What the World's Biggest Hedge Fund Has Been Selling

By Markets Fool.com

Every quarter, many money managers have to disclose what they've bought and sold via "13F" filings. Their latest moves can shine a bright light on smart stock picks.

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Today let's look at Bridgewater Associates, one of the world's largest hedge fund companies. Bridgewater was founded by Ray Dalio, who focuses on macroeconomic factors as he makes his investment decisions -- factors such as inflation, currency exchange rates, and GDP growth. He's clearly rather skilled, as the size of Bridgewater attests.

It can be hard to find many promising places to park your money when you have so many billions to invest, but Bridgewater partly solves that problem with index funds, recently holding about 36% of its reportable stock portfolio value in the Vanguard Emerging Markets Stock ETF , 27% in the S&P 500 SDPR ETF , and 26% in the iShares MSCI Emerging Markets Index ETF . The company's reportable stock portfolio totaled $12.8 billion in value as of Sept. 30.

So what does Bridgewater Associates' latest quarterly 13F filing tell us? Well, it sold out of its position in ConAgra Foods Inc. completely and significantly reduced its positions in Gilead Sciences and International Business Machines Corp. .


Source: ConAgra.

ConAgra Foods
ConAgra might look inviting with its 2.7% dividend, but ideally we want to see dividends growing at a decent clip, and the company's payout is currently lower than it was a decade ago because of a dividend cut in 2006 -- granted, the dividend has been growing steadily since then. The company has been struggling in recent years. Its acquisition of Ralcorp had investors hopeful about a strengthening private-label business, but the merger hasn'tbeen too productive yet, and ConAgra took on a lot of debt for the purchase, too. Some of its brands have been experiencing weakness, such as Healthy Choice and Chef Boyardee. This has many investors losing confidence in the company, but it also presents a good opportunity for true believers. The company is working on cutting costs and expanding its business, focusing on newer offerings like its Cafe Steamers and pursuing alternative sales channels such as dollar stores and convenience stores.

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Source: Jeffrey Beall via Wikimedia Commons.

Gilead Sciences
Gilead may not seem like a sensible stock to sell, as it has averaged annual stock-price growth of 34% over the past 20 years, but Bridgewater has shrunk its position by 30%. Still, Gilead remains among Bridgewater's top 10 holdings. The company has had great success with HIV drugs and is now continuing that success with new hepatitis C drugs (which have also generated controversy because of their steep price tags, which exceed $80,000 for a course of treatment). Bridgewater might be shaving a bit off its holding because of looming competition in the hep-C arena from AbbVie. As biotech investors like to see, the company also has a solid pipeline of possible future successes, and its balance sheet is strong, too. There's not much to dislike here, including the stock's price, which recently traded at a P/E ratio of only 18.


Photo: Flickr user ChrisDag.

International Business Machines
With a P/E ratio near 12 recently, IBM looks even more attractively priced than Gilead, but it's not firing on as many cylinders. It's transforming itself -- which takes time -- shrinking its hardware operations and shedding its semiconductor business as it focuses more on software and services, such as cloud computing. Software and services offer higher margins, but they've been a bit weak for Big Blue lately. That won't necessarily last, though, and there's a dividend that recently yielded 2.7% for patient IBM believers. Management has been rewarding shareholders handsomely via share buybacks, too, repurchasing more than $100 billion of its own stock between 2000 and 2013. Since the beginning of 2011, it has invested almost $50 billion in share buybacks and reduced its share count by nearly 20%. Given the company's deep pockets and hefty free cash flow (topping $13 billion annually), it's hard to count IBM out. Bridgewater shaved its position by 18%, but IBM is still a top 10 holding.

We should never blindly copy any investor's moves, no matter how talented the investor. But it can be useful to keep an eye on what smart folks are doing, and 13F forms can be great places to find intriguing candidates for our portfolios.

The article What the World's Biggest Hedge Fund Has Been Selling originally appeared on Fool.com.

Longtime Fool specialist Selena Maranjian, whom you can follow on Twitter,owns shares of Gilead Sciences. The Motley Fool recommends Gilead Sciences and owns shares of Gilead Sciences and IBM. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.