Ray Dalio Stock Portfolio Q3 2022: Top 10 Small-Cap Stocks
In this article, we discuss the top 10 small-cap stocks from Ray Dalio’s Q3 2022 portfolio. If you want to see more stocks in this selection, check out Ray Dalio Stock Portfolio Q3 2022: Top 5 Small-Cap Stocks.
According to Royce Investment Partners, although equity prices declined in the volatile market environment through the first half of 2022, the third quarter saw a solid yet temporary rally. However, unlike their large-cap counterparts, small-cap stocks did not reach a record low in Q3 2022. During the third quarter of 2022, the small-cap Russell 2000 Index was down 2.2%, ahead of the large-cap Russell 1000 Index, which was down 4.6% over the same period. Similarly, while the MSCI ACWI ex USA Small Cap Index dropped 8.4% in Q3 2022, the MSCI ACWI ex USA Large Cap Index plummeted 9.9%.
While markets have plunged in response to skyrocketing inflation and interest rates, a steeper decline is yet to emerge, as per Bridgewater founder Ray Dalio. The Federal Reserve has lifted rates by 3.75% over the last year. To avoid a “significant stagflation environment,” Dalio observed that the central bank would need to find a balance between inflation and interest rates. Ray Dalio believes that the United States is already facing a trade war, a technology war, a geopolitical war, and an economic war. He also sees a military war as a possibility in the near future.
Some of the premier holdings of the Bridgewater portfolio include PepsiCo, Inc. (NASDAQ:PEP), Johnson & Johnson (NYSE:JNJ), and The Procter & Gamble Company (NYSE:PG). However, in this turbulent market backdrop, paired with the outperformance of small-cap stocks, it is a good idea to check out billionaire Ray Dalio’s top small-cap picks.
We selected the top 10 small-cap stocks from the Bridgewater portfolio as of the end of the third quarter of 2022 for this analysis. The stocks are arranged according to the hedge fund’s stake value in each holding. Insider Monkey’s database of 895 elite hedge funds tracked as of the end of the second quarter of 2022 was used to assess the hedge fund sentiment around the securities.
Ray Dalio of Bridgewater Associates
Ray Dalio Stock Portfolio Q3 2022: Top Small-Cap Stocks
10. Omnicell, Inc. (NASDAQ:OMCL)
Number of Hedge Fund Holders: 19
Bridgewater Associates’ Stake Value: $6,022,000
Omnicell, Inc. (NASDAQ:OMCL) is a California-based company that provides medication management solutions and adherence tools for healthcare systems and pharmacies in the United States and internationally. Ray Dalio’s Bridgewater Associates held 69,192 shares of Omnicell, Inc. (NASDAQ:OMCL) in the third quarter of 2022, worth $6 million and representing 0.03% of the total 13F securities.
On November 2, Omnicell, Inc. (NASDAQ:OMCL) reported a Q3 non-GAAP EPS of $1.00, beating market estimates by $0.05. The revenue of $348.06 million climbed 17.4% year-over-year, but fell short of Wall Street consensus by $15.12 million. For full-year 2022, the company expects total GAAP and non-GAAP revenues to be between $1.284 billion and $1.294 billion, versus the prior guidance of $1.385 billion and $1.410 billion. The consensus revenue estimate came in at $1.40 billion.
Craig-Hallum analyst Matt Hewitt on November 3 maintained a Buy rating on Omnicell, Inc. (NASDAQ:OMCL) but lowered the firm's price target on the shares to $75 from $185. While Q3 results and guidance disappointed, the analyst said that he has seen this before and expects the business to rebound.
According to Insider Monkey’s Q2 data, 19 hedge funds were long Omnicell, Inc. (NASDAQ:OMCL), compared to 27 funds in the preceding quarter. The collective stakes in Q2 stood at $103.8 million, compared to $137.5 million in the prior quarter.
In addition to PepsiCo, Inc. (NASDAQ:PEP), Johnson & Johnson (NYSE:JNJ), and The Procter & Gamble Company (NYSE:PG), Omnicell, Inc. (NASDAQ:OMCL) is one of the stocks backed by Ray Dalio in Q3 2022.
Here is what Carillon Scout Small Cap Fund has to say about Omnicell, Inc. (NASDAQ:OMCL) in its Q1 2022 investor letter:
“Omnicell (NASDAQ:OMCL) provides an integrated suite of clinical infrastructure and workflow automation solutions for healthcare facilities. Cloud services have been a focus of the company and have shown good growth, automating many manual processes.”
9. WD-40 Company (NASDAQ:WDFC)
Number of Hedge Fund Holders: 14
Bridgewater Associates’ Stake Value: $6,638,000
WD-40 Company (NASDAQ:WDFC) was founded in 1953 and is headquartered in San Diego, California. The company develops and sells maintenance products, as well as homecare and cleaning products in the Americas, Europe, the Middle East, Africa, Australia, and the Asia Pacific. Securities filings for the third quarter of 2022 reveal that Ray Dalio owns 37,771 shares of WD-40 Company (NASDAQ:WDFC), worth $6.6 million and representing 0.03% of the total holdings.
On October 19, WD-40 Company (NASDAQ:WDFC) reported Q3 GAAP earnings per share of $1.08, and a revenue of $130.42 million, up 13.2% on a year-over-year basis. For FY2023, WD-40 Company (NASDAQ:WDFC) projects net sales growth of 5% to 10%, with net sales expected to fall between $545 million and $570 million.
DA Davidson analyst Linda Bolton Weiser on July 18 upgraded WD-40 Company (NASDAQ:WDFC) to Buy from Neutral with a price target of $205, up from $169. Given that she thinks the company should see double-digit pricing in FY23, the Street's sales growth estimate of 5%-7% "looks conservative," noted the analyst, who also thinks the company should return to a 55% gross margin "sometime in FY23."
According to the second quarter database of Insider Monkey, 14 hedge funds were bullish on WD-40 Company (NASDAQ:WDFC), compared to 15 funds in the prior quarter.
Here is what Polen U.S. Small Company Growth Fund has to say about WD-40 Company (NASDAQ:WDFC) in its Q1 2021 investor letter:
“WD-40 Company was a top contributor during the quarter. WD40’s primary product is the near-ubiquitous blue and yellow can of lubricant found in households around the world. WD-40 was one of the fortunate businesses that saw a substantial increase in demand for its product during the pandemic. The company is dubbing the phenomenon as ‘isolation renovation’ which reflects the increase in DIY and home improvement projects done while people were stuck at home. Not surprisingly, the company saw growth in the most recent quarter with outsized growth in its ecommerce channel. However, because the average DIY user only needs to replace the product every few years, we were concerned about a pull-forward in demand that might lead to slower growth going forward. We have exited our position to reinvest client capital in potential higher-return opportunities, as detailed below.”
8. TreeHouse Foods, Inc. (NYSE:THS)
Number of Hedge Fund Holders: 20
Bridgewater Associates’ Stake Value: $6,718,000
TreeHouse Foods, Inc. (NYSE:THS) is an Illinois-based company that manufactures and distributes private label foods and beverages in the United States and internationally. Ray Dalio’s Bridgewater Associates owned 158,369 shares of TreeHouse Foods, Inc. (NYSE:THS) as of Q3 2022, worth $6.71 million and representing 0.03% of the total portfolio.
On November 7, TreeHouse Foods, Inc. (NYSE:THS) announced Q3 non-GAAP earnings per share of $0.30. Revenue for the period climbed 16.4% year-over-year to $875 million. The company expects Q4 net sales growth of 22% to 24% year-over-year, versus a 22.61% consensus. It is one of the top small-cap stocks in Ray Dalio's portfolio.
Truist analyst Bill Chappell on August 9 raised the price target on TreeHouse Foods, Inc. (NYSE:THS) to $60 from $50 and kept a Buy rating on the shares, citing the company's better than expected Q2 results. The analyst expects the company to benefit from the consumer shift towards private labels in the second half of the year and into 2023.
According to Insider Monkey’s data, 20 hedge funds were long TreeHouse Foods, Inc. (NYSE:THS) at the end of Q2 2022, with combined stakes worth $293.2 million, compared to 21 funds in the prior quarter worth $207.3 million.
Here is what FPA Queens Road has to say about TreeHouse Foods, Inc. (NYSE:THS) in its Q1 2022 investor letter:
“TreeHouse Foods, Inc. (NYSE:THS), a manufacturer and distributor of private label food, announced in November 2021 a plan to explore strategic alternatives. The company has been under pressure from activist investor Jana Partners. The company has resisted a sale of the entire business but continues to look for strategic divestitures. While the company appears reasonably valued, we are concerned about its long-term outlook and have reduced our holdings.”
7. Evolent Health, Inc. (NYSE:EVH)
Number of Hedge Fund Holders: 30
Bridgewater Associates’ Stake Value: $8,398,000
Evolent Health, Inc. (NYSE:EVH) is a Virginia-based healthcare company that provides clinical and administrative solutions to patients and healthcare providers in the United States. Ray Dalio, as of Q3 2022, owns 158,369 shares of Evolent Health, Inc. (NYSE:EVH) worth $8.4 million, representing 0.03% of the total securities.
On November 2, Evolent Health, Inc. (NYSE:EVH) reported a Q3 non-GAAP EPS of $0.59, beating market estimates by $0.49. The revenue of $352.6 million climbed 58.5% year-over-year, missing Wall Street consensus by $4.18 million. For Q4 2022, revenue is expected to be in the range of approximately $361 million to $381 million versus a consensus of $376.16 million.
Piper Sandler analyst Jessica Tassan on November 4 maintained an Overweight rating on Evolent Health, Inc. (NYSE:EVH) but lowered the price target on the shares to $33 from $40. The company announced three new partnerships and reported strong Q3 results, the analyst told investors in a research note.
According to Insider Monkey’s data, 30 hedge funds were bullish on Evolent Health, Inc. (NYSE:EVH) at the end of Q2 2022, compared to 33 funds in the prior quarter. Glenn W. Welling’s Engaged Capital held the largest stake in the company, with 6.15 million shares worth $189 million.
Here is what Alger Capital specifically said about Evolent Health, Inc. (NYSE:EVH) in its second quarter investor letter:
“Evolent Health, Inc. (NYSE:EVH) is a health care delivery and payment services company that supports health systems and physician organizations (providers) and health plans (payers) as these clients move their business models from traditional fee-for-service (FFS) to value-based care. The company’s clinical and administrative solutions seek to help customers manage and administer patient care in a more cost-effective manner. Evolent Health targets mid-teen sales growth over the long-term, with a goal to reach mid-teens earnings before interest, taxes, depreciation and amortization (EBITDA) margin by 2024.
We believe Evolent’s strong second quarter stock performance is attributable to its positive first quarter 2022 earnings report, where Evolent exceeded many analysts’ expectations and raised its fiscal year 2022 outlook. Total lives, or individuals enrolled across all the platforms that Evolent offers, grew 74% year-over-year, driven by both the addition of new lives to the company’s platform and upselling to higher-priced offerings. Evolent also announced two new health plan or provider partnerships in the first quarter, bringing its year-to-date new partnerships to six. Evolent has historically targeted four to six new partnerships per year.
We also believe Evolent shares outperformed relative to health care services peers in the current market environment because, unlike many names in its peer set, it is already profitable and generates positive free cash flow.”
6. Mr. Cooper Group Inc. (NASDAQ:COOP)
Number of Hedge Fund Holders: 27
Bridgewater Associates’ Stake Value: $9,897,000
Mr. Cooper Group Inc. (NASDAQ:COOP) is a Texas-based company that provides servicing, origination, and transaction-based services related to single-family residences in the United States. Ray Dalio’s Bridgewater Associates added Mr. Cooper Group Inc. (NASDAQ:COOP) to its portfolio in the third quarter of 2022 by purchasing 244,367 shares worth approximately $10 million, representing 0.05% of the total 13F securities.
On October 26, Mr. Cooper Group Inc. (NASDAQ:COOP) posted a Q3 GAAP EPS of $1.55 and a revenue of $510 million, outperforming Wall Street estimates by $0.25 and $89.8 million, respectively. Book value per share increased to $58.18 and tangible book value per share increased to $56.35. The company also repurchased 1.1 million common shares for $50 million in Q3 2022.
Piper Sandler analyst Kevin Barker on November 10 raised the price target on Mr. Cooper Group Inc. (NASDAQ:COOP) to $64 from $63 and kept an Overweight rating on the shares. The analyst believes Mr. Cooper Group Inc. (NASDAQ:COOP)’s new guidance paired with more conviction surrounding repurchasing stock has resulted in a rally in the shares. Mr. Cooper Group Inc. (NASDAQ:COOP) is one of the very few mortgage companies on track to deliver earnings growth over the next few quarters, the analyst wrote in a research note.
Among the hedge funds tracked by Insider Monkey, 27 funds reported owning stakes worth $461.5 million in Mr. Cooper Group Inc. (NASDAQ:COOP) at the end of June 2022, compared to 30 funds in the prior quarter worth $504.20 million. Parag Vora’s HG Vora Capital Management held a prominent stake in the company, with 3.45 million shares worth $126.75 million.
Like PepsiCo, Inc. (NASDAQ:PEP), Johnson & Johnson (NYSE:JNJ), and The Procter & Gamble Company (NYSE:PG), Mr. Cooper Group Inc. (NASDAQ:COOP) is one of the top stocks from the Bridgewater portfolio.
Here is what Diamond Hill Capital specifically said about Mr. Cooper Group Inc. (NASDAQ:COOP) in its Q2 2022 investor letter:
“Also among our bottom contributors were mortgage servicing company Mr. Cooper Group Inc. (NASDAQ:COOP) and WESCO International, a leading distributor of electrical, industrial and communications materials and provider of supply chain management and logistics services. Rapidly rising interest rates in Q2 pushed mortgage rates higher, raising concerns about headwinds for the mortgage industry. Unlike peers, Mr. Cooper has a more balanced business model between mortgage origination and servicing, which should help its business from a fundamental perspective in this environment.”
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Disclosure: None. Ray Dalio Stock Portfolio Q3 2022: Top 10 Small-Cap Stocks is originally published on Insider Monkey.