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When Ray Dalio founded Bridgewater Associates, its office was just a two-bedroom apartment. Today, Bridgewater is one of the largest and best-performing hedge funds in the world. It manages over $100 billion in global investments and hires about 1200 employees researching and analyzing the market. Under Dalio’s leadership, Bridgewater returned 44.8% in 2010. During the economic turmoil in 2011, the fund still generated a return of about 25% through the end of November.

We are going to focus on the stocks with high upside potential that Dalio’s Bridgewater Associates is bullish about. All companies have at least $10 billion market cap and an analyst recommendation score of lower than 2.0 (1=strong buy, 2=buy, 3=hold, 4=sell, 5=strong sell). The market data is obtained from Finviz. As of September 30, 2011, Bridgewater reported to own at least $10 million worth of these stocks in its 13F filing.

Company Name

Ticker

Value

Activity

Analyst Recom

ORACLE CORP

ORCL

25136

65%

1.9

PFIZER INC

PFE

22675

85%

1.8

FEDEX CORP

FDX

21015

0%

1.9

METLIFE INC

MET

20052

99%

1.9

FREEPORT MCMORAN

FCX

19476

193%

1.8

GENERAL DYNAMICS

GD

19326

176%

1.9

MERCK & CO INC

MRK

15007

-7%

1.9

GENERAL ELECTRIC

GE

14166

-60%

1.9

THERMO FISHER

TMO

14005

38%

1.8

The largest position on the list above is Oracle Corp (NYSE:ORCL), in which Bridgewater had $25.1 million invested. During the third quarter, Bridgewater boosted its Oracle stake by 65%. The stock has a market cap of $135 billion and a relatively low P/E ratio of 14.8. The average analyst recommendation score for Oracle is 1.9. Oracle is also quite popular among hedge funds. At the end of September, there were 53 hedge funds with Oracle positions in their 13F portfolios. Besides Dalio’s Bridgewater Associates, Ken Fisher’s Fisher Asset Management also disclosed owning $588 million worth of Oracle shares at the end of the third quarter.

During the third quarter, Dalio also increased his stake in Pfizer Inc (NYSE:PFE) by 85%. At the end of September, Bridgewater had $23 million invested in this stock. Since then, Pfizer was up 23.26%, versus 13.58% for SPY in the same period. Pfizer has a market cap of $166B and a P/E ratio of 16.98. The analyst recommendation score for Pfizer is 1.8. The stock is also very popular among hedge funds. There are 74 hedge funds reported to own Pfizer in their portfolios at the end of September. Fisher Asset Management had $389 million invested in Pfizer as well. Ric Dillon, Bill Miller, and Lee Ainslie are also bullish about Pfizer.

Other mega-cap stocks with high upside potential that Dalio loves include Merck & Co Inc (NYSE:MRK) and General Electric Co (NYSE:GE). He also likes FedEx Corp (NYSE:FDX), Metlife Inc (NYSE:MET), Freeport McMoRan Copper & Gold (NYSE:FCX), General Dynamics Corp (NYSE:GD), and Thermo Fisher Scientific Inc (NYSE:TMO). We like Dalio and Bridgewater Associates. We believe that by focusing on Dalio’s stock picks, especially those with high upside potential, investors are more likely to outperform the market in the long term.

Source: Ray Dalio's 9 Stock Picks With High Upside Potential