Ray Dalio's Stock Picks Don't Explain His Spectacular Performance

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Includes: AMAT, AXP, DXC, GE, MSFT, NTAP, NVLS-OLD, PH, SPY, VWO
by: Insider Monkey

Ray Dalio was born in Jackson Heights, New York, in 1949. He has a BA from Long Island University and an MBA from Harvard Business School. He is known to have started investing when he was only 12 and apparently he had tripled his money by betting on Northeast Airlines at the time. According to the New Yorker, he is a macro investor with a sharp focus on global economic trends. He founded the Bridgewater Associates in 1975.

Ray Dalio returned 25% through the first 8 months of 2011. This is an amazing performance considering that average hedge fund lost nearly 3% during the same time frame. In some cases a hedge fund’s long stock picks explain most of its performance. This isn’t the case with Dalio. Here is a summary of the top ten stock picks of Ray Dalio as of June 30, 2011, and their performance as of October 7, 2011:

Security

Ticker

Value (x$1000)

Return

SPDR S&P 500 ETF

SPY

$2,712,828

-11.87%

Vanguard Intl Equity Index Funds

VWO

$926,076

-23.88%

Novellus Systems Inc

NVLS-OLD

$49,723

-17.74%

Microsoft Corp

MSFT

$44,138

1.59%

General Electric Co

GE

$43,590

-17.02%

Applied Materials Inc

AMAT

$42,550

-17.11%

Netapp Inc

NTAP

$39,033

-29.35%

Computer Sciences Corp

CSC

$37,993

-24.18%

American Express Co

AXP

$37,977

-15.65%

Parker Hannifin Corp

PH

$34,551

-26.04%

1. SPDR S&P 500 ETF Trust (NYSEARCA:SPY) tracks the S&P 500 index and the top holdings of the fund include Exxon Mobile (NYSE:XOM), Apple (NASDAQ:AAPL), IBM, Microsoft (NASDAQ:MSFT), Chevron CVX), Procter & Gamble (NYSE:PG), Johnson & Johnson (NYSE:JNJ), AT&T (NYSE:T), GE and Coca Cola (NYSE:KO). It has recently traded at $115.71. It has a market cap of $79.06 Billion and a P/E Ratio of 6.69.

2. Vanguard MSCI Emerging Markets ETF (NYSEARCA:VWO) is a fund that invests in companies of the emerging markets such as Brazil, Russia, China, Korea, and Taiwan, and is usually regarded as a long-term investment with expected volatility and higher risk. The fund was formerly known as Vanguard Emerging Markets ETF. The fund has recently traded at $37.01. It has a market cap of $38.27 billion and a P/E Ratio of 4.00.

3. Novellus Systems Inc. (NASDAQ:NVLS-OLD) was founded in 1984 and is a supplier of specialized equipment for semi-conductor manufacturing industry. The stock has recently traded at $29.73. It has a market cap of $2.07 billion and a P/E ratio of 8.41.

4. Microsoft Corp. (MSFT) has recently traded at $26.25. It has a market cap of $219.93 billion and a P/E Ratio of 9.72. David Einhorn is also extremely bullish about Microsoft. He laid out his case at the Ira Sohn Conference (read David Einhorn’s speech here).

5. General Electric Co. (NYSE:GE) has recently traded at $15.50. It has a market cap of $164.31 billion and a P/E Ratio of 12.05. The dividend yield is 3.87%.

6. Applied Materials Inc. (NASDAQ:AMAT) is a global company providing equipment, services and software to manufacturers of advanced semiconductors, flat panel displays and photovoltaic products. The stock has recently traded at $10.71. It has a market cap of $14.11 billion and a P/E Ratio of 7.37. The dividend yield is 2.99%.

7. NetApp Inc. (NASDAQ:NTAP) is an IT company which provides storage systems and software for data management and protection. It has evolved from being a box seller to a solution provider fairly quickly and has become a top competitor in this sector. The stock has recently traded at $37.29. It has a market cap of $13.74 billion and a P/E Ratio of 22.62.

8. Computer Sciences Corp. (CSC) is an IT Services company delivering custom solutions and system integration services for a diverse group of customers utilizing technological developments. The stock has recently traded at $28.59. It has a market cap of $4.43 billion and a P/E Ratio of 5.94. The dividend yield is 2.80%.

9. American Express Co (NYSE:AXP) has recently traded at $43.43. It has a market cap of $51.85 billion and a P/E Ratio of 11.37. The dividend yield is 1.66%. Warren Buffett has been a long-time AXP investor.

10. Parker Hannifin Corp. (NYSE:PH) is a manufacturer of motion and control technologies and systems targeting commercial, mobile, aerospace and industrial markets. The stock has recently traded at $66.01. It has a market cap of $9.98 Billion and a P/E Ratio of 10.39. The dividend yield is 2.24%.

Ray Dalio’s stock picks have performed rather poorly between June 30, 2011, and October 7, 2011. Most positions significantly underperformed the S&P 500 index. The only positive return was Microsoft. We usually recommend investors mimick top stock picks of prominent hedge fund managers. Unfortunately Dalio is an exception.

Disclosure: I am long MSFT, SPY.