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Bridgewater reduces exposure to emerging markets and maintains a larger U.S. cap

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Bridgewater reduces exposure to emerging markets and maintains a larger U.S. cap

Bridgewater is a North American hedge fund founded by investor Ray Dalio and based in Westport, Connecticut. The fund is currently managed by Co-CEOs Nir Bar Deo and Mark Bertolini and Co-CIOs Bob Prince and Greg Jensen.

The fund currently has 985 positions, according to its SEC filing. The 10 largest positions in the fund by size:

  1. (USA: PG) Procter & Gamble Co
  2. (USA: JNJ) Johnson and Johnson
  3. (USA: IEMG) Ishares Emerging Markets ETF
  4. (USA: Spy) SPDR S&P 500
  5. (USA: KO) Coca-Cola Co
  6. (USA: IVV) Ishares Core S&P 500 ETF
  7. (USA: VWO) Vanguard Emerging Markets ETF
  8. (USA: PEP) PepsiCo
  9. (USA: COST) Costco
  10. (USA: WMT) Walmart

The fund’s assets are heavily focused on large US conglomerates producing fast-moving consumer goods (FMCG) with stable earnings. These businesses are profitable and tend to perform better in market downturns compared to businesses with higher growth and lower cash flow generation.

Two of the ETFs in the top 10 holdings are invested in emerging market stocks, which typically create higher return opportunities in optimal growth markets but suffer more in times of global economic stress when inventors move to developed markets to save yourself

Below is a heat map showing the top 100 hedge fund positions by size:

Major fund increases during the quarter:

CVS Health (USA: CVS) saw the largest accumulation flow during the quarter, with the fund’s position weight increasing by 0.75% to 1.24%, with a total investment of $290 million.

The second largest position increase was in the iShares Core S&P500 ETF (USA: IVV) with an increase in position by 0.67% to a weight of 2.73%. The IVV ETF is tracking a -18% decline over 2022 as the index rose 8% in October.

Chinese agricultural technology company Pinduoduo has been listed on the US ADR (USA: PDD) was in the top 10 list with portfolio allocation growth of 0.46% to 1.26%. The stock has experienced very strong institutional accumulation over the past few years, which is explained by a Valuation of Fintel Property Accumulation 88.54. The stock is trading above pre-pandemic levels but well below pandemic highs.

The fund increased its energy exposure with a 0.31% increase in its portfolio allocation to Exxon Mobil (USA: XOM) to 0.69% by weight. Stocks are trading at all-time highs, but also enjoying record returns as oil and gas prices rebound significantly in 2022. Despite​​​​a strong share price, XOM continues to trade at a PE ratio below 10x.

Other new large-cap technology and fintech positions in the portfolio included payments company Mastercard (USA: MA) to 0.64% by weight, the alphabet (USA: GOOGL) with a weight of 0.45%, the meta-platform (USA: PURPOSE) with a weight of 0.40% and reservation stocks (USA: BKNG)

Fixed assets decrease during the quarter:

The fund reduced its exposure to emerging markets during the quarter, leaving 3.32% of its weight in the iShares MSCI Emerging Markets ETF (USA: EEM) to 0.24%, a position in the Vanguard World Emerging Markets ETF (USA: VWO) by 1.5% to 0.24% and reduced its allocation to the iShares Core MSCI Emerging Markets ETF (USA: IEMG) by 0.39% to 3.18%

Chinese e-commerce company Alibaba (USA: BABA) and JD.com (USA: JD) were also listed with both position weights of 3.28% and 0.5% were fully sold.

The fund reduced its gold position in the SPDR Gold Trust ETF (USA: GLD) by 0.6% to 0.93% wt. The ETF performed well during the pandemic as investors bought the commodity as a “safe haven” investment. During 2022, the price of the ETF began to decline, and it is down 9% so far.

Other sales included retailer Costco (USA: COST) to 2.45% by weight and the global chemical company Linde PLC (USA: LIN) as low as 0.06% by weight.

Written by Ben Ward for Fintel.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.

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