NASDAQ:TLAB): Bridgewater had $40.3 Million of TLAB and the stock lost 23% since September 2009. Dalio increased his TLAB holdings by 72% during the third quarter of 2010. The stock lost 29% since then. TLAB is one of the two long term stocks that had negative returns during the last 16 months.
9. ITT Educational Services Inc (NYSE:ESI): Bridgewater’s $36.8 Million investment returned -40%. Dalio increased his ESI holdings by 75% during the third quarter of 2010. The stock lost 4.6% since then.This is one of 10 stocks Whitney Tilson is shorting.
10. Illinois Tool Works Inc (NYSE:ITW): Dalio had $36 Million of ITW. This pick returned 25% over the last 16 months, outperforming the SPY by 2 percentage points. Dalio increased his ITW holdings by only 1% during the third quarter.
11. Parker Hannifin Corp (PH): Bridgewater had $34.3 Million in PH stock at the end of September 2009 and the stock returned 72% since then. Dalio reduced his PH holdings by 6% during the third quarter of 2010.
12. FedEx Corp (NYSE:FDX): Bridgewater had $31.9 Million invested in FDX. The stock returned 22% since September 2009, underperforming SPY by 1 percentage point. Currently the stock price is around $91. Dalio reduced his FDX holdings by 6% during the third quarter.
13. Microchip Technology Inc (NASDAQ:MCHP): Microchip Technology investment returned 39% since September 2009 beating the SPY by 16 percentage points. The amount of investment is $31.6 Million and Dalio increased his MCHP holdings by 24% during the third quarter.
14. American Express Co (NYSE:AXP): Bridgewater had 730,800 shares of AXP at the end of September 2009. Stock holdings increased by 42% during the third quarter of 2010. The stock outperformed the SPY by 5 percentage points over the past 16 months.
Weighted average return of Bridgewater’s long term picks is 25%, which is 2 percentage points higher than the S&P 500 return. Ray Dalio's hedge funds managed to beat the SPY by more than 15 percentage points in 2010. These results imply that the source of Dalio's spectacular 2010 performance wasn't his long-term stock investments.