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Ray Dalio’s Bridgewater Associates goes short on Euro Stoxx 50 stocks

Bridgewater Associates, the world’s largest hedge fund with around $150bn in assets under management, is once again building significant short positions in Euro Stoxx 50 components. The latest 13F filing reveals Ray Dalio’s firm is buying shares in a number of US retail and medical-focused stocks.

US investment management giant Bridgewater Associates is once again building significant short positions in European stocks, and now holds at least a 0.5% short position in 13 stocks in the Euro Stoxx 50 index.

Investors tend to take note of Bridgewater’s quarterly filings, with the Ray Dalio-founded firm now the world's largest hedge fund, at around $150bn in assets under management (AUM). A billionaire many times over, Ray Dalio is now co-CIO, having started the company almost 50 years ago.

Bridgewater’s flagship Pure Alpha II fund struggled during a volatile 2020, registering a 12.6% fall. But the fund has outperformed during this year’s difficult market environment, making an impressive 32% gain in the first six months.

Lately, Bridgewater has been active on the Euro Stoxx 50 index, going short on a number of its component stocks, and its latest move has seen the fund manager up its short positions on the index. Its most recent regulatory 13F filing reveals other prominent stocks the firm is buying and selling.

Bridgewater goes short again on Euro Stoxx 50

When the Euro Stoxx 50 index staged a mini rebound from mid-July through to mid-August, Bridgewater reduced its short positions on a number of the Euro index’s component stocks. But as the Euro 50 index fell back once more — it dropped 9.16% between 16 August and 1 September — Bridgewater once again moved to increase its short positions.

This move was in the offing, after Day Dalio’s fellow co-CIO Greg Jensen revealed his bearish outlook on the economy and financial markets last month. Jensen told Bloomberg that he believes markets will decline between 20% and 25% and that the EU economy could shrink by 4% over the next six to 12 months.

The hedge fund has to disclose short positions that equate to more than 0.5% of a company’s stock. On 31 August, Bridgewater said it held short positions in 13 EU Stoxx 50 companies meeting this criteria. Among these 13 shorted stocks — worth around €4.1bn — are French energy firm TotalEnergies [TTE.PA], as well as German financial firm Allianz [ALV.DE] and pharmaceutical company Bayer [BAYN.DE].

August filing reveals Ray Dalio’s latest sells

According to its latest regulatory 13F filing with the US Securities and Exchange Commission, Bridgewater upped its stakes in Walmart [WMT] and CVS Health [CVS], while reducing its holdings in Alibaba [BABA] and disposing of its JD.com [JD] holding. The top three individual stock positions at the end of the second quarter — Procter & Gamble [PG], Johnson & Johnson [JNJ] and Coca-Cola [KO] — made up 10.3% of the portfolio.

The Procter & Gamble position was established in the second half of 2020 and increased through to the first quarter of this year, before a marginal trimming in the latest quarter, leaving the stake at 4.11% of the portfolio. Its 3.26% holding in Johnson & Johnson was also increased over recent quarters, until a small cut back in the most recent quarter. The next largest stake, in the iShares Core MSCI Emerging Markets ETF [IEMG], at 3.18%, was also trimmed in Q2.

While the SPDR S&P 500 Trust ETF [SPY] maintains a top five spot with 2.9% of the portfolio, Ray Dalio has cut back on the position, which reached 21 million shares in 2011, down to 1.8 million shares. Also sold off this quarter following the purchase of more than 10 million shares from 2020 though to 2022, but remaining in the top five holdings, is Coca-Cola, which also has a 2.9% weighting.

Bridgewater ups stake in US retail giants

Sixth in the overall list, with a 2.7% weighting, is the iShares Core S&P 500 ETF [IVV]. Ray Dalio has added to Bridgewater’s holding in the ETF over five consecutive quarters.

Bridgewater also increased its stake in US retailers Costco [COST], Walmart and Target [TGT] in the second quarter. Costco now accounts for 2.5% of Bridgewater’s portfolio, which places it in the firm’s top 10 holdings. Right behind is Walmart at 2.4%, after the firm increased its position over recent quarters. It is followed by Target, which makes up 0.9% of the portfolio.

Other notable buys include CVS Health, which accounts for 1.24% of the portfolio as of Q2, and medical device company Medtronic [MDT], which the firm has built up its stake in over the first half of 2022 and now accounts for 1%.

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