We Know What Buffett, Soros, And Dalio Did Last Quarter

We Know What Buffett, Soros, And Dalio Did Last Quarter
Carl Hazeley

about 2 years ago4 mins

  • Warren Buffett’s Berkshire Hathaway is a bellwether for all investors, and the firm trimmed some of its winning positions last quarter.

  • Ray Dalio’s Bridgewater bet big on emerging markets and inflation hedges, all while keeping costs low via ETFs.

  • George Soros’s firm bought into US real estate and banks while selling off its EV play, perhaps due to sky-high valuations in the industry.

Warren Buffett’s Berkshire Hathaway is a bellwether for all investors, and the firm trimmed some of its winning positions last quarter.

Ray Dalio’s Bridgewater bet big on emerging markets and inflation hedges, all while keeping costs low via ETFs.

George Soros’s firm bought into US real estate and banks while selling off its EV play, perhaps due to sky-high valuations in the industry.

Mentioned in story

Three of America’s biggest hedge funds headed up by three of the biggest names in investing – Warren Buffett, Ray Dalio, and George Soros – have just laid out what they bought and sold last quarter. Dig into the details, and it won’t be long before you dig up a trove of investing ideas…

What’s Warren Buffett’s Berkshire Hathaway been up to?

We already know which four companies comprise 70% of Berkshire Hathaway’s $311 billion stock portfolio, but Buffett’s firm also reduced its investments in payments giants Visa and Mastercard last quarter, as well as in pharma firms including Bristol Myers-Squibb.

On the flip side, Berkshire bought into Royalty Pharma and Floor & Decor Holdings, and it ramped up its investment in energy giant Chevron.

What’s going on here?

What Warren Buffett’s firm does is always of interest to all investors: his track record speaks for itself, and several investors simply buy and sell when Berkshire does. And with Buffett a famed “value investor” with a very long-term time horizon on his investments, you might want to pay particular attention to his firm’s picks given high stock market valuations and rip-roaring inflation.

Last quarter was the fourth in a row that Berkshire sold more stocks than it bought, but that doesn’t tell the whole story. Berkshire, for instance, has held Visa since 2011, so the firm’s up tenfold on its position even though the stock’s down 10% this year. On the other hand, Berkshire bought into AbbVie in the third quarter of 2020 and began selling just a couple of quarters later, suggesting the firm may not consider it long-term winner despite a 14% gain in the last year.

What’s Ray Dalio’s Bridgewater Associates been up to?

Bridgewater’s top three investments last quarter were in exchange-traded funds (ETFs) that tracked emerging markets (EMs). And it doubled down on those bets by investing heavily in Chinese ecommerce giants JD.com and Alibaba, with the latter representing almost 3% of the entire portfolio. The firm is still betting big on the US, mind you: its next-biggest investment was in an ETF tracking the S&P 500. But individual US stocks is where Bridgewater did a lot of its selling, trimming its investments in Walmart, Johnson & Johnson, Procter & Gamble, and Danaher. It’s also worth noting that Bridgewater upped its investment in a gold ETF last quarter.

What’s going on here?

I took three key lessons from Bridgewater’s update. First, the importance of keeping investment costs low through the use of ETFs, which means Bridgewater can pay less than it otherwise would in broker fees and keep more profit for its investing clients.

Second, Bridgewater is bullish on China. The world’s richest family has bet big on EMs and particularly China, so it’s encouraging to see one of the world’s most famous and outspoken hedge fund managers doing the same. To replicate Bridgewater’s strategy, you could buy the three ETFs it’s piled into – the iShares MSCI Emerging Markets, iShares Core MSCI Emerging Markets, and Vanguard FTSE Emerging Markets ETF – and make single-stock bets on Alibaba and JD.com.

The third lesson was that Bridgewater hasn’t ignored the record high inflation levels of recent months and has upped its investment in gold, which investors – along with value stocks and other commodities – typically buy as a protective hedge.

What has George Soros’s firm been up to?

Last quarter, Soros Fund Management increased its bets on real estate and financial stocks, buying into the likes of MGM Growth Properties, Dr Horton, JPMorgan Chase, and Goldman Sachs. At the same time, Soros’s firm also sold its entire holdings of two companies: elevator manufacturer Otis Worldwide and electric vehicle (EV) battery startup QuantumScape.

What’s going on here?

There are plenty of reasons to get excited about investing in US real estate and banks right now. Real estate in subsectors like hospitality, offices, and retail has been hit hard by the pandemic, so analysts reckon bargain hunters could, say, still get a 10-15% discount on 2019 prices for hospitality real estate. That’s attractive considering the potential explosion in demand that’s likely to come when coronavirus is truly a thing of the past.

Banks should continue to be beneficiaries of the post-pandemic recovery too: interest rates should rise in the next few years, which will help banks earn more on their new loans. And since the money banks set aside last year in case customers default is now being released, they should have excess cash to return to shareholders in the form of dividends and share buybacks too.

And as for Soros selling off his EV play: well, I can’t say I blame him. EVs stocks have been all the rage this year, culminating in Rivian’s initial public offering in November. And despite the fact he only got in earlier this year, Soros might’ve reached the same conclusion we did: these sky-high valuations don’t make sense given that EV makers can’t all be market leaders, or even market survivors – and that logic could extend to the makers of their batteries too.

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