Ray Dalio is the President and Chief Investment Officer of Bridgewater Associates. His long-term annual returns average 15% net. Even in the economic collapse of 2008, his funds earned approximately 9% returns. Dalio uses a strategy that focuses on the process behind the economics. In other words, he looked at the 2008 recession as the inevitable outcome of having incomes that were not enough to manage debt. Taking this a step further, he embraced 2009 and 2010 as years of bankruptcies and restructuring, and through this anticipation was able to profit from it. Here are Ray Dalio’s 11 favorite stocks at the end of June 2011:
1. SPDR S&P 500 ETF Trust (NYSEARCA:SPY): Dalio holds a position in SPY worth $2.7 billion after increasing his position in the trust by 6% in the second quarter. SPY has a price-to-earnings ratio of 13 and net assets over $91.8 billion. It recently traded for $109.93, which is just marginally over its 52 week low.
2. Vanguard International Equity Index Funds (NYSEARCA:VWO): Dalio also holds a considerable position in VWO. His stake in the company is valued at $926 million after he increased his position in the company by 22% in the second quarter this year. The company has a $58.76 billion asset volume and a price-earnings ratio of 12. It is currently trading just over its 52-week low of $35.13.
3. iShares Emerging Markets ETF (NYSEARCA:EEM): Dalio held a $639 million position in this emerging markets ETF after he increased his holdings by 26% during the second quarter. George Soros is betting on a decline in EEM; he has $413 million invested in a put option in the company (See his entire portfolio).
4. Novellus Systems Inc. (NASDAQ:NVLS-OLD): NVLS recently traded for $26.22. The company has a $1.83 billion market cap and a price-to-earnings ratio of 7.36. It is currently trading just above its 52-week low of $25.26. Its one-year target estimate is set at $32.65. This is considerably lower than the 52 week high of $41.82. Dalio owns a $49.7 million position in the company.
5. Microsoft Corp. (NASDAQ:MSFT): MSFT has a market cap of $205.52 billion and a price-to-earnings ratio of 9.12. The stock recently traded at $24.53, which is just marginally higher than its 52-week low of $23.65. However, MSFT is expected to recover to its 52-week high of $29.46 and beyond. Its one-year target estimate is $31.90. Dalio owns a $44 million stake in the company after decreasing his position by 13% last quarter.
6. General Electric Co. (NYSE:GE): Dalio is more bullish about GE. He increased his position in the company by 26% last quarter, to a current value of $43.6 million. GE has a market cap of $155.72 billion and a dividend yield of 3.90%. It also has a price-earnings ratio of 11.6. GE most recently traded at $14.69 which is approximately its 52-week low.
7. Applied Materials Inc. (NASDAQ:AMAT): Dalio keeps almost .6% of his 13F portfolio in AMAP. His position is currently valued at $42.5 million.
8. Netapp, Inc. (NASDAQ:NTAP): NTAP has a market cap of $12.39 billion. Its price-earnings ratio is 20.43. It is currently trading at $33.64 but it is expected to rise to $50.59 within the next year. Dalio had a $39 million position in the company after he increased his shares by 156% during the second quarter of 2011.
9. Computer Sciences Corp. (NYSE:CSC): Dalio holds a $38 million position in CSC. The $4.12 billion market cap company offers a dividend yield of 3%. It has a price earnings ratio of 5.33 and, although it is currently trading at $26.60, is estimated to rise to $32.55 within the next year. CSC is also a favorite of John Osterweis of Osterweis Capital Management. He owns a $77.8 million position in the company (see John Osterweis’ top picks).
10. American Express Co. (NYSE:AXP): AXP has a market cap of $51.9 billion and a price earnings ratio of 11.29. The company also offers a dividend yield of 1.60%. It is currently trading at $43.48; it is expected to rise to over $57 within the next 12 months, besting its 52-week high of $53.80. Dalio increased his position in AXP by 175% last quarter, bringing his current position to a value of just under $38 million.
11. Parker Hannifin Corp. (NYSE:PH): PH is also a favorite of Dalio. He owns a $34.5 million position in the company. PH has a market cap of $9.43 billion and a price earnings ratio of 9.55. It offers a dividend of 2.30% and is estimated to swell from its current trade of $60.81 to $85.45 with one year.
Disclosure: I am long SPY.